This paper proposes a testing procedure in order to distinguish between the case where the volatility of an asset price is a deterministic function of the price itself and the one where it is a function of one or more (possibly unobservable) factors, driven by not perfectly correlated Brownian...

This paper proposes a procedure to test for the correct specification of the functional form of the volatility process, within the class of eigenfunction stochastic volatility models (Meddahi, 2001). The procedure is based on the comparison of the moments of realized volatility measures with the...

This paper outlines a testing procedure for assessing the relative out-of-sample predictive accuracy of multiple conditional distribution models, and surveys existing related methods in the area of predictive density evaluation, including methods based on the probability integral transform and...

In this paper I study the statistical properties of a bias corrected realized variance measure when high frequency asset prices are contaminated with market microstructure noise. The analysis is based on a pure jump process for asset prices and explicitly distinguishes among different sampling...

The purpose of this paper is to derive explicit formulae for the asset allocation decision for the loss aversion utility function proposed by Kahneman and Tuversky. We show that these utility functions exhibit constant absolute risk aversion. We also give analytic results which interpret the...

In this paper we re-consider the theoretical basis for the Lucas Critique from the point of view of Robust Decision Theory. We first emphasise that the Lucas Critique rests on a weak theoretical paradigm in that it fails to consider the motivation for the policy change by the government and...

This paper proposes an unobserved fundamental component of volatility as a measure of risk. This concept of fundamental volatility may be more meaningful than the usual measures of volatility for market regulators. Fundamental volatility can be obtained using a stochastic volatility model, which...

Chapter one is a brief discussion of a few methodological premises. The second chapter is meant to show (by means of a theoretical analysis) the effective macroeconomic relevance of oligopsony in the market for credit. This is done by using two models. In the first (simplified) model - where the...

We distinguish between intended production and residual generation and introduce the concept of by-production. We show that by-production provides the fundamental explanation for the positive correlation that is observed between intended production and residual generation. Most of the existing...

Is the result that equilibrium trading outcomes are efficient in markets without frictions robust to a scenario where agents' beliefs and plans aren't already aligned at their equilibrium values? In this paper, starting from a situation where agents' beliefs and plans aren't already aligned at...