This paper studies equilibrium in a pure exchange economy with unobservable Markov switching consumption growth regimes and regime-dependent preferences. Variations in risk attitudes have fundamental effects on the structure of equilibrium. Explicit solutions are provided for the market price of...

A large number of parameterizations have been proposed to model conditional variance dynamics in a multivariate framework. However, little is known about the ranking of multivariate volatility models in terms of their forecasting ability. The ranking of multivariate volatility models is...

We study the development of a duopoly industry -evolution of firm capacities and competitive behavior- in a continuous-time real-options model of capacity investment. Our methodology allows the evaluation of investment options and exercise rules in a strategic setup. In the initial industry...

We attempt to answer the following questions: What are the revaluation effects and the impact on performance, volatility, and return correlation from stock market liberalization in emerging markets? These questions have been studied extensively at the market-level but not at the firm level. Our...

We develop a class of ARCH models for series sampled at unequal time intervals set by trade or quote arrivals. Our approach combines insights from the temporal aggregation for GARCH models discussed by Drost and Nijman (1993) and Drost and Werker (1994), and the autoregressive conditional...

The risk-return trade-off being the very substance of finance, volatility has always been an essential parameter for portfolio management. Moreover, the generalization of the use of derivatives has placed in the forefront the concept of volatility risk: i.e. the model risk generated by treating...