We develop a framework for modelling conditional loss distributions through the introduction of risk factor dynamics. Asset value changes of a credit portfolio are linked to a dynamic global macroeconometric model, allowing macro effects to be isolated from idiosyncratic shocks. Default...

This paper re-examines the panel unit root tests proposed by Chang (2002). She establishes asymptotic independence of the t-statistics when integrable functions of lagged dependent variable are used as instruments even if the original series are cross sectionally dependent. She claims that her...

We consider Sharpe’s one factor model of asset returns and its extension to K factors in order to explain theoretically why diversification can fail. This model can be used to explain nonlinear dependence amongst the assets in a portfolio. The result is intimately related to the tail...

This paper provides a framework for an empirical analysis of the scope for cost minimization in public debt management. It assumes that a debt manager aims at minimizing the expected cost of government’s debt portfolio for a given level of short term interest rate and subject to a number of...

The objective of this paper is to inform the debate on how efficiency targets for Network Rail (formerly Railtrack) should be set during the 2002/03 Interim Review and beyond. Given the problems experienced during the 2000 Periodic Review, which focused on external benchmarks, we propose an...

This paper discusses unregulated market-based electricity transmission investment by third parties as opposed to regulated investment by designated transmission system operators. The analysis is set against a European and Australian institutional background and focuses on interconnection of...

The French electricity supply industry is characterized by a vertically integrated monopoly and public ownership and when the government introduced market rules, it was with the aim of preserving the integration of the public incumbent as a national champion. This had two paradoxical effects in...

We examine the properties of a multivariate Dickey-Fuller t-statistic designed to test for a unit root in a panel while taking account of cross-sectional dependence. The asymptotic distribution is presented and critical values provided. When intercepts are present, a modification along the lines...