We develop a new model where the dynamic structure of the asset price, after the fundamental value is removed, is subject to two different regimes. One regime reflects the normal period where the asset price divided by the dividend is assumed to follow a mean-reverting process around a...

This paper investigates liquidity changes in the corporate CDS market around two events that increased market transparency and standardization during the financial crisis: the regular dissemination of CDS positions by DTCC starting November 2008, and the implementation of the Small Bang in June...

Most solved dynamic structural macrofinance models are non-linear and/or non-Gaussian state-space models with high-dimensional and complex structures. We propose an annealed controlled sequential Monte Carlo method that delivers numerically stable and low variance estimators of the likelihood...

We estimate and test long-run risk models using international macroeconomic and financial data. The benchmark model features a representative agent who has recursive preferences with a time preference shock, a persistent component in expected consumption growth, and stochastic volatility in...

This paper examines whether deep/machine learning can help find any statistical and/or economic evidence of out-of-sample bond return predictability when real-time, instead of fully-revised, macro variables are taken as predictors. First, when using pure real-time macro information alone, we...

A common belief is to qualify the credit default swap (CDS) market as very liquid. However, looking at intra-daily CDS data on individual firms from a major inter-dealer broker, we find only limited support for this view. In fact, bid-ask spreads and daily number of trades in our CDS data are...

This paper addresses whether credit rating downgrades feed back on the asset value of the downgraded companies, causing real losses. To investigate this issue we construct a structural credit risk model incorporating ratings and the feedback loss. To estimate the parameters of the model we...

The paper proposes a new class of continuous-time asset pricing models where negative jumps play a crucial role. Whenever there is a negative jump in asset returns, it is simultaneously passed on to diffusion variance and the jump intensity, generating self-exciting co-jumps of prices and...

The paper proposes a new class of continuous-time asset pricing models where whenever there is a negative jump in asset returns, it is simultaneously passed on to diffusion variance and the jump intensity, generating co-jumps of prices and volatility and jump clustering. To properly deal with...