In many credit risk and pricing applications, credit transition matrix is modeled by a constant transition probability or generator matrix for Markov processes. Based on empirical evidence, we model rating transition processes as piecewise homogeneous Markov chains with unobserved structural...

Markowitz's celebrated mean--variance portfolio optimization theory assumes that the means and covariances of the underlying asset returns are known. In practice, they are unknown and have to be estimated from historical data. Plugging the estimates into the efficient frontier that assumes known...

In this paper, we argue that economists can learn a great deal from the design principles implemented in medical research. We develop a theoretical model to show the logic of adaptive sequential experiment design in the presence of uncertainty over negative effects and discuss how to choose...

Many longitudinal studies involve relating an outcome process to a set of possibly time-varying covariates, giving rise to the usual regression models for longitudinal data. When the purpose of the study is to investigate the covariate effects when experimental environment undergoes abrupt...

As a function of time t, mean residual life is the remaining life expectancy of a subject given survival up to t. The proportional mean residual life model, proposed by Oakes & Dasu (1990), provides an alternative to the Cox proportional hazards model to study the association between survival...

We analyze a three-player legislative bargaining game over an ideological and a distributive decision. Legislators are privately informed about their ideological intensities, i.e., the weight placed on the ideological decision relative to the weight placed on the distributive decision....

We analyze a legislative bargaining game over an ideological and a distributive issue. Legislators are privately informed about their ideological positions. Communication takes place before a proposal is offered and majority-rule voting determines the outcome. We compare the outcome of the...

Risk attitude and perception is reflected in brain reactions during RPID experiments. Given the fMRI data, an important research question is how to detect risk related regions and to investigate the relation between risk preferences and brain activity. Conventional methods are often insensitive...

We propose the use of a local autoregressive (LAR) model for adaptive estimation and forecasting of three of China’s key macroeconomic variables: GDP growth, inflation and the 7-day interbank lending rate. The approach takes into account possible structural changes in the data-generating...

But when a policy dimension and a distributive dimension are both present, we show that in equilibrium, the demands by the legislators have some influence on the bargaining outcome but they are not fully informative about the legislators' true preferences. We characterize equilibria under the...