We propose a new class of dynamic order book models that allow us to 1) study episodes of extreme low liquidity and 2) unite liquidity and volatility in one framework through which their joint dynamics can be examined. Liquidity and volatility in the U.S. Treasury securities market are analyzed...

Real-time macroeconomic data refl ect the information available to market participants, whereas fi nal data-containing revisions and released with a delay-overstate the information set available to them. We document that the in-sample and out-of-sample Treasury return predictability is signifi...

This paper deals with the estimation of the risk-return trade-off. We use a MIDAS model for the conditional variance and allow for possible switches in the risk-return relation through a Markov-switching specification. We find strong evidence for regime changes in the risk-return relation. This...

Policy impact studies often suffer from endogeneity problems. Consider the case of the ECB Securities Markets Programme: If Eurosystem interventions were triggered by sudden and strong price deteriorations, looking at daily price changes may bias downwards the correlation between yields and the...

This paper documents macroeconomic forecasting during the global financial crisis by two key central banks: the European Central Bank and the Federal Reserve Bank of New York. The paper is the result of a collaborative effort between staff at the two institutions, allowing us to study the...

We develop a class of ARCH models for series sampled at unequal time intervals set by trade orquote arrivals. Our approach combines insights from the temporal aggregation for GARCH models discussed byDrost and Nijman (1993) and Drost and Werker (1996), and the autoregressive conditional duration...

The purpose of this paper is to bridge two strands of the literature, one pertaining to the objective or physical measure used to model an underlying asset and the other pertaining to the risk-neutral measure used to price derivatives. We propose a generic procedure using simultaneously the...

Most high-frequency asset returns exhibit seasonal volatility patterns. This article proposes a new class of models featuring periodicity in conditional heteroscedasticity explicitly designed to capture the repetitive seasonal time variation in the second-order moments. This new class of...

This paper evaluates the role of various volatility specifications, such as multiple stochastic volatility (SV) factors and jump components, in appropriate modeling of equity return distributions. We use estimation technology that facilitates nonnested model comparisons and use a long data set...

The measurement of systemic risk is at the forefront of economists and policymakers concerns in the wake of the 2008 financial crisis. What exactly are we measuring and do any of the proposed measures perform well outside the context of the recent financial crisis? One way to address these...