Modeling the Joint Dynamics of Spot and Futures Markets with a Regime Switching Long Memory Volatility Process

2011 ◽  
Author(s):  
Jonathan Dark
Keyword(s):  
Long Memory ◽  
Regime Switching ◽  
Futures Markets ◽  
Joint Dynamics

scholarly journals DESTABILIZING EFFECTS OF BANK OVERLEVERAGING ON REAL ACTIVITY—AN ANALYSIS BASED ON A THRESHOLD MCS-GVAR

2017 ◽  
Vol 22 (7) ◽  
pp. 1750-1768 ◽  
Author(s):  
Marco Gross ◽  
Jerome Henry ◽  
Willi Semmler
Keyword(s):  
Regime Switching ◽  
Large Scale ◽  
Banking System ◽  
Real Activity ◽  
Vector Autoregressive ◽  
Joint Dynamics ◽  
Global Vector ◽  
Optimal Leverage ◽  
The Relationship ◽  
Activity Dependent

We investigate the consequences of overleveraging and the potential for destabilizing effects arising from financial- and real-sector interactions. In a theoretical framework, we model overleveraging and demonstrate how a highly leveraged banking system can lead to unstable dynamics and downward spirals. Inspired by models developed by Brunnermeier, Sannikov and Stein, we empirically measure the deviation-from-optimal-leverage for a sample of large EU banks. This measure of overleveraging is used to condition the joint dynamics of credit flows and macroeconomic activity in a large-scale regime change model: a Threshold Mixed-Cross-Section Global Vector Autoregressive (T-MCS-GVAR). The regime-switching component of the model is meant to make the relationship between credit and real activity dependent on the extent to which the banking system is overleveraged. We find significant nonlinearities as a function of overleverage. The farther the observed leverage in the banking system from optimal leverage, the more detrimental is the effect of a deleveraging shock on credit supply and economic activity.

Random coefficient autoregression, regime switching and long memory

2003 ◽  
Vol 35 (03) ◽  
pp. 737-754 ◽  
Author(s):  
Remigijus Leipus ◽  
Donatas Surgailis
Keyword(s):  
Probability Density ◽  
Power Law ◽  
Renewal Process ◽  
Long Memory ◽  
Regime Switching ◽  
Covariance Function ◽  
Random Coefficient ◽  
Levy Process ◽  
Partial Sums ◽  
Stable Lévy Process

We discuss long-memory properties and the partial sums process of the AR(1) process {X t , t ∈ 𝕫} with random coefficient {a t , t ∈ 𝕫} taking independent values A j ∈ [0,1] on consecutive intervals of a stationary renewal process with a power-law interrenewal distribution. In the case when the distribution of generic A j has either an atom at the point a=1 or a beta-type probability density in a neighborhood of a=1, we show that the covariance function of {X t } decays hyperbolically with exponent between 0 and 1, and that a suitably normalized partial sums process of {X t } weakly converges to a stable Lévy process.

Long memory and structural breaks in commodity futures markets

2010 ◽  
Vol 31 (11) ◽  
pp. 1076-1113 ◽  
Author(s):  
Jerry Coakley ◽  
Jian Dollery ◽  
Neil Kellard
Keyword(s):  
Long Memory ◽  
Futures Markets ◽  
Structural Breaks ◽  
Commodity Futures ◽  
Commodity Futures Markets
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