Computable Bounds for Extreme Event Probabilities in Stochastic Economic Models
AbstractThe paper introduces a multiplicative drift condition for evaluating stochastic economic models. The drift condition is shown to permit computation of quantitative bounds for extreme event probabilities in terms of the model primitives. By way of illustration, the technique is applied to a simple threshold autoregression model of exchange rates.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 927.
Length: 15 pages
Date of creation: 2005
Date of revision:
Contact details of provider:
Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia
Phone: +61 3 8344 5289
Fax: +61 3 8344 6899
Web page: http://www.economics.unimelb.edu.au
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-04-08 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Duffie, Darrell & Singleton, Kenneth J, 1993. "Simulated Moments Estimation of Markov Models of Asset Prices," Econometrica, Econometric Society, vol. 61(4), pages 929-52, July.
- Benoit Mandelbrot, 1963. "The Variation of Certain Speculative Prices," The Journal of Business, University of Chicago Press, vol. 36, pages 394.
- Bruce E. Hansen & Mehmet Caner, 1997.
"Threshold Autoregressions with a Unit Root,"
Boston College Working Papers in Economics
381, Boston College Department of Economics.
- Taylor, Alan M, 2001.
"Potential Pitfalls for the Purchasing-Power-Parity Puzzle? Sampling and Specification Biases in Mean-Reversion Tests of the Law of One Price,"
Econometric Society, vol. 69(2), pages 473-98, March.
- Alan M. Taylor, 2000. "Potential Pitfalls for the Purchasing-Power-Parity Puzzle? Sampling and Specification Biases in Mean-Reversion Tests of the Law of One Price," NBER Working Papers 7577, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marisa Cerantola).
If references are entirely missing, you can add them using this form.