Simulate two security daily returns with stochastic volatility and jumps . Allow for potential correlation of the jumps and have a parameter that can set that correlation to high or low . Calculate the correlation of the two assets and the value at risk for this portfolio . How does correlation change when jump correlation increases? How does value at risk change?
Based on the argument of growth accounting and other determinants, how would you anticipate the potential room for the future growth of China under the new normal steady state? China’s prospect for moderate growth are quite good given the track record of total factor productivity (TFP) growth over the last 20 years. A country’s growth potential is determined in large part by its ability to efficiently combine the factors of production with the highest productivity possible. Economic advancement based on superficial determinants such as increasing the quantity of the factors of production (i.e. increasing the number of physical capital devices and simply increasing the number of years in school), is not sustainable, because it does not address the performance of these factors, the deeper driver of growth. While China’s TFP has consistently lagged behind many Western countries, the growth in China’s TFP has been significant and sustained since Reform and Opening, suggesting that as long as the government continues to invest in policies that increase factor productivity, such as supportive infrastructure for physical capital, quality of education, and other efficiency-increasing investments, reasonable growth is highly probable.