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Sources of entropy in representative agent models

Backus, David; Chernov, Mikhail; Zin, Stanley E. - C.E.P.R. Discussion Papers - 2011

preferences, habits, and jumps. The metrics describe the pricing kernel’s dispersion (the entropy of the title) and dynamics (time …

Persistent link: https://www.econbiz.de/10009225955

Regime Changes and Financial Markets

Ang, Andrew; Timmermann, Allan G - C.E.P.R. Discussion Papers - 2011

Regime switching models can match the tendency of financial markets to often change their behavior abruptly and the phenomenon that the new behavior of financial variables often persists for several periods after such a change. While the regimes captured by regime switching models are identified...

Persistent link: https://www.econbiz.de/10009205067

Valuation of VIX Derivatives

Mencía, Javier; Sentana, Enrique - C.E.P.R. Discussion Papers - 2010

volatility mean reverting assumptions. We propose generalisations with a time varying central tendency, jumps and stochastic …

Persistent link: https://www.econbiz.de/10008468615

Credit Risk and Disaster Risk

Gourio, François - C.E.P.R. Discussion Papers - 2011

Macroeconomic models with financial frictions typically imply that the excess return on a well-diversified portfolio of corporate bonds is close to zero. In contrast, the empirical finance literature documents large and time-varying risk premia in the corporate bond market (the "credit spread...

Persistent link: https://www.econbiz.de/10008854475

Sources of Risk in Currency Returns

Chernov, Mikhail; Graveline, Jeremy; Zviadadze, Irina - C.E.P.R. Discussion Papers - 2012

includes (i) Gaussian shocks with stochastic variance, (ii) jumps up and down in the exchange rate, and (iii) jumps in the … probability of jumps in variance is increasing in the variance but not related to interest rates. Many of the jumps in exchange … rates are associated with macroeconomic and political news, but jumps in variance are not. Overall, jumps account for 25% of …

Persistent link: https://www.econbiz.de/10011083487

On Adjusting the HP-Filter for the Frequency of Observations

Ravn, Morten O; Uhlig, Harald - C.E.P.R. Discussion Papers - 2001

This Paper studies how the HP-Filter should be adjusted, when changing the frequency of observations. It complements the results of Baxter and King (1999) with an analytical analysis, demonstrating that the filter parameter should be adjusted by multiplying it with the fourth power of the...

Persistent link: https://www.econbiz.de/10005067569

Political Risk And Irreversible Investment: Theory And An Application To Quebec

Altug, Sumru G.; Demers, Fanny S; Demers, Michel - C.E.P.R. Discussion Papers - 2000

Political risk is widely present in developing but also in developed countries, and stems from a variety of sources. The objective of this paper is twofold. First, we develop a theoretical model to investigate the impact of political risk on irreversible investment. Second, we apply our model to...

Persistent link: https://www.econbiz.de/10005114366