Asset Allocation with Recursive Parameter Updating and Macroeconomic Regime Identifiers
In: Deutsche Bundesbank Discussion Paper No. 06/2023
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In: Deutsche Bundesbank Discussion Paper No. 06/2023
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In: European journal of political economy, Band 80, S. 102451
ISSN: 1873-5703
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In: SAFE Working Paper No. 334
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In: Deutsche Bundesbank Discussion Paper No. 16/2019
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Working paper
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Working paper
In: Journal of economic dynamics & control, Band 39, S. 18-36
ISSN: 0165-1889
In: Review of financial economics: RFE, Band 22, Heft 1, S. 36-46
ISSN: 1873-5924
AbstractWe study the impact of financial contagion on the dynamic asset allocation problem of a CRRA investor facing an incomplete market with two risky assets. We apply a Markov chain regime‐switching framework with state‐dependent jump intensities, diffusion volatilities and diffusion correlations. The key model feature that a switch to the bad contagion regime is triggered by a loss in one of the risky assets allows for the implementation of a hedging demand against contagion risk. Moreover, a state‐dependent diffusion correlation combined with heterogeneity in jump intensities and volatilities can, e.g., generate a flight to quality effect upon a systemic jump.
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In: Deutsche Bundesbank Discussion Paper No. 04/2023
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In: Deutsche Bundesbank Discussion Paper No. 12/2022
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In: Journal of international economics, Band 132, S. 103512
ISSN: 0022-1996
In: Deutsche Bundesbank Discussion Paper No. 33/2020
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Working paper
In: Journal of International Economics, Band 132, Heft 103512
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