We introduce a new model for time-varying spatial dependence. The model extends the well-known static spatial lag model. All parameters can be estimated conveniently by maximum likelihood. We establish the theoretical properties of the model and show that the maximum likelihood estimator for the...

Principal Component Analysis (PCA) is a common procedure for the analysis of financial market data, such as implied volatility smiles or interest rate curves. Recently, Pelsser and Lord [11] raised the question whether PCA results may not be 'facts but artefacts'. We extend this line of research...

Current understanding holds that financial contagion is driven mainly by system-wide interconnectedness of institutions. A distinction has been made between systematic and idiosyncratic channels of contagion, with shocks transmitted through the latter expected to be substantially more likely to...