This paper explores the implications of time varying volatility for optimal monetary policy and the measurement of welfare costs. We show how macroeconomic models with linear and quadratic state dependence in their variance structure can be used for the analysis of optimal policy within the...

This paper uses a simplified version of the Duffie and Lando (2002) deferred filtration model to handle the effect of asymmetric information about US banks asset portfolios during the recent crisis, when banks were reluctant to lend to one another because they were not sure about the balance...

This paper shows that the standard and deferred filtration structural models of corporate default are isomorphic, allowing the insights of the standard full information setting to be carried over to the more complex case of asymmetric information. It shows that the accounting lag, which provides...

This paper addresses questions about the structure of the economy and financial markets raised by recent research on the term structure. The work of Duffee (2012) and Joslin, Preibsch and Singleton (2012) suggests that macroeconomic variables affect risk premia rather than bond yields, which are...

We adapt the Meiselman (1962) OLS forward rate revision framework to obtain the discrete time analogue of the Heath, Jarrow and Morton (1992) specification and use it for estimating and testing term structure models. Our framework is based upon the Wold representation of the factor dynamics and...

This study examines the optimal portfolio choice of a long-term bond investor, who faces a set of macroeconomic risk factors, both observable (inflation and output gap) and latent ones (real interest rate, inflation central tendency and real interest rate central tendency). It makes use of the...

This paper develops a macro-finance model of the yield curve and uses this to explain the behavior of the US Treasury market. Unlike previous macro-finance models which assume a homoscedastic error process and suppose that the one-period return is directly observable, I develop a general affine...

The effect of information and communications technology (ICT) and other investment on the UK's GDP potential is analysed and tests of the standard assumptions are provided. It is found that, in the absence of hedonic price series for the UK ICT sector, it is acceptable to use surrogates based on...