This paper extends the gravity model to financial markets by examining how distance and bilateral linkages influence stock market correlations between the United States and selected emerging economies. To this end, the Poisson Pseudo Maximum Likelihood (PPML) estimator is used to account for...

Guaranteed annuity options (GAOs) allow policyholders to convert accumulated funds into life annuities at maturity at a guaranteed minimum rate. Thus, insurers are exposed to both investment and longevity risks. Accurate valuation of these long-term, survival-contingent contracts is essential...

In this paper, we present an approach to relate typological measures of language complexity (based on the grammars of different languages) with empirical measures of that complexity (based on actual texts). It is known as the "structure-conduct-performance paradigm", and we have taken it from...

A dynamic modelling for heavy-tailed cylindrical time series is developed by combining score-driven models with a generalised Pareto-type cylindrical distribution. The proposed specification extends existing cylindrical models by allowing location, scale, concentration, and crucially, the tail...

We investigate the impact of structural shocks on the joint distribution of future real GDP growth and inflation in the euro area. We model the conditional mean of these variables, along with selected financial indicators, using a VAR and perform quantile regressions on the VAR residuals to...

Randomized response is a widely used survey technique for measuring stigmatized populations, but it may provide limited information in small samples. This paper introduces a method of elicitation through perfectly correlated questions, showing that correlation can substantially improve...

Internal ratings-based models play a central role in bank risk management and regulatory capital determination, yet their validation remains methodologically challenging and operationally resourceintensive. In this paper, we contribute to the quantitative validation of probability of default...

Building on the testable implications for IV validity underlying local average treatment effect (LATE) estimation, we (i) propose a simple testing procedure that may accommodate high-dimensional covariates and (ii) demonstrate that it can also detect biases arising from misspecified IV...

Exogenous shocks can affect equity markets by changing volatility and cross-market co-movement. This study examines how two U.S.-centred events, treated as different shock types, influence time-varying conditional correlations between the U.S. stock market and other G7 markets. The uncertainty...

We argue that capital misallocation arises endogenously due to incomplete consumption insurance. We model risk-averse entrepreneurs with heterogeneous productivity who face idiosyncratic output shocks and choose how much capital to rent before uncertainty unfolds. We show that incomplete markets...

The price of cryptocurrency Bitcoin has risen sharply over the past ten years, with many investors adding Bitcoin to their portfolios, benefitting from price increases and diversifying their investments. But is Bitcoin suitable for this purpose? This Weekly Report examines the extent to which...

In the analysis of multivariate stochastic volatility models, many estimation procedures begin by transforming the data, taking the logarithm of the squared returns to obtain a linear state space model. A well-known series representation links the correlations between elements of the observation...

We devise two algorithms for approximating solutions of PSDisation, a problem in actuarial science and finance, to find the nearest valid correlation matrix that is positive semidefinite (PSD). The first method converts the PSDisation problem with a positive semidefinite constraint and other...

In the last few decades, the study of ordinal data in which the variable of interest is not exactly observed but only known to be in a specific ordinal category has become important. In Psychometrics such variables are analysed under the heading of item response models (IRM). In Econometrics,...

This paper proposes a nonparametric estimator of the spot volatility matrix with high-frequency data. Our newly proposed Positive Definite Fourier (PDF) estimator produces symmetric positive semi-definite estimates and is consistent with a suitable choice of the localizing kernel. The PDF...

Amid the growing debate over how cryptocurrencies are reshaping global finance, this study explores the nexus between Bitcoin, Brent Crude Oil, Gold and the U.S. Dollar Index. We used a time-varying vector autoregressive (tvVAR) model to examine the connection among these four assets during the...

This paper studies how a forward-looking decision maker experiments on unknown alternatives of correlated utilities. The utilities are modeled by a Brownian motion such that similar alternatives yield similar utilities. Experimentation trades off between the continuation value of exploration and...

We develop a data-driven procedure to identify which correlations in high-dimensional dynamic systems should be time-varying, constant, or zero. The method integrates a vine-based multivariate partial correlation model with sequential penalized estimation. Applied to 50 US equities and...

The presence of autocorrelated financial returns has major implications for investment decisions. Unsurprisingly, therefore, numerous studies have sought to shed light on whether returns are autocorrelated or not, to what extent, and when. Standard tests for autocorrelation rely on the...

This study examines the evolution of public debt among the 27 EU member states using Graph Theory tools; the Threshold Weighted-Minimum Dominating Set (TW-MDS) and the k-core decomposition method, alongside a standard network quantitative metric, the density. By separating the data into three...

We employ distribution regression to estimate the joint distribution of two outcome variables conditional on covariates. Bivariate Distribution Regression (BDR) is particularly valuable when some dependence between the outcomes persists after accounting for the impact of the covariates. Our...

Since China implemented its carbon trading mechanism, trading risks arising from unstable carbon prices have significantly reduced its emission-reduction efficiency. Unlike traditional research, which focuses on the impact of fossil fuels on carbon prices, this study emphasises risk spillovers...