In this paper we consider the optimal stopping problem for general dynamic monetary utility functionals. Sufficient conditions for the Bellman principle and the existence of optimal stopping times are provided. Particular attention is payed to representations which allow for a numerical...

Market option prices in last 20 years conrmed deviations from the Black and Scholes (BS) models assumptions, especially on the BS implied volatility. Implied binomial trees (IBT) models capture the variations of the implied volatility known as \volatility smile". They provide a discrete...

In this paper we adopt a principal components analysis (PCA) to reduce the dimensionality of the term structure and employ autoregressive models (AR) to forecast principal components which, in turn, are used to forecast swap rates. Arguing in favor of structural variation, we propose data...

In this study we forecast the term structure of FIBOR/EURIBOR swap rates by means of recursive vector autoregressive (VAR) models. In advance, a principal components analysis (PCA) is adopted to reduce the dimensionality of the term structure. To evaluate ex–ante forecasting performance for...

This paper addresses the question of the British state of convergence towards the Euro area, compared to the USA. Economically, the analysis is based on dependences in the money and capital markets, namely the uncovered interest parity (UIP) and the expectation hypothesis of the term structure...

I construct risk-corrected approximations of the policy functions of DSGEmodels around the stochastic steady state and ergodic mean that are linear in the state variables. The resulting approximations are uniformly more accurate than standard linear approximations and capture the dynamics of...

Predicting default probabilities is at the core of credit risk management and is becoming more and more important for banks in order to measure their client's degree of risk, and for rms to operate successfully. The SVM with evolutionary feature selection is applied to the CreditReform database....

We introduce a nonlinear infinite moving average as an alternative to the standard state-space policy function for solving nonlinear DSGE models. Perturbation of the nonlinear moving average policy function provides a direct mapping from a history of innovations to endogenous variables,...

We prove that standard regularity and saddle stability assumptions for linear approximations are sufficient to guarantee the existence of a unique solution for all undetermined coefficients of nonlinear perturbations of arbitrary order to discrete time DSGE models. We derive the perturbation...