Nonparametric kernel density estimation has recently been used to estimate and test short-term interest rate models, but inference has been based on asymptotics. We derive finite sample properties of kernel density estimates of the ergodic distribution of the short-rate when it follows a...

I present a fully-rational symmetric-information model of an IPO, as well as a dynamic imperfectly competitive model of the aftermarket trading that follows. The model helps explain why IPO share allocations favor large institutional investors. It also helps to explain IPO underpricing, and...

I study the finite sample distribution of one of Ait-Sahalia's (1996c) nonparametric tests of continuous-time models of the short-term riskless rate. The test rejects true models too often because interest rate data are highly persistent but the asymptotic distribution of the test (and of the...

Jamshidian and Zhu (1997) propose a discrete grid method for simplifying the computation of Value at Risk (VaR) for fixed-income portfolios. Their method relies on two simplifications. First, the value of fixed income instruments is modeled as depending on a small number of risk factors chosen...

Many large financial institutions compute the Value-at-Risk (VaR) of their trading portfolios using historical simulation based methods, but the methods' properties are not well understood. This paper theoretically and empirically examines the historical simulation method, a variant of...

The bursting of the housing price bubble during 2007 and 2008 was accompanied by high interbank spreads, and a partial breakdown of interbank lending. This paper theoretically models how Knightian uncertainty over banks risk exposures may have contributed to the breakdown. The paper shows: 1)...

Recent research has shown that different methods of computing Value at Risk (VAR) generate widely varying results, suggesting the choice of VAR method is very important. This paper examines six VAR methods, and compares their computational time requirements and their accuracy when the sole...