We reconsider the canonical model of price setting with menu costs by Ball and Romer (1990). Their original model exhibits multiple equilibria for nominal aggregate demand shocks of intermediate size. By abandoning Ball and Romer's (1990) assumption that demand shocks are common knowledge among...

Portfolio selection and risk management are very actively studied topics in quantitative finance and applied statistics. They are closely related to the dependency structure of portfolio assets or risk factors. The correlation structure across assets and opposite tail movements are essential to...

It was evident that credit default swap (CDS) spreads have been highly correlated during the recent financial crisis. Motivated by this evidence, this study attempts to investigate the extent to which CDS markets across regions, maturities and credit ratings have integrated more in crisis. By...

We quantify spillovers of inflation expectations between the United States (US) and Euro Area (EA) based on break-even inflation (BEI) rates. In contrast to previous studies, we model US and EA BEI rates jointly in a structural vector autoregressive (SVAR) model. The SVAR approach allows to...

For a semi-martingale Xt, which forms a stochastic boundary, a rate-optimal estimator for its quadratic variation (X;X)t is constructed based on observations in the vicinity of Xt. The problem is embedded in a Poisson point process framework, which reveals an interesting connection to the theory...

In practice, multivariate dependencies between extreme risks are often only assessed in a pairwise way. We propose a test to detect when tail dependence is truly high{dimensional and bivariate simpli cations would produce misleading results. This occurs when a signi cant portion of the...

A flexible statistical approach for the analysis of time-varying dynamics of transaction data on financial markets is here applied to intra-day trading strategies. A local adaptive technique is used to successfully predict financial time series, i.e., the buyer and the seller-initiated trading...

We provide elementary insights into the effectiveness of certification to increase market transparency. In a market with opaque product quality, sellers use certification as a signaling device, while buyers use it as an inspection device. This difference alone implies that seller-certification...

There is consensus that the recent financial crisis revolved around a crash of the short-term credit market. Yet there is no agreement around the necessary policies to prevent another credit freeze. In this experiment we test the effects that contract length (i.e. maturity mismatch) has on the...

I compare the performance of solution methods in solving a standard real business cycle model with labor market search frictions. Under the conventional calibration, the model is solved by the projection method using the Chebyshev polynomials as its basis, and the perturbation methods up to...