We investigate the effect of model specification on the aggregation of (correlated) market and credit risk. We focus on the functional form linking systematic credit risk drivers to default probabilities. Examples include the normal based probit link function for typical structural models, or...

We propose a new Markov switching model with time varying probabilities for the transitions. The novelty of our model is that the transition probabilities evolve over time by means of an observation driven model. The innovation of the time varying probability is generated by the score of the...

We propose a novel empirical framework to assess the likelihood of joint and conditional failure for Euro area sovereigns. Our model is based on a dynamic skewed-t copulawhich captures all the salient features of the data, including skewed and heavy-tailed changes in the price of CDS protection...

This discussion paper resulted in a publication in the <I>Journal of Econometrics</I> (2004). Volume 119, p. 45.<P> We study the optimal choice of quasi-likelihoods for nearly integrated,possibly non-normal, autoregressive models. It turns out that the two mostnatural candidate criteria, minimum Mean...</p></i>

Accepted for an article forthcoming in the <I>Review of Economics and Statics</I>. Volume 97, 2015.<P> We study whether and when parameter-driven time-varying parameter models lead to forecasting gains over observation-driven models. We consider dynamic count, intensity, duration, volatility and copula...</p></i>

We study the strong consistency and asymptotic normality of the maximum likelihood estimator for a class of time series models driven by the score function of the predictive likelihood. This class of nonlinear dynamic models includes both new and existing observation driven time series models....

A macro-prudential policy maker can manage risks to financial stability only if currentand future risks can be reliably assessed. We propose a novel framework to assessfinancial system risk. Using a dynamic factor framework based on state-space methods, we model latent macro-financial and credit...

This discussion paper resulted in a publication in the <I>Journal of Corporate Finance</I> (2011). Vol. 17, issue 5.<P> This paper analyzes the impact of blockownership dispersion on firm value. Blockholdings by multiple blockholders is a widespread phenomenon in the U.S. market. It is not clear, however,...</p></i>

This discussion paper resulted in an article in the <I>Journal of Empirical Finance</I> (2009). Vol. 16, issue 1, pages 42-54.<P> We study the relation between the credit cycle and macro-economic fundamentals in an intensity-based framework. Using rating transition and default data of U.S. corporates from...</p></i>

We introduce a new model for time-varying spatial dependence. The model extends the well-known static spatial lag model. All parameters can be estimated conveniently by maximum likelihood. We establish the theoretical properties of the model and show that the maximum likelihood estimator for the...