Search Results

SORT BY: PREVIOUS / NEXT
Jel Classification:G17 

Journal Article
Financial Engineering Versus Cancer

If financial engineering can distribute the pecuniary risk of medical research, then it can play a role in curing cancer.
Economic Synopses , Issue 18

Working Paper
Inflation Expectations, Liquidity Premia and Global Spillovers in Japanese Bond Markets

We provide market-based estimates of Japanese inflation expectations using an arbitrage-free dynamic term structure model of nominal and real yields that accounts for liquidity premia and the deflation protection afforded by Japanese inflation-indexed bonds, known as JGBi’s. We find that JGBi liquidity premia exhibit significant variation, and even switch sign. Properly accounting for them significantly lowers the estimated value of the indexed bonds’ deflation protection and affects inflation risk premium estimates. After liquidity adjustment, long-term Japanese inflation expectations ...
Working Paper Series , Paper 2024-12

Working Paper
From Which Consumption-Based Asset Pricing Models Can Investors Profit? Evidence from Model-Based Priors

This paper compares consumption-based asset pricing models based on the forecasting performance of investors who use economic constraints derived from the models to predict the equity premium. Three prominent asset pricing models are considered: Habit Formation, Long Run Risk, and Prospect Theory. I propose a simple Bayesian framework through which the investors impose the economic constraints as model-based priors on the parameters of their predictive regressions. An investor whose prior beliefs are rooted in the Long Run Risk model achieves more accurate forecasts overall. The greatest ...
Finance and Economics Discussion Series , Paper 2016-027

Report
Simple and reliable way to compute option-based risk-neutral distributions

This paper describes a method for computing risk-neutral density functions based on the option-implied volatility smile. Its aim is to reduce complexity and provide cookbook-style guidance through the estimation process. The technique is robust and avoids violations of option no-arbitrage restrictions that can lead to negative probabilities and other implausible results. I give examples for equities, foreign exchange, and long-term interest rates.
Staff Reports , Paper 677

Working Paper
The Effect of Large Investors on Asset Quality: Evidence from Subprime Mortgage Securities

The government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac?the dominant investors in subprime mortgage-backed securities before the 2008 crisis?substantively affected collateral composition in this market. Mortgages included in securities designed for the GSEs performed better than those backing other securities in the same deals, holding observable risk constant. Consistent with the transmission of private information, these effects are concentrated in low-documentation loans and for issuers that were highly dependent on the GSEs and were corporate affiliates of the mortgage ...
FRB Atlanta Working Paper , Paper 2014-4

Report
Assessing financial stability: the Capital and Loss Assessment under Stress Scenarios (CLASS) model

The CLASS model is a top-down capital stress testing framework that uses public data, simple econometric models, and auxiliary assumptions to project the effect of macroeconomic scenarios on U.S. banking firms. Through the lens of the model, we find that the total banking system capital shortfall under stressful macroeconomic conditions began to rise four years before the financial crisis, peaking in the fourth quarter of 2008. The capital gap has since fallen sharply, and is now significantly below pre-crisis levels. In the cross section, banking firms estimated to be most sensitive to ...
Staff Reports , Paper 663

Working Paper
Financial Nowcasts and Their Usefulness in Macroeconomic Forecasting

Financial data often contain information that is helpful for macroeconomic forecasting, while multistep forecast accuracy also benefits by incorporating good nowcasts of macroeconomic variables. This paper considers the role of nowcasts of financial variables in making conditional forecasts of real and nominal macroeconomic variables using standard quarterly Bayesian vector autoregressions (BVARs). For nowcasting the quarterly value of a variety of financial variables, we document that the average of the available daily data and a daily random walk forecast to fill in the missing days in the ...
Working Papers (Old Series) , Paper 1702

Working Paper
Monetary policy surprises, positions of traders, and changes in commodity futures prices

Using futures data for the period 1990?2008, this paper finds evidence that expansionary monetary policy surprises tend to increase crude and heating oil prices, and contractionary monetary policy shocks increase gold and platinum prices. Our analysis uncovers substantial heterogeneity in the magnitude of this response to positive and negative surprises across different commodities and commodity groups. The results also suggest that the positions of futures traders for the metals and energy commodities strongly respond to monetary policy shocks. The adjustment of the net long positions of ...
FRB Atlanta Working Paper , Paper 2013-12

Report
The equity risk premium: a review of models

We estimate the equity risk premium (ERP) by combining information from twenty models. The ERP in 2012 and 2013 reached heightened levels?of around 12 percent?not seen since the 1970s. We conclude that the high ERP was caused by unusually low Treasury yields.
Staff Reports , Paper 714

Working Paper
Bayesian Inference and Prediction of a Multiple-Change-Point Panel Model with Nonparametric Priors

Change point models using hierarchical priors share in the information of each regime when estimating the parameter values of a regime. Because of this sharing, hierarchical priors have been very successful when estimating the parameter values of short-lived regimes and predicting the out-of-sample behavior of the regime parameters. However, the hierarchical priors have been parametric. Their parametric nature leads to global shrinkage that biases the estimates of the parameter coefficient of extraordinary regimes toward the value of the average regime. To overcome this shrinkage, we model ...
FRB Atlanta Working Paper , Paper 2018-2

FILTER BY year

FILTER BY Content Type

FILTER BY Author

Christensen, Jens H. E. 5 items

Smolyansky, Michael 5 items

Adrian, Tobias 4 items

Vogt, Erik 4 items

Giannone, Domenico 3 items

Spiegel, Mark M. 3 items

show more (65)

FILTER BY Jel Classification

G12 24 items

G01 8 items

C58 7 items

C32 6 items

E52 5 items

show more (43)

PREVIOUS / NEXT