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Credit Spreads as Predictors of Real-Time Economic Activity : A Bayesian Model-Averaging Approach
Faust, Jon - 2011
Employing a large number of real and financial indicators, we use Bayesian Model Averaging (BMA) to forecast real-time measures of economic activity. Importantly, the predictor set includes option-adjusted credit spread indexes based on bond portfolios sorted by maturity and credit risk as...
Persistent link: https://www.econbiz.de/10013130981
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Credit Risk and Disaster Risk
Gourio, Francois - 2011
Corporate credit spreads are large, volatile, countercyclical, and significantly larger than expected losses, but existing macroeconomic models with financial frictions fail to reproduce these patterns, because they imply small and constant aggregate risk premia. Building on the idea that...
Persistent link: https://www.econbiz.de/10013125570
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Simple Variance Swaps
Martin, Ian - 2011
the single-name variance swap market to dry up completely. This paper defines and analyzes a simple variance swap, a … relative of the variance swap that in several respects has more desirable properties. First, simple variance swaps are robust …
Persistent link: https://www.econbiz.de/10013128275
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An Evaluation of Multi-Factor Cir Models Using Libor, Swap Rates, and Cap and Swaption Prices
Kaplin, Andrew - 2010
We evaluate the classical Cox, Ingersoll and Ross (1985) (CIR) model using data on LIBOR, swap rates and caps and … swaptions. With three factors the CIR model is able to fit the term structure of LIBOR and swap rates rather well. The model is … able to match the hump shaped unconditional term structure of volatility in the LIBOR-swap market. However, statistical …
Persistent link: https://www.econbiz.de/10012763074
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Banks and Derivatives
Gorton, Gary B.; Rosen, Richard J. - 2021
interest-rate sensitivities of interest rate swap positions of U.S. commercial banks to empirically address the question of … whether swap contracts have increased or decreased systematic risk in the U.S. banking system. We find that the banking system … as a whole faces little net interest-rate risk from swap portfolios …
Persistent link: https://www.econbiz.de/10013224189
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Estimating Event Probabilities from Macroeconomic Models Using Stochastic Simulation
Fair, Ray C. - 2007
This paper shows how probability questions can be answered within the context of macroeconometric models by using stochastic simulation. One can estimate, for example, the probability of a recession occurring within some fixed period in the future. Probability estimates are presented for two...
Persistent link: https://www.econbiz.de/10012776706
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The Influence of Probability on Risky Choice : A Parametric Examination
Lattimore, Pamela K. - 2010
The appeal of expected utility theory as a basis for a descriptive model of risky decision making has diminished is a result of empirical evidence which suggests that individuals do not behave in a manner consistent with the prescriptive tenets of EUT. In this paper, we explore the influence of...
Persistent link: https://www.econbiz.de/10012760030
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Is the Fda Too Conservative or Too Aggressive? : A Bayesian Decision Analysis of Clinical Trial Design
Montazerhodjat, Vahid - 2015
Implicit in the drug-approval process is a trade-off between Type I and Type II error. We explore the application of Bayesian decision analysis (BDA) to minimize the expected cost of drug approval, where relative costs are calibrated using U.S. Burden of Disease Study 2010 data. The results for...
Persistent link: https://www.econbiz.de/10013016659
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Evaluation of Subjective Probability Distributions in the Hrs
Hurd, Michael D.; McGarry, Kathleen M. - 2021
In the Health and Retirement Survey respondents were asked about the chances they would live to 75 or to 85, and the chances they would work after age 62 or 65. We analyze the responses to determine if they behave like probabilities, if their averages are close to average probabilities in the...
Persistent link: https://www.econbiz.de/10013223066
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Individual Subjective Survival Curves
Gan, Li; Hurd, Michael D.; McFadden, Daniel L. - 2021
Testing life-cycle models and other economic models of saving and consumption at micro level requires knowledge of individuals' subjective believes of their mortality risk. Previous studies have shown that individual responses on subjective survival probabilities are generally consistent with...
Persistent link: https://www.econbiz.de/10013226056