This paper analyzes and quantifies the idea of model risk in the environment of internal modelbuilding. We define various types of model risk including estimation risk, model risk in distributionand model risk in functional form. By the quantification of these concepts we analyzethe impact of...

Within an internal model the Economic Scenario Generator (ESG) is an important component. In orderto get a regulatory approval of an internal model it is required that the implemented models (must be) passeda rigorous validation process, see Ceiops [2009].In this paper we focus on the particular...

In ESTAR models it is usually dfficult to determine parameter estimates, as it can be observedin the literature. We show that the phenomena of getting strongly biased estimators is aconsequence of the so-called identication problem, the problem of properly distinguishing thetransition function...

Determining good parameter estimates in ESTAR models is known to be difficult. We showthat the phenomena of getting strongly biased estimators is a consequence of the so-calledidentication problem, the problem of properly distinguishing the transition function in relationto extreme parameter...

While it is widely agreed that Purchasing Power Parity (PPP) holds as a long-runconcept the specific dynamic driving the process is largely build upon a priori economicbelief rather than a thorough statistical modeling procedure. The two prevailing timeseries models, i.e. the exponential smooth...

We study the empirical behaviour of semi-parametric log-periodogram estimation forlong memory models when the true process exhibits a change in persistence. Simulationresults confirm theoretical arguments which suggest that evidence for long memory islikely to be found...