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An Efficient Generalized Discrete Time Approach To Poisson Gaussian Bond Option Pricing In The Heath Jarrow Morton Model
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Book Synopsis An Efficient Generalized Discrete-time Approach to Poisson-Gaussian Bond Option Pricing in the Heath-Jarrow-Morton Model by : Sanjiv Ranjan Das
Download or read book An Efficient Generalized Discrete-time Approach to Poisson-Gaussian Bond Option Pricing in the Heath-Jarrow-Morton Model written by Sanjiv Ranjan Das and published by . This book was released on 1997 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Term structure models employing Poisson-Gaussian processes may be used to accommodate the observed skewness and kurtosis of interest rates. This paper extends the discrete-time, pure-Gaussian version of the Heath-Jarrow-Morton model to the pricing" of American-type bond options when the underlying term structure of interest rates follows a Poisson-Gaussian process. The Poisson-Gaussian process is specified using a hexanomial tree (six nodes emanating from each node), and the tree is shown to be recombining. The scheme is parsimonious and convergent. This model extends the class of HJM models by (i) introducing a more generalized volatility specification than has been used so far, and (ii) inducting jumps, yet retaining lattice recombination, thus making the model useful for practical applications
Book Synopsis An Optimization-based Econometric Framework for the Evaluation of Monetary Policy by : Julio Rotemberg
Download or read book An Optimization-based Econometric Framework for the Evaluation of Monetary Policy written by Julio Rotemberg and published by . This book was released on 1998 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper considers a simple quantitative model of output, interest rate and inflation determination in the United States, and uses it to evaluate alternative rules by which the Fed may set interest rates. The model is derived from optimizing behavior under rational expectations, both on the part of the purchasers of goods and upon that of the sellers. The model matches the estimates responses to a monetary policy shock quite well and, once due account is taken of other disturbances, can account for our data nearly as well as an unrestricted VAR. The monetary policy rule that most reduces inflation variability (and is best on this account) requires very variable interest rates, which in turn is possible only in the case of a high average inflation rate. But even in the case of a constrained-optimal policy, that takes into account some of the costs of average inflation and constrains the variability of interest rates so as to keep average inflation low, inflation would be stabilized considerably more and output stabilized considerably less than under our estimates of current policy. Moreover, this constrained-optimal policy also allows average inflation to be much smaller. This version contains additional details of our derivations and calculations, including three technical appendices, not included in the version published in NBER Macroeconomics Annual 1997.
Book Synopsis Bond and Money Markets by : Moorad Choudhry
Download or read book Bond and Money Markets written by Moorad Choudhry and published by Butterworth-Heinemann. This book was released on 2003-07-04 with total page 1152 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Bond and Money Markets is an invaluable reference to all aspects of fixed income markets and instruments. It is highly regarded as an introduction and an advanced text for professionals and graduate students.Features comprehensive coverage of: * Government and Corporate bonds, Eurobonds, callable bonds, convertibles * Asset-backed bonds including mortgages and CDOs * Derivative instruments including futures, swaps, options, structured products* Interest-rate risk, duration analysis, convexity, and the convexity bias * The money markets, repo markets, basis trading, and asset/liability management * Term structure models, estimating and interpreting the yield curve * Portfolio management and strategies,total return framework, constructing bond indices* A stand alone reference book on interest rate swaps, the money markets, financial market mathematics, interest-rate futures and technical analysis * Includes introductory coverage of very specialised topics (for which one previously required several texts) such as VaR, Asset & liability management and credit derivatives * Combines accessible style with advanced level topics
Book Synopsis NBER Reporter by : National Bureau of Economic Research
Download or read book NBER Reporter written by National Bureau of Economic Research and published by . This book was released on 1997 with total page 526 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Efficient Estimation of Average Treatment Effects Using the Estimated Propensity Score by : Keisuke Hirano
Download or read book Efficient Estimation of Average Treatment Effects Using the Estimated Propensity Score written by Keisuke Hirano and published by . This book was released on 2000 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: We are interested in estimating the average effect of a binary treatment on a scalar outcome. If assignment to the treatment is independent of the potential outcomes given pretreatment variables, biases associated with simple treatment-control average comparisons can be removed by adjusting for differences in the pre-treatment variables. Rosenbaum and Rubin (1983, 1984) show that adjusting solely for differences between treated and control units in a scalar function of the pre-treatment, the propensity score, also removes the entire bias associated with differences in pre-treatment variables. Thus it is possible to obtain unbiased estimates of the treatment effect without conditioning on a possibly high-dimensional vector of pre-treatment variables. Although adjusting for the propensity score removes all the bias, this can come at the expense of efficiency. We show that weighting with the inverse of a nonparametric estimate of the propensity score, rather than the true propensity score, leads to efficient estimates of the various average treatment effects. This result holds whether the pre-treatment variables have discrete or continuous distributions. We provide intuition for this result in a number of ways. First we show that with discrete covariates, exact adjustment for the estimated propensity score is identical to adjustment for the pre-treatment variables. Second, we show that weighting by the inverse of the estimated propensity score can be interpreted as an empirical likelihood estimator that efficiently incorporates the information about the propensity score. Finally, we make a connection to results to other results on efficient estimation through weighting in the context of variable probability sampling.
