We present a simple theory of business-cycle movements of option prices and volumes. This theory relies on time-varying heterogeneity between agents in their demand for insurance against aggregate risk. Formally, we build an infinite-horizon model where agents face an aggregate risk, but also...

The purpose of this paper is to propose discrete-time term structure models where the historical dynamics of the factor (xt) is given, in the univariate case, by a Gaussian AR(p) process, and, in the multivariate case, by a Gaussian n-dimensional VAR(p) process. The factor (xt) is considered as...

We consider the problems of derivative pricing and inference when the stochastic discount factor has an exponential-affine form and the geometric return of the underlying asset has a dynamics characterized by a mixture of conditionally Normal processes. We consider both the static case in which...

We study the liquidity allocation among European banks around the Lehman Brothers’ insolvency using a novel dataset of all interbank loans settled via the Eurosystem’s payment system TARGET2. Following the Lehman insolvency, lenders in the overnight segment become sensitive to counterparty...

Stock exchange industry consolidation is at work since many years and has recently accelerated through competition for order flows, agreements and mergers. However, consolidation may not mean that all shocks are transmitted to every place. Therefore, following Forbes and Rigobon (2002) we...

In this paper we argue that banks anticipate short-term market rates when setting interest rates on loans and deposits. In order to include anticipated rates in an empirical model, we use two methods to forecast market rates - a level, slope, curvature model and a principal components model -...

This paper examines issues related to the estimation of the government spending multiplier (GSM) in a Dynamic Stochastic General Equilibrium context. We stress a potential source of bias in the GSM arising from the combination of Edgeworth complementarity/substitutability between private...

This article analyzes the hysteresis hypothesis in the unemployment rates of the four French overseas regions (Guadeloupe, Martinique, Guyana, Reunion) [FORs] over the period 1993-2008. We use standard univariate and panel unit root tests, among them Choi (2006) and Lopez (2009) that account for...

Estimates of the Nairu generally suffer from a large uncertainty, which can be reduced by adopting a bivariate framework and assuming that shifts of the Phillips curve share a common trend with the unemployment rate. We consider in this paper if this common trend assumption is empirically...

This paper develops an arbitrage-free affine term structure model of potentially defaultable sovereign bonds to model a cross-section of eight euro area government bond yield curves since January 1999. The existence of a common monetary policy under European Monetary Union determines the short...