Macro-Micro, Trends vs. Noise, and SSA - II
27 Pages Posted: 12 Jul 2016 Last revised: 17 Sep 2016
Date Written: July 11, 2016
We describe some details of extensions of the Macro Micro (MM) model. Applications include a long-term real-world PFE risk simulation, including realistic quasi-random Macro trends. The details elaborated here include the use of the 3rd order skew Green function to obtain micro mean reversion, a random time distribution for the Macro component, sliding down the yield curve, and approximate no-arbitrage in the MM model.
Keywords: macro, micro, MM, real-world, PFE, risk, quasi-random, trends, 3rd order skew Green function, micro mean reversion, random time distribution, approximate no-arbitrage
JEL Classification: C14, C63, E44, F65, G1
Suggested Citation: Suggested Citation