In this paper we examine the relation between dollar-real exchange rate volatility implied in option prices and subsequent realized volatility, in the period of February 1999 to June 2000. Our results are in line with recent literature, suggesting that the implied volatility obtained from a...

Within a mean-variance model we analyze the problem of decentralized portfolio management. We find the solution for the optimal portfolio allocation for a head trader operating in <i>n</i> different markets, which is called the optimal centralized portfolio. However, as there are many traders...

Resorting to an extension of the debt crisis model of Cole and Kehoe (JIE 1996), we evaluate financial aspects of an optimum currency area. Our focus is to appraise the welfare of a country, which belongs to a monetary union and might suffer a speculative attack on its public debt. A default may...

Dekel, Lipman, and Rustichini (2001) show that preferences over menus of lotteries can be represented by the use of a unique subjective state space and a prior. We provide foundations for Bayesian updating in such a setup. When the subjective state space is finite, we show that Bayesian updating...

This paper presents a method for extracting risk neutral densities for exchange rate options. Implied volatility may be used as a forecast for future volatility and the predicted density to assess the future evolution of market expectations regarding prices in financial market. Implied skewness...

In this work we measure the evolution of the long-range dependence phenomenon of returns and volatilities of nominal British exchange rates (British pound against US dollar) futures contracts negotiated on the Chicago Mercantile Exchange from 1986 to 2004. The measurement employs the R/S classic...

In the context of the stable roommates problem, it is shown that acyclicity of preferences is equivalent to the existence of symmetric utility functions, i.e. the utility of agent <i>i</i> when matched with <i>j</i> is the same as <i>j</i>'s utility when matched with <i>i</i>.

The article evaluates the performance of the small-scale macro model (SSMM) of the Central Bank of Brazil as a tool for supporting the monetary policy decision process. The forecasts of IPCA inflation for 1 to 3 quarters ahead were compared to market forecasts as well as to the projections of a...

This work develops an integrated model for optimal asset allocation in commercial banks that incorporates uncertain liquidity constraints that are currently ignored by RAROC and EVA models. While the economic profit accounts for the opportunity cost of risky assets, what may even incorporate a...

The purpose of this paper is to verify, based on the portfolio balance exchange rate determination theory, the impact of the foreign exchange swaps offered by the Central Bank of Brazil on the attributes of the local foreign exchange interest rate term structure. For this, it is used the...