This paper presents a new stochastic volatility model which allows for persistent shifts in volatility of stock market returns, referred to as structural breaks. These shifts are endogenously driven by large return shocks (innovations), reflecting large pieces of market news. These shocks are...

In the aftermath of the recent financial crisis there has been considerable focus on methods for predicting macroeconomic variables when their behavior is subject to abrupt changes, associated for example with crisis periods. In this paper we propose similarity based approaches as a way to...

We build a time varying DSGE model with financial frictions in order to evaluate changes in the responses of the macroeconomy to financial friction shocks. Using US data, we find that the transmission of the financial friction shock to economic variables, such as output growth, has not changed...

We consider time series forecasting in the presence of ongoing structural change where both the time-series dependence and the nature of the structural change are unknown. Methods that downweight older data, such as rolling regressions, forecast averaging over different windows and exponentially...

We consider time series forecasting in the presence of ongoing structural change where both the time series dependence and the nature of the structural change are unknown. Methods that downweight older data, such as rolling regressions, forecast averaging over different windows and exponentially...

In this paper we propose the use of an asymmetric binary link function to extend the proportional hazard model for predicting loan default. The rationale behind this approach is that the symmetry assumption, that has been widely used in the literature, could be considered as quite restrictive,...