Since the launch of Bitcoin, there has been a lot controversy surrounding what asset class it is. Several authors recognize potential cryptocurrencies but also certain deviations with respect to functions conventional currency. Instead, Bitcoin’s diversifying factor and its high return have generated attention portfolio managers. In this context, understanding how volatility is explained critic...

We develop a model in which the capital of the intermediary sector plays a critical role in determining asset prices. The model is cast within a dynamic general equilibrium economy, and the role for intermediation is derived endogenously based on optimal contracting considerations. Low intermediary capital reduces the risk-bearing capacity of the marginal investor. We show how this force helps ...

We focus on the pairwise correlations of Japanese stock returns to study their correlation dynamics empirically. Two types of reduced size sample portfolios are created to observe the changes in conditional correlation: a set of individual stock portfolios created by using a network-based clustering algorithm and a single portfolio created from the mean return indexes of the individual sample p...

Causation looms large in legal and moral reasoning. People construct causal models of the social and physical world to understand what has happened, how and why, and to allocate responsibility and blame. This chapter explores people’s commonsense notion of causation, and shows how it underpins moral and legal judgments. As a guiding framework it uses the causal model framework (Pearl, 2000) roo...

empirical researches have shown that in highly volatile market, conditional correlation between returns is stronger, so diversification cannot reduce risk. to test this claim in iran’s financial market, quintiles of stock return distribution have been estimated by kernel density and garch models. then, average conditional correlation, error variance and conditional capm has been calculated to t...

in this paper, we show that the chapman-kolmogorov formula could be used as a recursive formula for computing the m-step-ahead conditional density of a markov bilinear model. the stationary marginal probability density function of the model may be approximated by the m-step-ahead conditional density for sufficiently large m.

We study the correlation of monthly excess returns for seven major countries over the period 1960-90. We find that the international covariance and correlation matrices are unstable over time. A multivariate GARCH(1,1) model with constant conditional correlation helps to capture some of the evolution in the conditional covariance structure. However tests of specific deviations lead to a rejecti...

We document asymmetric and time-varying features of dependence between the credit risks of global systemically important banks (G-SIBs) in the UK banking industry using a CDS dataset. We model the dependence of CDS spreads using a dynamic asymmetric copula. Comparing our model with traditional copula models, we find that they usually underestimate the probability of joint (or conditional) defau...

We test the importance of multivariate information for modelling and forecasting inflation’s conditional mean and variance. In the literature, the existence of inflation’s conditional heteroskedasticity has been debated for years, as it seemed to appear only in some datasets and for some lag lengths. This phenomenon might be due to the fact that inflation depends on a linear combination of econ...