We provide a simulation smoother to a exible state-space model with lagged states and lagged dependent variables. Qian (2014) has introduced this state-space model and proposes a fast Kalman filter with time-varying state dimension in the presence of missing observations in the data. In this...

We provide a simulation smoother to a exible state-space model with lagged states and lagged dependent variables. Qian (2014) has introduced this state-space model and proposes a fast Kalman filter with time-varying state dimension in the presence of missing observations in the data. In this...

A major concern about the use of simulation models regards their relationship with the empirical data. The identification of a suitable indicator quantifying the distance between the model and the data would help and guide model selection and output validation. This paper proposes the use of a...

Simulated models suffer intrinsically from validation and comparison problems. The choice of a suitable indicator quantifying the distance between the model and the data is pivotal to model selection. However, how to validate and discriminate between alternative models is still an open problem...

The main goal of this paper is to better understand the behavior of credit spreads in the past and the potential risk of unexpected future credit spread changes. One important consideration to note regarding credit spreads is the fact that bond spreads contain a liquidity premium, which...

In general, the properties of the conditional distribution of multiple period returns do not follow easily from the one-period data generating process. This renders computation of Value-at-Risk and Expected Shortfall for multiple period returns a non-trivial task. In this paper we consider some...

We introduce a financially constrained production framework in which heterogeneous firms and banks entertain multiple credit connections. The parameters of credit market interaction are estimated from real data in order to reproduce a set of empirical regularities of the Japanese credit market....

A major concern about the use of simulation models regards their relationship with the empirical data. The identification of a suitable indicator quantifying the distance between the model and the data would help and guide model selection and output validation. This paper proposes the use of a...

Backtesting stock market investment strategies is fraught with danger – for example, overfitting. The signal to noise ratio in stock markets is so low that overfitting is inevitable. Simulation offers a means of assessing and compensating for the dangers. It is not obvious at first how...

Empirical research on the benefits of investing in inflation-linked bonds usually relies on a limited number of observations due to the relatively recent introduction of these assets. We estimate models for the break-even inflation rate and use these to create hypothetical inflation-linked bond...