This paper examines latent risk factors in models for migration risk. We employ thestandard statistical framework for ordered categorical variables and induce dependencebetween migrations by means of latent risk factors. By assuming a Markov process forthe dynamics of the latent factors, the...

This study investigates loss aversion when the reference point is state-dependent.Using a state-dependent structure, prospects are more attractive if they depend positively on the reference point and are less attractive in case of negative dependence. In addition, the structure is neutral in the...

The aim of this paper is to explain why cross-sectional estimated migration correlations displayed in the academic and professional literature can be either not consistent, or inefficient, and to discuss alternative approaches. The analysis relies on a model with stochastic migration in which...

In this paper we explain how to use rating histories provided by the internal scoring systems of banks and by rating agencies in order to predict the future risk of a set of borrowers. The method is developed following the steps suggested by the Basle Committee. To introduce both migration...

We propose a general robust semiparametric bootstrap method to estimate conditional predictive distributions of GARCH-type models. Our approach is based on a robust estimator for the parameters in GARCH-type models and a robustified resampling method for standardized GARCH residuals, which...

In this study new realized volatility measures based on Multi-Scale regression and Discrete Sine Transform (DST) approaches are presented. We show that Multi-Scales estimators similar to that recently proposed by Zhang (2004) can be constructed within a simple regression based approach by...

In this study new realized volatility measures based on Multi-Scale regression and Discrete Sine Transform (DST) approaches are presented. We show that Multi-Scales estimators similar to that recently proposed by Zhang (2004) can be constructed within a simple regression based approach by...

Demand is growing for a better understanding of how assets are priced in countries outside of the U.S.While financial data are available for many firms world-wide, it is important to have a reliable andreplicable method of constructing high-quality systematic risk factors from these data. This...

We identify local and global factors across international bond markets that arepoorly spanned by the traditional level, slope and curvature factors but havestrong forecasting power for future bond excess returns. Local and global fac-tors are jointly signicant predictors of bond returns, where...

We explore the pricing of variance risk by decomposing stocks' total variance into systematicand idiosyncratic return variances. While systematic variance risk exhibits a negative priceof risk, common shocks to the variances of idiosyncratic returns carry a large positive riskpremium. This...