Book Synopsis A Simple Framework for Nonparametric Specification Testing by : Glenn Ellison
Download or read book A Simple Framework for Nonparametric Specification Testing written by Glenn Ellison and published by . This book was released on 1998 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a simple framework for testing the specification of parametric conditional means. The test statistics are based on quadratic forms in the residuals of the null model. Under general assumptions the test statistics are asymptotically normal under the null. With an appropriate choice of the weight matrix, the tests are shown to be consistent and to have good local power. Specific implementations involving matrices of bin and kernel weights are discussed. Finite sample properties are explored in simulations and an application to some parametric models of gasoline demand is presented.
Book Synopsis Maximum Likelihood Estimation of Discretely Sampled Diffusions by : Yacine Aït-Sahalia
Download or read book Maximum Likelihood Estimation of Discretely Sampled Diffusions written by Yacine Aït-Sahalia and published by . This book was released on 1998 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: When a continuous-time diffusion is observed only at discrete dates, not necessarily close together, the likelihood function of the observations is in most cases not explicitly computable. Researchers have relied on simulations of sample paths in between the observations points, or numerical solutions of partial differential equations, to obtain estimates of the function to be maximized. By contrast, we construct a sequence of fully explicit functions which we show converge under very general conditions, including non-ergodicity, to the true (but unknown) likelihood function of the discretely-sampled diffusion. We document that the rate of convergence of the sequence is extremely fast for a number of examples relevant in finance. We then show that maximizing the sequence instead of the true function results in an estimator which converges to the true maximum-likelihood estimator and shares its asymptotic properties of consistency, asymptotic normality and efficiency. Applications to the valuation of derivative securities are also discussed.
Book Synopsis The Role of Propensity Score in Estimating Dose-response Functions by : Guido Imbens
Download or read book The Role of Propensity Score in Estimating Dose-response Functions written by Guido Imbens and published by . This book was released on 1999 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: Estimation of average treatment effects in observational, or non-experimental in pre-treatment variables. If the number of pre-treatment variables is large, and their distribution varies substantially with treatment status, standard adjustment methods such as covariance adjustment are often inadequate. Rosenbaum and Rubin (1983) propose an alternative method for adjusting for pre-treatment variables based on the propensity score conditional probability of receiving the treatment given pre-treatment variables. They demonstrate that adjusting solely for the propensity score removes all the bias associated with differences in pre-treatment variables between treatment and control groups. The Rosenbaum-Rubin proposals deal exclusively with the case where treatment takes on only two values. In this paper an extension of this methodology is proposed that allows for estimation of average causal effects with multi-valued treatments while maintaining the advantages of the propensity score approach.
Book Synopsis Estimating Log Models by : Willard G. Manning
Download or read book Estimating Log Models written by Willard G. Manning and published by . This book was released on 1999 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Solving Dynamic Equilibrium Models by a Method of Undetermined Coefficients by : Lawrence J. Christiano
Download or read book Solving Dynamic Equilibrium Models by a Method of Undetermined Coefficients written by Lawrence J. Christiano and published by . This book was released on 1998 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: I present an undetermined coefficients method for obtaining a linear approximating to the solution of a dynamic, rational expectations model. I also show how that solution can be used to compute the model's implications for impulse response functions and for second moments.
