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λ variation in recursive analysis with the BP model. Note: The color scale refers to λ values for each µ and month. The models are estimated in a recursive manner by using only information available up to each month between 1995:5 and 1996:12. 

λ variation in recursive analysis with the BP model. Note: The color scale refers to λ values for each µ and month. The models are estimated in a recursive manner by using only information available up to each month between 1995:5 and 1996:12. 

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Technical Report
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Early-warning models most commonly optimize signaling thresholds on crisis probabilities. The ex-post threshold optimization is based upon a loss function accounting for preferences between forecast errors, but comes with two crucial drawbacks: unstable thresholds in recursive estimations and an in-sample overfit at the expense of out-ofsample perf...

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