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SUMMARY:Asset Pricing with Realistic Crises Dynamics
DTSTART:20201117T110000
DTEND:20201117T120000
DTSTAMP:20260408T035213Z
UID:f2ec5a576415057bcfd1d848ac93acf93b5050016ff91d72143abaf0
CATEGORIES:Conferences - Seminars
DESCRIPTION:Goutham GOPALAKRISHNA\, SFI@EPFL\, PhD student\nWhat causes de
 ep recessions and slow recovery? I revisit this question and develop a mac
 ro-finance asset pricing model that quantitatively matches the salient emp
 irical features of financial crises such as a large drop in the output\, a
  high risk premium\, reduced financial intermediation\, and a long duratio
 n of economic distress. The model features leveraged intermediaries who ar
 e subjected to both capital and productivity shocks\, and face a regime-de
 pendent exit rate. I show that the model without time varying intermediary
  productivity and exit\, which reduces to Brunnermeier and Sannikov [2016]
 \, suffers from a tension between the amplification and the persistence of
  financial crises. In particular\, there is a trade-off between the uncond
 itional risk premium\, the conditional risk premium\, and the probability 
 and duration of crisis.\nFeatures that generate high financial amplificati
 on also induce faster recovery\, at odds with the data. I show that my mod
 el resolves this tension and generates realistic crises dynamics. The mode
 l is solved using a novel numerical method with active machine learning th
 at is scalable and overcomes the curse of dimensionality.
LOCATION:Zoom
STATUS:CONFIRMED
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