In this paper we develop a new methodology for finding optimal government policies in economies with heterogeneous agents. The methodology is solely based on three classes of equilibrium conditions from the government's and individual agent's optimization problems: 1) the first order conditions;...

This paper aims at providing macroeconomists with a detailed exposition of the New Keynesian DSGE model. Both the sticky price version and the sticky information variant are derived mathematically. Moreover, we simulate the models, also including lagged terms in the sticky price version, and...

In this paper, I show how gradient-based optimization methods can be used to estimate stochastic dynamic models in economics. By extending the state space to include all model parameters, I show that we need to solve the model only once to do structural estimation. Parameters are then estimated...

We propose an integrated model of the joint dynamics of FX rates and asset prices for the pricing of FX derivatives, including Quanto products; the model is based on a multivariate construction for Levy processes which proves to be analytically tractable. The approach allows for simultaneous...

In this paper we apply the multivariate construction for Lévy processes introduced by Ballotta and Bonfiglioli (2014) to propose an integrated model for the joint dynamics of FX exchange rates and asset prices. We show that the proposed construction is consistent in terms of symmetries with...

Hedge funds offer desirable risk-return profiles; but we also find high management fees, lack of transparency and worse, very limited liquidity (they are often closed to new investors and disinvestment fees can be prohibitive). This creates an incentive to replicate the attractive features of...

The recent crisis made it evident that replicating the performance of a benchmark is not a sufficient goal to meet the expectations of usually risk-averse investors. The manager should also consider that the investor are seeking for a downside protection when the benchmark performs poorly and...

We study the impact of income disaster-which can be triggered by various reasons such as pandemics and technological disruption-on Friedman's permanent income hypothesis. Although the hypothesis is still retained, our general equilibrium model offers two insights. First, with income disaster the...

This paper proposes a GARCH-jump mixed model for individual stock returns that takes into account four types of risks: the systematic and idiosyncratic jumps and the systematic and idiosyncratic diffusive volatility. By considering a general pricing kernel with all underlying risk factors, we...

We develop a novel machine learning method to estimate large dimensional time-varying GMM models via our newly designed ridge fusion regularization scheme. Our method is a one-step procedure and allows for abrupt, smooth and dual type time variation with a fast rate of convergence. It...