Search results for "stochastic"

A problem-adjusted genetic algorithm for flexibility design

2013

Many present markets for goods and services have highly volatile demand due to short life cycles and strong competition in saturated environments. Determination of capacity levels is difficult because capacities often need to be set long before demand realizes. In order to avoid capacity-demand mismatches, operations managers employ mix-flexible resources which allow them to shift excess demands to unused capacities. The Flexibility Design Problem (FDP) models the decision on the optimal configuration of a flexible (manufacturing) network. FDP is a difficult stochastic optimization problem, for which traditional exact approaches are not able to solve but the smallest instances in reasonable…

Excessive Focus on Risk? Non-performing Loans and Efficiency of Microfinance Institutions

2021

A Stochastic Variance Factor Model for Large Datasets and an Application to S&P Data

2008

The aim of this paper is to consider multivariate stochastic volatility models for large dimensional datasets. We suggest the use of the principal component methodology of Stock and Watson [Stock, J.H., Watson, M.W., 2002. Macroeconomic forecasting using diffusion indices. Journal of Business and Economic Statistics, 20, 147–162] for the stochastic volatility factor model discussed by Harvey, Ruiz, and Shephard [Harvey, A.C., Ruiz, E., Shephard, N., 1994. Multivariate Stochastic Variance Models. Review of Economic Studies, 61, 247–264]. We provide theoretical and Monte Carlo results on this method and apply it to S&P data.

Labor and product market reforms and external Imbalances: Evidence from advanced economies

2021

We explore the impact of major labor and product market reforms on current account dynamics using a new “narrative” database of major changes in employment protection for regular workers and product market regulation for non-manufacturing industries covering 26 advanced economies over the past four decades. Our main finding is that product market deregulation is associated with a weakening of the current account, while labor market deregulation is associated with an improvement. These effects are transitory and driven by both saving and investment responses. Labor and product market reforms both have a more positive impact on the current account balance when implemented under weak macroecon…

THE STOCHASTIC VOLATILITY MODEL OF BARNDORFF-NIELSEN AND SHEPHARD IN COMMODITY MARKETS

2010

We consider the non-Gaussian stochastic volatility model of Barndorff-Nielsen and Shephard for the exponential mean-reversion model of Schwartz proposed for commodity spot prices. We analyze the properties of the stochastic dynamics, and show in particular that the log-spot prices possess a stationary distribution defined as a normal variance-mixture model. Furthermore, the stochastic volatility model allows for explicit forward prices, which may produce a hump structure inherited from the mean-reversion of the stochastic volatility. Although the spot price dynamics has continuous paths, the forward prices will have a jump dynamics, where jumps occur according to changes in the volatility p…

Volatility co-movements: a time-scale decomposition analysis

2015

In this paper, we are interested in detecting contagion from US to European stock market volatilities in the period immediately after the Lehman Brothers collapse. The analysis is based on a factor decomposition of the covariance matrix, in the time and frequency domain, using wavelets. The analysis aims to disentangle two components of volatility contagion (anticipated and unanticipated by the market). Once we focus on standardized factor loadings, the results show no evidence of contagion (from the US) in market expectations (coming from implied volatility) and evidence of unanticipated contagion (coming from the volatility risk premium) for almost any European country. Finally, the estim…

Inferring Cognitive Heterogeneity From Aggregate Choices

2020

Theories of bounded rationality often assume a rich dataset of choices from many overlapping menus, limiting their practical applicability. In contrast, we study the problem of identifying the distribution of cognitive characteristics in a population of agents from a minimal dataset that consists of aggregate choice shares from a single menu, and includes no observable covariates of any kind. With homogeneous preferences, we find that “consideration capacity” and “consideration probability” distributions can both be recovered effectively if the menu is sufficiently large. This remains true generically when tastes are heterogeneous with a known distribution. When the taste distribution is un…

Equilibrium characterization of networks under conflicting preferences

2017

In this work we characterize equilibrium introduced in configurations for networks with conflicting preferences. We use the model Hernandez et al. (2013) to study the effect of three main factors: the strength of individual preferences, the level of integration in the network, and the intensity of conflict in the population. Our aim is to understand how likely is it that social outcomes are either those in which preferences dominate choices or those in which some individuals sacrifice their preferences to achieve consensus with others. Our results show that, the stronger individual preferences, the harder to achieve consensus in choices. However, in cases where the payoff ratio is less extr…

Stochastic monotonicity in intergenerational mobility tables

2010

SUMMARY The aim of this paper is to test for stochastic monotonicity in intergenerational socio-economic mobility tables. In other words, we question whether having a parent from a high socio-economic status is never worse than having one with a lower status. Using existing inferential procedures for testing unconditional stochastic monotonicity, we first test a set of 149 intergenerational mobility tables in 35 different countries and find that monotonicity cannot be rejected in hardly any table. In addition, we propose new testing procedures for testing conditional stochastic monotonicity and investigate whether monotonicity still holds after conditioning on a number of covariates such as…

ESCAPE TIMES IN STOCK MARKETS

2005

We study the statistical properties of escape times for stock price returns in the Wall Street market. In particular we get the escape time distribution for real data from daily transactions and for three models: (i) the Wiener process with drift and a constant market volatility, (ii) Heston and (iii) GARCH models, where the volatility is a stochastic process. We find that the first model is unable to catch all the features of the escape time distribution of real data. Moreover, the Heston model describes the probability density function for both return and escape times better than the GARCH model.