Estimation of Default Probabilities is critical to the correct pricing of credit derivatives and determining the appropriate level of reserves to support credit risky activities (Basel II). Given that credit default swaps (CDS) reflect the market consensus on default probability (with a direct...

This paper presents a fully rational general equilibrium model that produces a time-varying exchange rate risk premium and solves the uncovered interest rate parity (U.I.P) puzzle. In this two-country model, agents are characterized by slow-moving external habit preferences similar to Campbell &...

We propose a new semiparametric procedure for estimating multivariate models with conditioning variables. The semiparametric model is based on the parametric conditional copula and nonparametric conditional marginals. To avoid the curse of dimensionality in the estimation of the latter, we...

Emerging market financial crises are abrupt and dramatic, usually occurring after a period of high output growth, massive capital flows, and a boom in asset markets. This paper develops an equilibrium asset pricing model with informational frictions in which vulnerability and the crisis itself...

We present a quantitative analysis of the effects of population aging and pension reform on international capital markets. First, demographic change alters the time path of aggregate savings within each country. Second, this process may be amplified when a pension reform shifts old-age provision...

In this paper we test whether volatility in six emerging markets has changed significantly over the period 1976:01-2002:03. This period corresponds to the years of more profound development of both the financial and the productive sides in emerging countries. We use alternative methodologies of...