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Mencía, Javier; Sentana, Enrique - C.E.P.R. Discussion Papers - 2010

volatility mean reverting assumptions. We propose generalisations with a time varying central tendency, jumps and stochastic …

Persistent link: https://www.econbiz.de/10008468615

Sources of Risk in Currency Returns

Chernov, Mikhail; Graveline, Jeremy; Zviadadze, Irina - C.E.P.R. Discussion Papers - 2012

includes (i) Gaussian shocks with stochastic variance, (ii) jumps up and down in the exchange rate, and (iii) jumps in the … probability of jumps in variance is increasing in the variance but not related to interest rates. Many of the jumps in exchange … rates are associated with macroeconomic and political news, but jumps in variance are not. Overall, jumps account for 25% of …

Persistent link: https://www.econbiz.de/10011083487

No Arbitrage Priors, Drifting Volatilities, and the Term Structure of Interest Rates

Carriero, Andrea; Clark, Todd; Marcellino, Massimiliano - C.E.P.R. Discussion Papers - 2014

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...

Persistent link: https://www.econbiz.de/10011083412

Bond Return Predictability: Economic Value and Links to the Macroeconomy

Gargano, Antonio; Pettenuzzo, Davide; Timmermann, Allan G - C.E.P.R. Discussion Papers - 2014

Studies of bond return predictability find a puzzling disparity between strong statistical evidence of return predictability and the failure to convert return forecasts into economic gains. We show that resolving this puzzle requires accounting for important features of bond return models such...

Persistent link: https://www.econbiz.de/10011083511

Common Drifting Volatility in Large Bayesian VARs

Carriero, Andrea; Clark, Todd; Marcellino, Massimiliano - C.E.P.R. Discussion Papers - 2012

The estimation of large Vector Autoregressions with stochastic volatility using standard methods is computationally very demanding. In this paper we propose to model conditional volatilities as driven by a single common unobserved factor. This is justified by the observation that the pattern of...

Persistent link: https://www.econbiz.de/10011083279

Liquidity Constraints, Production Costs And Output Decisions

Povel, Paul E M; Raith, Michael - C.E.P.R. Discussion Papers - 2000

This paper analyses the interaction of financing and output market decisions in an oligopolistic setting. We integrate two ideas that have been analysed separately in previous work: some authors argue that due to risk-shifting, debt (leverage) makes a firm 'aggressive' in its output market;...

Persistent link: https://www.econbiz.de/10005504397

Cross-Country Variations in Capital Structures: The Role of Bankruptcy Codes

Acharya, Viral V; John, Kose; Sundaram, Rangarajan K - C.E.P.R. Discussion Papers - 2005

We conduct a theoretical and empirical investigation of the impact of bankruptcy codes on firms’ capital-structure choices. In our theoretical framework, costs of financial distress are endogenously determined as a function of the bankruptcy code. Anticipated liquidation values emerge as the...

Persistent link: https://www.econbiz.de/10005504655

Cash Holdings and Credit Risk

Acharya, Viral V; Davydenko, Sergei A.; Strebulaev, Ilya - C.E.P.R. Discussion Papers - 2009

Intuition suggests that firms with higher cash holdings are safer and should have lower credit spreads. Yet empirically, the correlation between cash and spreads is robustly positive and higher for lower credit ratings. This puzzling finding can be explained by the precautionary motive for...

Persistent link: https://www.econbiz.de/10004980203

Rollover Risk and Market Freezes

Acharya, Viral V; Gale, Douglas M; Yorulmazer, Tanju - C.E.P.R. Discussion Papers - 2009

We consider the debt capacity of a risky asset when debt is being rolled over and there is a liquidation cost in case of default. We show that debt capacity depends on how information about the quality of the asset is revealed. When the information structure is based on “optimistic”...

Persistent link: https://www.econbiz.de/10004980204

Bank Capital, Liquid Reserves, and Insolvency Risk

Hugonnier, Julien; Morellec, Erwan - C.E.P.R. Discussion Papers - 2015

We develop a dynamic model to assess the effects of liquidity and leverage requirements on banks' insolvency risk. The model features endogenous capital structure, liquid asset holdings, payout, and default decisions. In the model, banks face taxation, flotation costs of securities, and default...

Persistent link: https://www.econbiz.de/10011165669