We propose a new multivariate GARCH model with Dynamic Conditional Correlations that extends previous models by admitting multivariate thresholds in conditional volatilitiesand correlations. The model estimation is feasible in large dimensions and the positive definiteness of the conditional...

We propose a multivariate nonparametric technique for generating reliable short-term historical yield curve scenarios and confidence intervals. The approach is based on a Functional Gradient Descent (FGD) estimation of the conditional mean vector and covariance matrix of a multivariate interest...

We propose a simple class of semiparametric multivariate GARCH models, allowing for asymmetric volatilities and time-varying conditional correlations. Estimates for time-varying conditional correlations are constructed by means of a convex combination of estimates for averaged correlations...

We propose a multivariate nonparametric technique for generating reliable scenarios and confidence intervals for the term structure of interest rates from historical data. The approach is based on a functional gradient descent (FGD) estimation of the conditional mean vector and the conditional...

This paper analyzes the expected life-time utility and the hedging demands in an exchange only, representative agent general equilibrium under incomplete information. We derive an expression for the investor’s expected life-time utility, and analyze his hedging demands for intertemporal changes...

This paper investigates the extent to which differences in information costs can explain the equity home bias puzzle. In a model where the cost of acquiring information regarding the Foreign asset is higher than for the Home asset, we show that–if cost functions are convex–the expected size of...

This paper analyzes the term structure of interest rates in an exchange-only Lucas (1978) economy where consumers learn about a stochastic growth rate through observations of the endowment process and an external public signal. We allow for deluded consumers, who exaggerate the degree of...

We show that a simple equilibrium model with uncertain growth is able to simultaneously generate patterns in implied volatility and risk aversion that are similar to the ones observed in the data. In addition, the model produces an implied pricing kernel that is increasing for particular levels...

We show in a theoretical model that the expected excess return on any asset depends on its covariance not only with the market portfolio, but also with changes in the representative agents estimate. We test our model by using GMM and compare it to the Fama-French model. The results suggest that...

The term structure of American interest rates is filtered to reduce the influence of cross correlations and auto correlations on its factors. A three-factor model is fitted to the filtered data. Contrary to most studies of the term structure on monthly data, performing statistical tests we...