This paper considers the problem of model uncertainty in the case of multi-asset volatility models and discusses the use of model averaging techniques as a way of dealing with the risk of inadvertently using false models in portfolio management. Evaluation of volatility models is then considered...

We propose a method to produce density forecasts of the term structure of government bond yields that accounts for (i) the possible mispecification of an underlying Gaussian Affine Term Structure Model (GATSM) and (ii) the time varying volatility of interest rates. For this, we derive a Bayesian...

This paper presents new models for aggregate UK data on mortgage possessions (foreclosures) and mortgage arrears (payment delinquencies). The innovations include the treatment of difficult to observe variations in loan quality and shifts in forbearance policy by lenders, by common latent...

This paper studies the pruned state-space system for higher-order approximations to the solutions of DSGE models. For second- and third-order approximations, we derive the statistical properties of this system and provide closed-form expressions for first and second unconditional moments and...

This Paper provides a novel approach to forecasting time series subject to discrete structural breaks. We propose a Bayesian estimation and prediction procedure that allows for the possibility of new breaks over the forecast horizon, taking account of the size and duration of past breaks (if...

The carry trade is the investment strategy of going long in high-yield target currencies and short in low-yield funding currencies. Recently, this naive trade has seen very high returns for long periods, followed by large crash losses after large depreciations of the target currencies. Based on...

This Paper aims at improving the understanding of the transmission of shocks across countries and how this transmission may have changed over time. By employing a model that allows for parameter changes across regimes, we show that transmission of shocks from the US to European countries may...

There is a long tradition of using oil prices to forecast U.S. real GDP. It has been suggested that the predictive relationship between the price of oil and one-quarter ahead U.S. real GDP is nonlinear in that (1) oil price increases matter only to the extent that they exceed the maximum oil...

We propose a new approach to predictive density modeling that allows for MIDAS effects in both the first and second moments of the outcome and develop Gibbs sampling methods for Bayesian estimation in the presence of stochastic volatility dynamics. When applied to quarterly U.S. GDP growth data,...

Many users of structural VAR models are primarily interested in learning about the shape of structural impulse response functions. This requires joint inference about sets of structural impulse responses, allowing for dependencies across time as well as across response functions. Such joint...