The concept of common factors has in the econometrics literature been applied to conditional means or in some cases to conditional variances. In this paper we generalize this concept to bivariate distributions. This is done using the conditional bivariate copula as the statistical tool. The...

We propose a seasonal cointegration model [SECM] for quarterly data which includes variables with different numbers of unit roots and thus needs to be transformed in different ways in order to yield stationarity. A Monte Carlo simulation is carried out to investigate the consequences of...

For finite dimensional factor models, the paper studies general quadratic term structures. These term structures include as special cases the affine term structures and the Gaussian quadratic term structures, previously studied in the literature. We show, however, that there are other,...

We summarize some methods useful in formulating and solving Hansen-Sargent robust control problems, and suggest extensions to discretion and simple rules. Matlab, Octave, and Gauss software is provided. We illustrate these extensions with applications to the term structure of interest rates, the...

In this paper, which is a substantial extension of the earlier essay Björk (2001), we give an overview of some recent work on the geometric properties of the evolution of the forward rate curve in an arbitrage free bond market. The main problems to be discussed are as follows. 1. When is a...

In this paper we study a fairly general Wiener driven model for the term structure of forward prices. The model, under a fixed martingale measure, Q, consists of two infinite dimensional stochastic differential equations (SDEs). The first system is a standard HJM model for (forward) interest...

This paper analyzes how bond option prices are affected by different types of monetary policy. Analytical results from a general equilibrium model with sticky wages show that employment or output targeting typically give lower bond option prices than inflation targeting. -- inflation targeting ;...

This paper contains a forecasting exercise on 30 time series, ranging on several fields, from economy to ecology. The statistical approach to artificial neural networks modelling developed by the author is compared to linear modelling and to other three well-known neural network modelling...