Book Synopsis A Research Assistant's Guide to Random Coefficients Discrete Choice Models of Demand by : Aviv Nevo
Download or read book A Research Assistant's Guide to Random Coefficients Discrete Choice Models of Demand written by Aviv Nevo and published by . This book was released on 1998 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: The study of differentiated-products markets is a central part of empirical industrial organization. Questions regarding market power, mergers, innovation, and valuation of new brands are addressed using cutting-edge econometric methods and relying on economic theory. Unfortunately, difficulty of use and computational costs have limited the scope of application of recent developments in one of the main methods for estimating demand for differentiated products: random coefficients discrete choice models. As our understanding of these models of demand has increased, both the difficulty and costs have been greatly reduced. This paper carefully discusses the latest innovations in these methods with the hope of (1) increasing the understanding, and therefore the trust, among researchers who never used these methods, and (2) reducing the difficulty of use, and therefore aiding in realizing the full potential of these methods.
Download or read book The SOFOLES written by Natalie Pickering and published by . This book was released on 2000 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Efficient Intertemporal Allocations with Recursive Utility by : Bernard Dumas
Download or read book Efficient Intertemporal Allocations with Recursive Utility written by Bernard Dumas and published by . This book was released on 1999 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this article, our objective is to determine efficient allocations in economies with multiple agents having recursive utility functions. Our main result is to show that in a multiagent economy, the problem of determining efficient allocations can be characterized in terms of a single value function (that of a social planner), rather than multiple functions (one for each investor), as has been proposed thus far (Duffie, Geoffard and Skiadas (1994)). We then show how the single value function can be identified using the familiar technique of stochastic dynamic programming. We achieve these goals by first extending to a stochastic environment Geoffard's (1996) concept of variational utility and his result that variational utility is equivalent to recursive utility, and then using these results to characterize allocations in a multiagent setting.
Book Synopsis Semiparametric Estimation of Instrumental Variable Models for Casual Effects by : Alberto Abadie
Download or read book Semiparametric Estimation of Instrumental Variable Models for Casual Effects written by Alberto Abadie and published by . This book was released on 2000 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Moment Estimation with Attrition by : John M. Abowd
Download or read book Moment Estimation with Attrition written by John M. Abowd and published by . This book was released on 1997 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present a method that accommodates missing data in longitudinal datasets of the type usually encountered in economic and social applications. The technique uses various extensions of missing at random' assumptions that we customize for dynamic models. Our method, applicable to longitudinal data on persons or firms, is implemented using the Generalized Method of Moments with reweighting that appropriately corrects for the attrition bias caused by the missing data. We apply the method to the estimation of dynamic labor demand models. The results demonstrate that the correction is extremely important.
Book Synopsis Approximation Bias in Linearized Euler Equations by : Sydney C. Ludvigson
Download or read book Approximation Bias in Linearized Euler Equations written by Sydney C. Ludvigson and published by . This book was released on 1999 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: A wide range of empirical applications rely on linear approximations to dynamic Euler equations. Among the most notable of these is the large and growing literature on precautionary saving that examines how consumption growth and saving behavior are affected by uncertainty and prudence. Linear approximations to Euler equations imply a linear relationship between expected consumption growth and uncertainty in consumption growth, with a slope coefficient that is a function of the coefficient of relative prudence. This literature has produced puzzling results: Estimates of the coefficient of relative prudence (and the coefficient of relative risk aversion) from regressions of consumption growth on uncertainty in consumption growth imply estimates of prudence and risk aversion that are unrealistically low. Using numerical solutions to a fairly standard intertemporal optimization problem, our results show that the actual relationship between expected consumption growth and uncertainty in consumption growth differs substantially from the relationship implied by a linear approximation. We also present Monte Carlo evidence that shows that the instrumental variables methods commonly used to estimate the parameters correct some, but not all, of the approximation bias.
Book Synopsis Interactions-based Models by : William A. Brock
Download or read book Interactions-based Models written by William A. Brock and published by . This book was released on 2000 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper describes a range of methods which have been proposed to study interactions in economic and social contexts. By interactions, we refer to interdependences between individual decisions which are not mediated by markets. These types of models have been employed to understand phenomena ranging from the effect of neighborhoods on the life prospects of children to the evolution of political party platforms. We provide a general choice-based framework for modeling such interactions which subsumes a number of specific models which have been studied. This framework illustrates the relationship between interactions-based models and models in statistical mechanics. Our analysis is then extended to the econometrics of these models, with an emphasis on the identification of group-level influences on individual behavior. Finally, we review some of the empirical work on interactions which has appeared in the social science literature.
