Structural breaks are pervasive among macroeconomic and financial time series; consequently, forecasts may lose accuracy out of sample, which renders monitoring structural breaks a critical practice. We develop a structural break monitoring scheme, Bayesian Sequential Probability Test (BSPT),...

Auction data often contain information on only the most competitive bids as opposed to all bids. The usual measurement error approaches to unobserved heterogeneity are inapplicable due to dependence among order statistics. We bridge this gap by providing a set of positive results. First, we show...

This, somewhat unusual collection of problems in Measure-Theoretic Probability and Stochastic Analysis, should have been more appropriately called: ``The Problems I Like". For the material borrowed from the existing literature, full references and occasional historical remarks are provided....

Keynes recognized that there were a few cases where his rational analysis of decision making under conditions of uncertainty and risk using: (a) interval valued probability in Parts II and III of the A Treatise on Probability,(b) decision weights in Part IV of the A Treatise on Probability ,or...

This paper is concerned with the process of risk allocation for a generic multivariate model when the risk measure is chosen as the Value-at-Risk (VaR). Making use of Malliavin calculus, we recast the traditional Euler contributions from an expectation conditional to an event of zero probability...

The security market line is often flat or downward-sloping. We hypothesize that probability weighting plays a role and that one ought to differentiate between periods in which agents overweight extreme events and those in which they underweight them. Overweighting inflates the probability of...

The multivariate conditional probability distribution models the effects of a set of variables onto the statistical properties of another set of variables. In the study of systemic risk in a financial system, the multivariate conditional probability distribution can be used for stress-testing by...

Ramsey's 1922 and 1926 critiques about Keynes's logical ,objective probability relations overlooked Keynes's already specified response that Keynes had incorporated on pp. 35-36 of chapter III of the A Treatise on Probability FIVE YEARS before Ramsey made his critique .This fact calls into...

Random variables and statistics are at the very center of Econometrics. Probability distributions assign a probability to a random variable. The cumulative probability describes the probability that a random variable will not exceed a given value. The normal probability distribution (also known...

There is still controversy regarding what criterion to use to evaluate causality. The law & economics literature proposes the use of probabilistic causality as a superior criterion, suggesting the elimination of binary causality criteria. This led to explanations that violate our intuitions,...