In this paper we introduce a stochastic network formation model where agents choose both actions and links. Neighbors in the network benefit from each other's action levels through local complementarities and there exists a global interaction effect reflecting a strategic substitutability in...

Large scale Bayesian model averaging and variable selection exercises present, despite the great increase in desktop computing power, considerable computational challenges. Due to the large scale it is impossible to evaluate all possible models and estimates of posterior probabilities are...

In this paper we discuss how a regression model, with a non-continuous response variable, that allows for dependency between observations should be estimated when observations are clustered and there are repeated measurements on the subjects. The cluster sizes are assumed to be large. We …nd...

Promoting social information reporting and disclosure can promote sustainable banking. The paper aims to measure banking social sustainability by constructing a new interval-based composite indicator using the Thomson Reuters database. In this work, we propose an approach to constructing...

We consider the issue of Block Bootstrap methods in processes that exhibit strong dependence. The main difficulty is to transform the series in such way that implementation of these techniques can provide an accurate approximation to the true distribution of the test statistic under...

The solutions of a macroeconometricmodel with expectations of future-dated variables has to be approximated by numerical simulations. A brief review of deterministic and stochastic dynamic simulations of a backward-looking model is followed by a conceptual presentation of methods for dynamic...

Option prices seem to behave in ways inconsistent with the Black-Scholes model. Implied volatility varies with the strike price in a parabolic shape that is often called the volatility 'smile.' My objective in this paper is to identify implied probability distributions that might explain this...

We analyze the pricing of risky income streams in a world with competitive security markets where investors are constrained by restrictions on possible portfolio holdings. We investigate how we can transfer concepts and pricing techniques from a world without frictions to such a more realistic...

This paper presents a new numerical method for pricing American call options when the volatility of the price of the underlying stock is stochastic. By exploiting a log-linear relationship of the optimal exercise boundary with respect to volatility changes, we derive an integral representation...

This paper derives an analytic expression for the distribution of the average volatility in the stochastic volatility model of Hull and White. This result answers a longstanding question, posed by Hull and White (Journal of Finance 42, 1987), whether such an analytic form exists. Our findings...