G17 - Financial Forecasting and Simulation
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Quantum Monte Carlo for Economics: Stress Testing and Macroeconomic Deep Learning
Using the quantum Monte Carlo algorithm, we study whether quantum computing can improve the run time of economic applications and challenges in doing so. We apply the algorithm to two models: a stress testing bank model and a DSGE model solved with deep learning. We also present innovations in the algorithm and benchmark it to classical Monte Carlo. -
The potential effect of a central bank digital currency on deposit funding in Canada
A retail central bank digital currency denominated in Canadian dollars could, in theory, create competition for bank deposit funding. -
A Counterfactual Valuation of the Stock Index as a Predictor of Crashes
Stock market fundamentals would not seem to meaningfully predict returns over a shorter-term horizon—instead, I shift focus to severe downside risk (i.e., crashes). -
Early Warning of Financial Stress Events: A Credit-Regime-Switching Approach
We propose an early warning model for predicting the likelihood of a financial stress event for a given future time, and examine whether credit plays an important role in the model as a non-linear propagator of shocks. -
Predicting Financial Stress Events: A Signal Extraction Approach
The objective of this paper is to propose an early warning system that can predict the likelihood of the occurrence of financial stress events within a given period of time. To achieve this goal, the signal extraction approach proposed by Kaminsky, Lizondo and Reinhart (1998) is used to monitor the evolution of a number of economic indicators that tend to exhibit an unusual behaviour in the periods preceding a financial stress event. -
A Semiparametric Early Warning Model of Financial Stress Events
The authors use the Financial Stress Index created by the International Monetary Fund to predict the likelihood of financial stress events for five developed countries: Canada, France, Germany, the United Kingdom and the United States. -
Jump-Diffusion Long-Run Risks Models, Variance Risk Premium and Volatility Dynamics
This paper calibrates a class of jump-diffusion long-run risks (LRR) models to quantify how well they can jointly explain the equity risk premium and the variance risk premium in the U.S. financial markets, and whether they can generate realistic dynamics of risk-neutral and realized volatilities. -
The Canadian Debt-Strategy Model: An Overview of the Principal Elements
The Canadian Debt Strategy Model helps debt managers determine their optimal financing strategy. The model’s code and documentation are available to the public.