We propose an equivalent formulation of a two player information design problem in terms of choosing a copula, as opposed to choosing a joint distribution of a signal and the state variable. We then propose a copula based signal ordering which is both necessary and sufficient for the more...

This paper characterizes identification in dynamic linear models. It shows that identification restrictions are linear in the structural parameters and are therefore easy to use. Using these restrictions, it analyzes the role of exogenous variables in helping to achieve identification

Marketing researchers are increasingly taking advantage of the instrumental variable (IV)-free Gaussian copula approach. They use this method to identify and correct endogeneity when estimating regression models with non-experimental data. The Gaussian copula approach’s original presentation...

A decision maker tests whether the gradient of the loss function evaluated at a judgmental decision is zero. If the test does not reject, the action is the judgmental decision. If the test rejects, the action sets the gradient equal to the boundary of the rejection region. This statistical...

This paper investigates the counterparty credit risk of interest rate swaps positions using the credit valuation adjustment (CVA) measure, and examines the potential dependency relationships between the probability of default (PD) and exposure at default (EAD). We empirically tested, using...

We introduce a structural vector autoregressive (SVAR) model with each of the mutually independent errors following a skewed generalized t-distribution that is more flexible than a Student's t-distribution typically considered. Hence, the effect of potential distributional misspecification is...

Technical inefficiency of production reflects a shortfall of output from the potential permitted by inputs. Allocative inefficiency reflects deviations from the optimal ratio of inputs. It is the absolute value of allocative inefficiency that is economically important. Adding allocative...

We present a general methodology based on skew t copulas and Bayesian inference for modelling extreme multivariate dependent losses and the regulatory capital for operational risk. Current approaches fail to model both asymmetric dependence and accurate extreme upper tail dependence (e.g. 99.9%...

Policy makers depend on economists, statisticians, and other social scientists to make accurate observations and draw solid conclusions from quantitative analysis. Econometrics, for example, has come a long way in the past century and guides many decisions made today. On the other hand, some...

The choice of a copula model from limited data is a hard but important task. Motivated by the visual patterns that different copula models produce in smoothed density heatmaps, we consider copula model selection as an image recognition problem. We extract image features from heatmaps using the...