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The consumption data exhibits conditional heteroskedasticity similar to those exhibited by stock market returns. I model the comovement of the time series of aggregate consumption and stock market return data using a Multivariate GARCH-in-mean framework. Using the time series of the variances...
Persistent link: https://www.econbiz.de/10013151174
We study default risk in an incomplete markets general equilibrium setting. We show some interesting properties of default and recovery rates in equilibrium, and derive CAPM-type equilibrium bounds on credit spreads. We are able to price aggregate components of credit risk, summarized in our...
Persistent link: https://www.econbiz.de/10013151298