A new test for constant correlation is proposed. Based on the bivariate Student-t distribution, this test is derived as Lagrange multiplier (LM) test. Whereas most of the traditional tests (e.g. Jennrich, 1970, Tang, 1995 and Goetzmann, Li & Rouwenhorst, 2005) specify the unknown correlations as...

Basel III introduces for the first time an international framework for liquidity risk regulation, reflecting the experience of excessive liquidity risk taking of banks in the run up to the financial crisis that erupted in August 2007, and associated negative externalities. As central banks play...