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Forecasts in a Slightly Misspecified Finite Order VAR

Müller, Ulrich K. - 2011

We propose a Bayesian procedure for exploiting small, possibly long-lag linear predictability in the innovations of a finite order autoregression. We model the innovations as having a log-spectral density that is a continuous mean-zero Gaussian process of order 1/√T. This local embedding makes...

Persistent link: https://www.econbiz.de/10012461943

A Sharper Ratio : A General Measure for Correctly Ranking Non-Normal Investment Risks

Smetters, Kent - 2013

While the Sharpe ratio is still the dominant measure for ranking risky assets, a substantial effort has been made over the past three decades to find a way to account for non-Normally distributed risks. This paper derives a generalized ranking measure which, under a regularity condition,...

Persistent link: https://www.econbiz.de/10012459163

Asset Pricing with Endogenously Uninsurable Tail Risk

Ai, Hengjie - 2018

This paper studies asset pricing in a setting in which idiosyncratic risk in human capital is not fully insurable. Firms use long-term contracts to provide insurance to workers, but neither side can commit to these contracts; furthermore, worker-firm relationships have endogenous durations owing...

Persistent link: https://www.econbiz.de/10012480625

Parallel Inverse Aggregate Demand Curves in Discrete Choice Models

Kroft, Kory - 2020

This paper highlights a previously-unnoticed property of commonly-used discrete choice models, which is that they feature parallel demand curves. Specifically, we show that in random utility models, inverse aggregate demand curves shift in parallel with respect to variety if and only if the...

Persistent link: https://www.econbiz.de/10012481632

Microeconomic Origins of Macroeconomic Tail Risks

Acemoglu, Daron - 2015

We document that even though the normal distribution provides a good approximation to GDP fluctuations, it severely underpredicts "macroeconomic tail risks," that is, the frequency of large economic downturns. Using a multi-sector general equilibrium model, we show that the interplay of...

Persistent link: https://www.econbiz.de/10012457801

Do Rare Events Explain CDX Tranche Spreads?

Seo, Sang Byung - 2016

We investigate whether a model with a time-varying probability of economic disaster can explain the pricing of collateralized debt obligations, both prior to and during the 2008-2009 financial crisis. Namely, we examine the pricing of tranches on the CDX, an index of credit default swaps on...

Persistent link: https://www.econbiz.de/10012455957

Solution Methods for Models with Rare Disasters

Fernández-Villaverde, Jesús - 2016

This paper compares different solution methods for computing the equilibrium of dynamic stochastic general equilibrium (DSGE) models with rare disasters along the line of those proposed by Rietz (1988), Barro (2006}, Gabaix (2012), and Gourio (2012). DSGE models with rare disasters require...

Persistent link: https://www.econbiz.de/10012456676

Implications of Alternative Operational Risk Modeling Techniques

de Fontnouvelle, Patrick - 2005

variants of value at risk models that estimate frequency, severity, and loss distributions. This paper examines the empirical … regularities in operational loss data. Using loss data from six large internationally active banking institutions, we find that … loss data by event types are quite similar across institutions. Furthermore, our results are consistent with economic …

Persistent link: https://www.econbiz.de/10012467582

Loss Aversion and Seller Behavior : Evidence from the Housing Market

Genesove, David - 2001

Data from downtown Boston in the 1990s show that loss aversion determines seller behavior in the housing market …

Persistent link: https://www.econbiz.de/10012470583

Covering Up Trading Losses : Opportunity-Cost Accounting as an Internal Control Mechanism

Kane, Edward J. - 1998

This paper analyzes the methods of loss concealment used by rogue traders in the Barings and Daiwa scandals. The …

Persistent link: https://www.econbiz.de/10012471988

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