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The distinction between stationarity, difference stationarity, deterministic trends as well as between short- and long-range dependence has a major impact on statistical conclusions, such as confidence intervals for population quantities or point and interval forecasts. In this paper, recent...
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An important determinant of option prices is the elasticity of the pricing kernel used to price all claims in the economy. In this paper, we first show that for a given forward price of the underlying asset, option prices are higher when the elasticity of the pricing kernel is declining than...
Persistent link: https://www.econbiz.de/10011545120
Mis-selling by banks has occurred repeatedly in many nations over the last decade. While clients may benefit from competition - enabling them to choose financial services at lowest costs - economic frictions between banks and clients may give rise to mis-selling. Examples of mis-selling are...
Persistent link: https://www.econbiz.de/10011503064
This essay reviews a cornerstone of the European Banking Union project, the resolution of systemically important banks. The focus is on the inherent conflict between a possible intervention by resolution authorities, conditional on a crisis situation, and effective prevention prior to a crisis....
Persistent link: https://www.econbiz.de/10010402319
Portfolio choice is usually modelled by von Neumann-Morgenstern utility. Risk-value models are more general and permit the derivation of risk-value efficient frontiers. A behaviorally based risk measure with an endogenous or exogenous benchmark is used to derive efficient portfolios and to...
Persistent link: https://www.econbiz.de/10009675747
Israelis commonly hold substantial foreign currency balances at home. This paper examines the phenomenon of these "closet dollars." We show that closet dollars are attractive only if there exists a positive probability that domestic deposits will pay negative dollar rates of return. If such...
Persistent link: https://www.econbiz.de/10009675778
Securitization is a financial innovation that experiences a boom-bust cycle, as many other innovations before. This paper analyzes possible reasons for the breakdown of primary and secondary securitization markets, and argues that misaligned incentives along the value chain are the primary cause...
Persistent link: https://www.econbiz.de/10003831219