Template-Type:ReDIF-Paper 1.0
Author-Name:Kentaro Kikuchi
Author-Name-First: Kentaro
Author-Name-Last: Kikuchi
Author-Email: kentaro-kikuchi@biwako.shiga-u.ac.jp
Author-Workplace-Name: Faculty of Economics, Shiga University
Title:Quadratic Gaussian Joint Pricing Model for Stocks and Bonds: Theory and Empirical Analysis
Abstract:This study proposes a joint pricing model for stocks and bonds in a no-arbitrage framework. A stock price representation is obtained in a manner consistent with the quadratic Gaussian term structure model, in which the short rate is the quadratic form of the state variables. In this study, specifying the dividend as a function using the quadratic form of the state variables leads to a stock price representation that is exponential-quadratic in the state variables. We prove that the coefficients determining the stock price have to satisfy some matrix equations, including an algebraic Riccati equation. Moreover, we specify the sufficient condition in which the matrix equations do have a unique solution. In our empirical analysis using Japanese data, we obtain estimates with a good fit to the actual data. Furthermore, we estimate the risk premiums for stocks and bonds and analyze how the BOJ's unconventional monetary policy has affected these risk premiums.
Creation-Date: 2015-01
Revision-Date:
Publication-Status:
File-URL: https://www.econ.shiga-u.ac.jp/risk/DPB14kikuchi20150107.pdf File-Format: Application/pdf
File-Function: First version, 2016
Number: 14
Classification-JEL: C13,E43,E44,G12
Keywords: risk premium, quadratic Gaussian term structure model, unscented Kalman filter, algebraic Riccati equation, controllability, portfolio rebalance
Handle: RePEc:shg:dpapeb:14
Template-Type: ReDIF-Paper 1.0
Author-Name: Kenshiro Ninomiya
Author-Name-First: Kenshiro
Author-Name-Last: Ninomiya
Author-Email: k-nino@biwako.shiga-u.ac.jp
Author-Workplace-Name: Faculty of Economics, Shiga University
Title: Financial Structure, Cycle, and Instability
Abstract:The subprime loan mortgage crisis has revived scholarly interest in Minsky's financial instability hypothesis. The related mathematical models present twotypes of Minskian financial structures. We construct macrodynamic models that consider both structures and discuss financial instability and cycles. We also demonstrate that one of the financial cycles occurs when a real factor stabilizes the economy. The burden of interest-bearing debt is an important determinant of the cycle. We posit that the escalating financial fragility in this cycle is a more appropriate interpretation of the Minskian financial structure that refers to hedging, speculative and Ponzi behaviors. We further demonstrate that another financial structure destabilizes the economy. If the instability occurs at the point of fragility, then the economy may deteriorate into financial crisis. Fragility then becomes instability.
Length: 35 pages
Creation-Date: 2015-07
Revision-Date: 2017-01
Publication-Status:
File-URL: https://www.econ.shiga-u.ac.jp/risk/DPB15Ninomiya20170127.pdf
File-Format: Application/pdf
File-Function: First version, 2015
Number: 15
Classification-JEL: E12, E32, E33, E43
Keywords: Minskian financial structure, financial fragility, business cycle, financial instability.
Handle: RePEc:shg:dpapeb:15
Template-Type: ReDIF-Paper 1.0
Author-Name: Kenshiro Ninomiya
Author-Name-First: Kenshiro
Author-Name-Last: Ninomiya
Author-Email: k-nino@biwako.shiga-u.ac.jp
Author-Workplace-Name: Faculty of Economics, Shiga University
Title: Financial Structure and Instability in an Open Economy
Abstract:The subprime loan mortgage crisis has revived scholarly interest in Minsky's financial instability hypothesis. The related mathematical models present two types of Minskian financial structures, which we identify as the lenders' risk type (LR) and the hedge, speculative and Ponzi type (HSP)We construct macrodynamic models in a fixed and floating exchange rate sys- tem which considers both the LR and HSP financial structures. We examine the effects of international capital mobility and international lenders' risks and demonstrate the significance of the LR and HSP financial structures in the fixed and floating exchange rate system. We emphasize the significance of stable financial structures in order to stabilize dynamic systems in an open economy.
Length: 22 pages
Creation-Date: 2017-02
Revision-Date:
Publication-Status:
File-URL: https://www.econ.shiga-u.ac.jp/risk/DPB16Ninomiya20170215.pdf
File-Format: Application/pdf
File-Function: First version, 2017
Number: 16
Classification-JEL:E12, E32, E33, E43
Keywords: Minskian financial structure, financial fragility, financial instability,international capital mobility
Handle: RePEc:shg:dpapeb:16