This paper extends Gertler's (1999) tractable overlapping generations model by allowing for imperfect labour markets and distortionary taxation. Furthermore, we allow for stochastic variation in demographic structure. The model is then used to study demographic change in a small open economy of...

This paper analyzes effects of tax-favored savings plans on savings and retirement decisions in a realistically specified life-cycle model. Individuals face mortality risk and stochastic earnings, allocate assets between conventional savings accounts (CSAs) and tax-deferred accounts (TDAs), make...

Using monthly data from 1926:01 to 2003:12 for the United States, this paper examines the predictability of real stock prices based on the dividend-price ratio. In particular, we focus on estimating and forecasting a nonlinear exponential smooth autoregressive model (ESTAR). One motivation for...

This paper examines different multivariate models to evaluate what are the main determinants when doing VaR forecasts for a portfolio of assets. To achieve this goal, we unify past multivariate models by using a general copula framework and we propose many new extensions. We differentiate the...

The empirical evidence from financial markets suggests that the pattern of response of market volatility to shocks is highly dependent on the magnitude of shocks themselves. Markov-Switching GARCH (MS-GARCH) models are a valuable tool for modelling state dependence in the dynamics of the...

This paper is a step towards the econometric foundation of computational intelligence in finance. Financial time series modeling and forecasting are addressed with an artificial neural network, examining issues of its topology dependency. Structural dependency of results is viewed not as a...

VAR modelling is a frequent technique in econometrics for assumed linear processes. VAR modelling offers some desirable features such as relatively simple procedures for model specification and the possibility of making a quick and non-iterative maximum likelihood estimation of the system...

The Efficient Market Hypothesis (EMH) states that the current market price fully reflects all available information. The weak form of the EMH considers only past price data and rules out predictions based on the price data only. The prices follow a random walk, where successive changes have zero...

This paper describes and analyses the use of the Filtered Historical Simulation algorithm in pricing spread options. Spread options are contracts whose payoff depends on the price difference (spread) between two or more underlying assets at a future date. Such kind of options are written in the...

The main problem in the combination of volatility forecasts is that the volatility cannot be directly observed and hence loss functions such as the MSFE cannot be directly used unless a suitable proxy of the conditional variance is defined. A common approach is to use the squared returns but...