This paper is aimed at studying the effects of the exchange-rate variations on the budget deficit. To do this, the available deterministic models of budget deficit are extended by assuming that the movements of the exchange rate are driven by stochastic processes, and that the extreme and sudden...

This research develops a stochastic model of the consumer's decision making under an environment of risk and uncertainty. In the proposed model agents perceive that a mixed diffusionjump process drives the exchange rate depreciation and a diffusion process governs the real interest rate, these...

This research develops a stochastic model of the consumer's decision making under an environment of risk and uncertainty. In the proposed model agents perceive that a mixed diffusionjump process drives the exchange rate depreciation and a diffusion process governs the real interest rate, these...

In this paper, we develop a stochastic model to hedge the present value of cash flows against interest-rate risk with fixed-income products, in particular, with zero coupon bonds. In our approach, the dynamics of the interest rate is driven by a mean-reverting stochastic diffusion process. The...

We present two models for hedging European options on an underlying asset driven by a mixed diffusion-jump process. The first model, values the option as the average of option prices hedging sequential jumps. In the second model, the option price is determined by minimizing the variance of the...

This paper is aimed in analyzing the impact of the growing use of contingent claims in the objectives of monetary policy. To reach this end, a continuous time, stochastic model of macroeconomic equilibrium of a monetary economy where the agents are exposed to the risk market is developed. In the...

This paper is aimed to provide a consistent theoretical framework for the decision making process of a consumer-investor in an environment of risk and uncertainty with constant volatility. In this research, the Wiener and Poisson processes play an essential role in modeling market risk and...

This paper investigates the existence of long memory in the volatility of the Mexican stock market. We use a stochastic volatility (SV) model to derive statistical test for changes in volatility. In this case, estimation is carried out through the Kalman filter (KF) and the improved...

This paper develops a stochastic model of temporary stabilization of prices with the exchange rate acting as a nominal anchor of inflation. The model presents imperfect credibility, and explicitly recognizes the uncertainty in the dynamics of the exchange rate and in the expected behaviour of...

This paper determines the tax rate, withheld by the clearing member, on gains from listed futures that guarantees the same tax revenue as that of the current tax treatment of non-corporate individual investors residents in Mexico. The proposed tax policy reduces costs and improves market...