Related papers: Endogenous Current Coupons
We introduce an approximation strategy for the discounted moments of a stochastic process that can, for a large class of problems, approximate the true moments. These moments appear in pricing formulas of financial products such as bonds…
It is well known that the minimal superhedging price of a contingent claim is too high for practical use. In a continuous-time model uncertainty framework, we consider a relaxed hedging criterion based on acceptable shortfall risks.…
We consider a two-factor model for the valuation of a non callable defaultable bond which pays coupons at certain given dates. The model under consideration is the Jump to Default Constant Elasticity of Variance (JDCEV) model. The JDCEV…
We develop a dynamic multi-agent model of an interbank payment system where banks choose their level of available funds on the basis of private payoff maximisation. The model consists of the repetition of a simultaneous move stage game with…
Real-world decision-making problems often involve decision-dependent uncertainty, where the probability distribution of the random vector depends on the model decisions. Few studies focus on two-stage stochastic programs with this type of…
We present the method of moments approach to pricing barrier-type options when the underlying is modelled by a general class of jump diffusions. By general principles the option prices are linked to certain infinite dimensional linear…
We consider a financial market in discrete time and study pricing and hedging conditional on the information available up to an arbitrary point in time. In this conditional framework, we determine the structure of arbitrage-free prices.…
A stochastic model with a continuum of economic agents often involves shocks at both macro and micro levels. This can be formalized by a continuum of random variables that are conditionally independent given the macro level shocks. Based on…
We study a large economy in which firms cannot compute exact solutions to the non-linear equations that characterize the equilibrium price at which they can sell future output. Instead, firms use polynomial expansions to approximate prices.…
This paper re-examines the problem of estimating risk premia in linear factor pricing models. Typically, the data used in the empirical literature are characterized by weakness of some pricing factors, strong cross-sectional dependence in…
We extend the Berry, Levinsohn and Pakes (BLP, 1995) random coefficients discrete-choice demand model, which underlies much recent empirical work in IO. We add interactive fixed effects in the form of a factor structure on the unobserved…
In this paper, we propose a price staleness factor model that accounts for pervasive market friction across assets and incorporates relevant covariates. Using large-panel high-frequency data, we derive the maximum likelihood estimators of…
Copula is a powerful tool to model multivariate data. We propose the modelling of intraday financial returns of multiple assets through copula. The problem originates due to the asynchronous nature of intraday financial data. We propose a…
We consider identification, inference and validation of linear panel data models when both factors and factor loadings are accounted for by a nonparametric function. This general specification encompasses rather popular models such as the…
We consider a static linear panel model with both correlated and uncorrelated random coefficients, where the former can depend arbitrarily on observable regressors while the latter are independent of them. We provide sufficient conditions…
Non Performing Asset(NPA) has been in a serious attention by banks over the past few years. NPA cause a huge loss to the banks hence it becomes an extremely critical step in deciding which loans have the capabilities to become an NPA and…
The DUCK-calculus presented here is a recent approach to cope with probabilistic uncertainty in a sound and efficient way. Uncertain rules with bounds for probabilities and explicit conditional independences can be maintained incrementally.…
We study a new measure of codependency in the second moment of a continuous-time multivariate asset price process, which we name the realized copula of volatility. The statistic is based on local volatility estimates constructed from…
We introduce a dynamic and stochastic interbank model with an endogenous notion of distress contagion, arising from rational worries about future defaults and ensuing losses. This entails a mark-to-market valuation adjustment for interbank…
We examine the household-specific effects of the introduction of Time-of-Use (TOU) electricity pricing schemes. Using a causal forest (Athey and Imbens, 2016; Wager and Athey, 2018; Athey et al., 2019), we consider the association between…