A characteristic function-based method is proposed to estimate the time-changed Lévy models, which take into account both stochastic volatility and infinite-activity jumps. The method facilitates computation and overcomes problems related to the discretization error and to the non-tractable...

Various forecasts using panel data with spatial error correlation are compared using Monte Carlo experiments. The true data generating process is assumed to be a simple error component regression model with spatial remainder disturbances of the autoregressive or moving average type. The best...

Credit migrations constitute the building blocks of modern risk management. A firm-specific structural model of credit migration that incorporates the firm’s capital structure and the risk perception of rating agencies is proposed. The proposed model employs the notion of distance-to-default,...

A regime-switching beta model is proposed to measure dynamic risk exposures of hedge funds to various risk factors during different market volatility conditions. Hedge fund exposures strongly depend on whether the equity market (S&P 500) is in the up, down, or tranquil regime. In the down-state...

The exact distribution of the likelihood ratio test statistic to test the equality of several variance-covariance matrices has a non-manageable form. On the other hand, the existing asymptotic approximations do not exhibit the necessary precision for many applications. For these reasons, the...