This paper develops a model and estimate simultaneously the joint dynamics of default-free and defaultable bond term structures.

We construct a model for pricing sovereign debt that accounts for the risks of both default and restructuring, and allows for compensation for illiquidity. Using a new and relatively efficient method, we estimate the model using Russian dollar-denominated bonds.(...)

Recently, Diebold and Li (2003) obtained good forecasting results foryield curves in a reparametrized Nelson-Siegel framework. We analyze similarmodeling approaches for price curves of variance swaps that serve nowadaysas hedging instruments for options on realized variance. We consider the...

We investigate the evolution of health over the life-cycle. We allow for two sources of persistence: unobserved heterogeneity and state dependence. Estimation indicates that there is a large degree of heterogeneity. For half the population, there are modest degrees of state dependence...

We introduce a Nelson-Siegel type interest rate term structure model with the underlying yield factors following autoregressive processes revealing time-varying stochastic volatility. The factor volatilities capture risk inherent to the term structure and are associated with the time-varying...

In this paper we first investigate the validity of a general Value at Risk approach, which iswidely used for risk management in banking and insurance companies. We discuss and widely rejectthe conventional assumptions, e.g. independent identically distributed normal returns, and as...

We use a unique dataset of bond downgrades from a niche rating company that has been found to be reacting faster to publicly available information than its competitors. Using regime-switching models we propose risk measures to quantify stock return disturbances (distress costs) associated with...

We extend the Carlstrom and Fuerst (American Economic Review,1997, 87, pp. 893–910) agency cost model of business cycles by includingtime-varying uncertainty in the technology shocks that affectcapital production. We first demonstrate that standard linearizationmethods can be used to solve the...

There is a large body of evidence supporting the notion that a) those who grow up to be patient(forward-looking) do better in life compared to those who do not, and b) parents can inculcatethe virtue of delayed gratification in their children by taking the right sort of actions. We studya...

We study a variant of the conventional keeping-up-with-the-Joneses setup in whichheterogeneous-ability agents care both about consumption and leisure and receive anutility premium if their consumption exceeds that of the Joneses’. Unlike the conventionalsetup in which all agents are assumed to...