Density forecasts have become quite important in economics and finance. For example, such forecasts play a central role in modern financial risk management techniques like Value at Risk. This paper suggests a regression based density forecast evaluation framework as a simple alternative to other...

The paper presents a comprehensive data set of all bonds issued by the sixteen German states (L¨ander) since 1992. It thus provides a complete picture of a capital market comparable in size to funds raised in the German fixed income market for corporations. The quantitative analysis reveals...

Assessing the discriminative power of rating systems is an important question to banks and to regulators. In this article we analyze the Cumulative Accuracy Profile (CAP) and the Receiver Operating Characteristic (ROC) which are both commonly used in practice. We give a test-theoretic...

Following Diamond (1997) and Fecht (2004) we use a model in which financial market access of households restrains the efficiency of the liquidity insurance that banks' deposit contracts provide to households that are subject to idiosyncratic liquidity shocks. But in contrast to these approaches...

Recent empirical studies criticize the sluggish financial integration in the euro area and find that only interbank money markets are fully integrated so far. This paper studies the optimal regional and/or sectoral integration of financial systems given that integration is restricted to the...

This paper looks at the dynamic price relationship between spreads in the corporate bond market and credit default swaps (CDS). It picks up where Blanco et al (2005) leave off but is focused on European credit markets. The study is based on companies listed in the iTraxx CDS index and thus on...

This paper compares four forms of inter-regional financial risk sharing: (i) segmentation, (ii) integration trough the secured interbank market, (iii) integration trough the unsecured interbank market, (iv) integration of retail markets. The secured interbank market is an optimal risk-sharing...

Recognizing that human rationality has bounds that are unequal across individuals entails treating it as a special scarce resource, tied to individuals and used for deciding on its own uses. This causes a meta-mathematical difficulty to the axiomatic theories of human capital and resource...

This paper studies the signalling effect of the consumption-wealth ratio (cay) on German stock returns via vector error correction models (VECMs). The effect of cay on U.S. stock returns has been recently confirmed by Lettau and Ludvigson with a two-stage method. In this paper, performances of...

One of the main results of the literature on the effects of uncertainty on trade states that uncertainty should not matter in the presence of well developed forward markets. Empirical studies, however, do not support this result. We derive the demand for forward cover in a small open economy...