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The Role of Volatility Shocks and Rare Events in Long-Run Risk Models

Branger, Nicole - 2012

We study a long-run risk model with a stochastic consumption growth rate, a stochastic volatility, a stochastic jump intensity, and a stochastic mean reversion level for the latter two processes. First, using a square-root specification instead of the Ornstein-Uhlenbeck process suggested by...

Persistent link: https://www.econbiz.de/10013109228

Disasters Risk and Business Cycles

Gourio, Francois - 2010

To construct a business cycle model consistent with the observed behavior of asset prices, and study the effect of shocks to aggregate uncertainty, I introduce a small, time-varying risk of economic disaster in a standard real business cycle model. The paper establishes two simple theoretical...

Persistent link: https://www.econbiz.de/10013150731

The Impact of Uncertainty and Certainty Shocks

Schüler, Yves Stephan - 2019

's (2009) two identification steps into one. I find that an uncertainty shock widens the conditional distribution of future … real economic activity growth, in line with a risk shock. Conversely, a certainty shock (a shock strongly decreasing … that the two shocks are different shocks. Each shock impacts the real economy uniquely. I support this with the underlying …

Persistent link: https://www.econbiz.de/10012867821

Uncertainty Shocks and Non-Fundamental Debt Crises : An Ambiguity Approach

Grosse Steffen, Christoph - 2015

This paper develops a theory of sovereign debt crises driven by uncertainty shocks that are modeled as changes in … preferences in view of ambiguity averse investors. An uncertainty shock raises the price of issuing debt which in turn affects the …

Persistent link: https://www.econbiz.de/10013023262

Competitive Lending with Partial Knowledge of Loan Repayment

Brock, William A.; Manski, Charles F. - 2021

We study a competitive credit market in which lenders with partial knowledge of loan repayment use one of three decision criteria - maximization of expected utility, maximin, or minimax regret - to make lending decisions. Lenders allocate endowments between loans and a safe asset, while...

Persistent link: https://www.econbiz.de/10013233223

Disaster Risk and Business Cycles

Gourio, Francois - 2010

Most macroeconomic models fail to replicate the level, volatility, and countercyclicality of risk premia which has been documented in empirical research. In this paper, I introduce a tractable business cycle model with a small, exogenously time-varying risk of economic disaster. Both asset...

Persistent link: https://www.econbiz.de/10013146622

Technological advances and the decision to invest

Flor, Christian Riis; Hansen, Simon Lysbjerg - In: Annals of finance 9 (2013) 3, pp. 383-420

Persistent link: https://www.econbiz.de/10009776439

The Impact of Uncertainty and Certainty Shocks

Schüler, Yves S. - 2021

Persistent link: https://www.econbiz.de/10013315321

Evaluation of Long-Dated Investments Under Uncertain Growth Trend, Volatility and Catastrophes

Gollier, Christian - 2021

Because of the uncertainty about how to model the growth process of our economy, there is still much confusion about which discount rates should be used to evaluate actions having long-lasting impacts, as in the contexts of climate change, social security reforms or large public infrastructures...

Persistent link: https://www.econbiz.de/10013315817

Disasters Risk and Business Cycles

Gourio, François - 2009

Persistent link: https://www.econbiz.de/10012463250