We use a no-arbitrage essentially affine three-factor model to estimate term premia in US and German ten-year government bond yields. In line with the existing literature, we find that estimated premia have followed a downward trend since the 1980s: from 4.9 per cent in 1981 to 0.7 per cent in...

The revised Basel Capital Accord requires banks to meet a capital requirement for operational risk as part of an overall risk-based capital framework. Three distinct options for calculating operational risk charges are proposed (Basic Approach, Standardised Approach, Advanced Measurement...

Policy evaluation based on the estimation of dynamic stochastic general equilibrium models with aggregate macroeconomic time series rests on the assumption that a representative agent can be identified, whose behavioural parameters are independent of the policy rules. Building on earlier work by...

The paper assesses whether the monthly returns of the listed shares of Italian banks are predicted by changes in balance-sheet indicators. The sample covers the period from January 1997 to June 2003. Estimates use both unadjusted and risk-adjusted returns. Results show that the stock returns of...

For a class of long memory volatility models, we establish the asymptotic distribution theory of the Gaussian estimator and the Lagrange multiplier test. Both the case of estimation of martingale difference and ARMA levels are considered. A Montecarlo exercise is presented to assess the small...

Among the many controversial variables in finance, risk premia stand out for their lack of observability. Measuring premia as the difference between realized returns on risky and risk-free assets has not led to unanimous conclusions about their size, which greatly depends on the length of the...

This paper uses Garch models to estimate the objective and risk-neutral density functions of financial asset prices and, by comparing their shapes, recover detailed information on economic agents' attitudes toward risk. It differs from recent papers investigating analogous issues because it uses...

In this paper, we exploit the heterogeneity in the forecasts obtained by estimating different factor models to measure forecast uncertainty. Our approach is simple and intuitive. It consists first in selecting all the models that outperform some benchmark model, and then in constructing an...

This paper studies the identification and estimation of treatment response with heterogeneous spillovers in a network model. We generalize the standard linear-in-means model to allow for multiple groups with between and within-group interactions. We provide a set of identification conditions of...

In this paper we develop a portfolio optimization strategy based on the extraction of option-implied distributions and the application of robust asset allocation. We compute the option-implied probability density functions of the constituents of the Euro Stoxx 50 Index. To obtain the...