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Likelihood-based estimation of latent generalised ARCH structures

Fiorentini, Gabriele; Sentana, Enrique; Shephard, Neil - London School of Economics (LSE) - 2003

GARCH models are commonly used as latent processes in econometrics, financial economics and macroeconomics. Yet no exact likelihood analysis of these models has been provided so far. In this paper we outline the issues and suggest a Markov chain Monte Carlo algorithm which allows the calculation...

Persistent link: https://www.econbiz.de/10010884643

The Dantzig selector in Cox's proportional hazards model

Antoniadis, Anestis; Fryzlewicz, Piotr; Letué, Frédérique - London School of Economics (LSE) - 2010

The Dantzig selector (DS) is a recent approach of estimation in high-dimensional linear regression models with a large … selection operator (LASSO), this approach sets certain regression coefficients exactly to zero, thus performing variable … selection. However, such a framework, contrary to the LASSO, has never been used in regression models for survival data with …

Persistent link: https://www.econbiz.de/10010745019

Inference for stochastic volatility models using time change transformations

Kalogeropoulos, Konstantinos; Roberts, Gareth O.; … - London School of Economics (LSE) - 2010

We address the problem of parameter estimation for diffusion driven stochastic volatility models through Markov chain Monte Carlo (MCMC). To avoid degeneracy issues we introduce an innovative reparametrisation defined through transformations that operate on the time scale of the diffusion. A...

Persistent link: https://www.econbiz.de/10010746298

Balance sheet capacity and endogenous risk

Danielsson, Jon; Song Shin, Hyun; Zigrand, Jean-Pierre - London School of Economics (LSE) - 2011

Banks operating under Value-at-Risk constraints give rise to a welldefined aggregate balance sheet capacity for the banking sector as a whole that depends on total bank capital. Equilibrium risk and market risk premiums can be solved in closed form as functions of aggregate bank capital. We...

Persistent link: https://www.econbiz.de/10010884614

On time-scaling of risk and the square–root–of–time rule

Danielsson, Jon; Zigrand, Jean-Pierre - London School of Economics (LSE) - 2003

Many financial applications, such as risk analysis and derivatives pricing, depend on time scaling of risk. A common method for this purpose, though only correct when returns are iid normal, is the square–root–of–time rule where an estimated quantile of a return distribution is scaled to a...

Persistent link: https://www.econbiz.de/10010745168

Market liquidity and funding liquidity

Brunnermeier, Markus K.; Pedersen, Lasse Heje - London School of Economics (LSE) - 2007

We provide a model that links an asset's market liquidity; i.e., the ease with which it is traded; and traders' funding liquidity, i.e. the ease with which they can obtain funding. Traders provide market liquidity, and their ability to do so depends on their availability of funding. Conversely,...

Persistent link: https://www.econbiz.de/10010745945

Equilibrium asset pricing with systemic risk

Danielsson, Jon; Zigrand, Jean-Pierre - London School of Economics (LSE) - 2006

We provide an equilibrium multi-asset pricing model with micro-founded systemic risk and heterogeneous investors. Systemic risk arises due to excessive leverage and risk taking induced by free-riding externalities. Global risk-sensitive financial regulations are introduced with a view of...

Persistent link: https://www.econbiz.de/10010746199

The impact of risk regulation on price dynamics

Danielsson, Jon; Shin, Hyun Song; Zigrand, Jean-Pierre - London School of Economics (LSE) - 2004

Most financial risk regulations assume that asset returns are exogenous, where risk is estimated from historical data. This assumption fails to take into account the feedback effect of trading decisions on prices. We investigate the consequences of risk constrained trading by means of...

Persistent link: https://www.econbiz.de/10011126542

Equilibrium asset pricing with systemic risk

Danielsson, Jon; Zigrand, Jean-Pierre - London School of Economics (LSE) - 2008

We provide an equilibrium multi-asset pricing model with micro- founded systemic risk and heterogeneous investors. Systemic risk arises due to excessive leverage and risk taking induced by free-riding externalities. Global risk-sensitive financial regulations are introduced with a view of...

Persistent link: https://www.econbiz.de/10011126632

Model risk of risk models

Danielsson, Jon; James, Kevin R.; Valenzuela, Marcela; … - London School of Economics (LSE) - 2014

This paper evaluates the model risk of models used for forecasting systemic and market risk. Model risk, which is the potential for different models to provide inconsistent outcomes, is shown to be increasing with and caused by market uncertainty. During calm periods, the underlying risk...

Persistent link: https://www.econbiz.de/10011163510