This paper studies the pitfalls of applying the Cholesky decomposition for forecasting multivariate volatility. We analyze the impact of one of the main issues in empirical application of using the decomposition: The sensitivity of the forecasts to the order of the variables in the covariance...

Stochastic mortality models have been developed for a range of applications from demographic projections to financial management. Financial risk based models build on methods used for interest rates and apply these to mortality rates. They have the advantage of being applied to financial pricing...

In the existing literature, conditional forecasts in the vector autoregressive (VAR) framework have not been commonly presented with probability distributions or error bands. This paper develops Bayesian methods for computing such distributions or bands. It broadens the class of conditional...

Disability adjusted life years lost (DALYs) are one of the most usual health outcome metrics in environmental and health assessments and cost-effectiveness or cost/benefit analysis of interventions in those two areas. The methodology for DALYs' calculation has been evolving under the Global...

A basket option is an option whose underlying is a portfolio of individual stock prices. Due to the unknown dependence structure between stocks, basket option pricing relies in general on approximations or numerical methods like Monte Carlo simulation. We propose a methodology for pricing basket...

The class of spectrally positive Lévy processes is a frequent choice for modelling loss processes in areas such as insurance or operational risk. Dependence between such processes (for example, between different lines of business) can be modelled with Lévy copulas. This approach is a...

We propose two new tests for detecting clustering in multivariate Value-at-Risk (VaR) forecasts. First, we consider CUSUM-tests to detect first-order instationarities in the matrix of VaR-violations. Second, we propose x²-tests for detecting cross-sectional and serial dependence in the...

We introduce a methodology to characterise financial cycles combining a novel multivariate spectral approach to identifying common cycle frequencies across a set of indicators, and a time varying aggregation emphasising systemic developments. The methodology is applied to 13 European Union...

In this paper we extend the theory of precautionary saving to the case in which uncertainty is multidimensional and we develop a matrix-measure of multivariate prudence. Furthermore, we characterize comparative prudence, decreasing and increasing prudence, the effect of uncertainty on the...