The moral hazard problem associated with deposit insurance generates the potential for excessive risk taking on the part of bank owners. The banking literature identifies franchise value--a firm's profit-generating potential--as one force mitigating that risk taking. We argue that in the...

This paper examines the relationship between asset risk and franchise values and between asset risk and ownership structure. Stock price data from publicly traded S&L is used to measure portfolio risk and franchise or charter values. The empirical results provide support for the moral hazard...

Beginning in 1998, commercial banks may determine their regulatory capital requirements for market risk exposure using value-at-risk (VaR) models; i.e., time-series models of the distributions of portfolio returns. Currently, regulators have available three statistical methods for evaluating the...

Foreign exchange rates are examined using cointegration tests over various time periods linked to regime shifts in central bank behavior. The number of cointegrating vectors seems to vary across these regime changes within the foreign exchange market. For example, cointegration is not generally...

Forecasts are of great importance and widely used in economics and finance. Quite simply, good forecasts lead to good decisions. The importance of forecast evaluation and combination techniques follows immediately—forecast users naturally have a keen interest in monitoring and improving...

Many economic and financial time series have been found to exhibit dynamics in variance; that is, the second moment of the time series innovations varies over time. Many possible model specifications are available to capture this phenomena, but to date, the class of models most widely used are...

The volatility forecast evaluations most meaningful to forecast users are those conducted under economically relevant loss functions. Although several such loss functions are proposed in the literature, their implied economic costs are of interest only to specific types of volatility forecast...