This paper investigates the use of multiple directions of stratification as a variance reduction technique for Monte Carlo simulations of path-dependent options driven by Gaussian vectors. The precision of the method depends on the choice of the directions of stratification and the allocation...

In this paper, we present a generic method for the Monte-Carlo pricing of (generalized) auto-callable products (aka. trigger products), i.e., products for which the payout function features a discontinuity with a (possibly) stochastic location (the trigger) and value (the payout).The Monte-Carlo...

We develop a new approach for pricing both continuous-time and discrete-time American options which is based on the fact that any American option is equivalent to a European one with a consumption process involved. This approach admits the construction of an upper bound (a lower bound) on the...

This paper provides a selective overview of nonlinear exchange rate models recently proposed in the literature and assesses their contribution to understanding exchange rate behavior. Two key questions are examined. The first question is whether nonlinear autoregressive models of real exchange...

This paper presents some conventional and new measures of market, credit, and liquidity risks for government bonds. These measures are analyzed from the perspective of a sovereign's debt manager. In particular, it examines duration, convexity, M-square, skewness, kurtosis, and VaR statistics as...

A stochastic volatility model where volatility was driven solely by a latent variable called news was estimated for three stock indices. A Markov chain Monte Carlo algorithm was used for estimating Bayesian parameters and filtering volatilities. Volatility persistence being close to one was...

This paper extends the Bayesian Model Averaging framework to panel data models where the lagged dependent variable as well as endogenous variables appear as regressors. We propose a Limited Information Bayesian Model Averaging (LIBMA) methodology and then test it using simulated data. Simulation...

This paper discusses the estimation of models of the term structure of interest rates. After reviewing the term structure models, specifically the Nelson-Siegel Model and Affine Term- Structure Model, this paper estimates the terms structure of Treasury bond yields for the United States with...

The paper asks how state of the art DSGE models that account for the conditional response of hours following a positive neutral technology shock compare in a marginal likelihood race. To that end we construct and estimate several competing small-scale DSGE models that extend the standard real...

We examine the linkages between market and funding liquidity pressures, as well as their interaction with solvency issues surrounding key financial institutions during the 2007 subprime crisis. A multivariate GARCH model is estimated in order to test for the transmission of liquidity shocks...