type="main" xml:lang="en" <p>VaR (value-at-risk) estimates are currently based on two main techniques: the variance-covariance approach or simulation. Statistical and computational problems affect the reliability of these techniques. We illustrate a new technique – filtered historical simulation...</p>

The persistence of financial instability calls into question the adequacy of the current regulatory regime. A critical review of the three pillars at the core of current financial regulation exposes some structural flaws. Four new pillars are proposed and compared with measures proposed to shore...

We propose a new method to compute option prices based on GARCH models. In an incomplete market framework, we allow for the volatility of asset return to differ from the volatility of the pricing process and obtain adequate pricing results. We investigate the pricing performance of this approach...

This paper presents a characterization of callable bond pricing and call decision when there are transactions costs. When a capital structure is kept constant a firm that has outstanding callable bonds refinances them with similarly structured callable bonds. Since refinancing is costly, firms...

The informational content of changing risk for dynmaic asset allocation is analyzed in order to investigate its importance in determining expected index returns. We consider a class of optimal dynamic strategies taking into account both changing risk and expected returns that vary accordingly to...

We propose a simple class of multivariate GARCH models, allowing for time-varying conditional correlations. Estimates for time-varying conditional correlations are constructed by means of a convex combination of averaged correlations (across all series) and dynamic realized (historical)...