ADVANCE - Working Papers
Permanent URI for this collection
Browse
Browsing ADVANCE - Working Papers by Title
Now showing 1 - 10 of 19
Results Per Page
Sort Options
- CDOs in the light of the current crisisPublication . Gaspar, Raquel M.; Schmidt, ThorstenThis paper proposes a top-down model for pricing Collateralized Debt Obligation (CDOs). Our proposal is both treatable and realistic, in the sense we are able to obtain closed-form solutions to single tranche CDOs and capturing extreme credit events. We use as key ingredients the so-called (T, x)-bonds, as proposed in Filipovic, Overbeck, and Schmidt (2008), but generalize their affine specificationby including shot-noise processes. Our claim is that affine diffusions combined with shot-noise processes lead to an improved modeling of CDO spreads in comparison to existing affine jump-diffusion models. The proposed approach allows in particular for better capturing the possibility of extreme events, like the ones underlying the current crisis. We illustrate our results with a very concrete (simple) instance of our class of models. Finally, we identify the connections between the top-down and bottom-up approaches for modeling credit risk, within our class of models. Concretely, we show that even when taking a bottom-up approach the aggregate loss process would be a process of affine shot-noise type.
- Convexity adjustments for ATS modelsPublication . Gaspar, Raquel M.; Murgoci, AgathaPractitioners are used to value a broad class of exotic interest rate derivatives simply by adjusting for what is known as convexity adjustments (or convexity corrections). We start by exploiting the relations between various interest rate models and their connections to measure changes. As a result we classify convexity adjustments into forward adjustments and swaps adjustments. We, then, focus on affine term structure (ATS) models and, in this context, conjecture convexity adjustments should be related of affine functionals. In the case of forward ad¬justments, we show how to obtain exact formulas. Concretely for LIBOR in arrears (LIA) contracts, we derive the system of Riccatti ODE-s one needs to compute to obtain the exact adjustment. Based upon the ideas of Schrager and Pelsser (2006) we are also able to derive general swap adjustments useful, in particular, when dealing with constant maturity swaps (CMS). Our approach bypasses the need for Taylor approximations or unrealistic assumptions. They include exact convexity adjustments previously derived, such as the adjustments associated with Gaussian models, but are far more general as they provide solutions for the entire ATS class of models.
- Do insiders time their trades? Evidence from Euronext LisbonPublication . Gonçalves, Pedro; Duque, JoãoIn this paper, we examine the existence of insider trading abnormal profits in Euronext Lisbon from January 2001 to December 2005. Using the methodology of event studies, our overall results show that, in spite of existing legislation to regulate transactions, insiders are still able to make abnormal profits. Results also show that insider buying is a stronger indicator than insider selling and that the magnitude and duration of abnormal profits depend on both firm and transaction-specific factors. These include industry classification, firm size, firm valuation and relative trading volume.
- Efficiency, concentration and competition in the brazilian banking sector: a comparative literature analysisPublication . Wolters, Mark; Couto, EduardoThe past two decades have seen a revolution in the Latin American banking industry with a rash of crises, reforms, deregulation, privatizations, and foreign bank investment. The region has become a hot bed of interest in global financial markets. Brazil in particular has seen a significant change in its banking sectors competitive makeup with increases in foreign bank participation and lessening of public bank burden on the federal government. Competition, consolidation, and efficiency measures throughout the region have led to a reexamining of the costs and benefits of consolidated banking sectors and the threat of monopolistic actions of banks. Possible statistical analytical tools for efficiency, concentration, and competition are discussed, such as the Panzer Rosse H-Statistic, Frontier Analysis, and others. The quiet life theory of a monopoly is examined and put up against the efficient structure hypothesis of Demsetz in order to see which theory may hold more credence in the Brazilian banking sector upon further research. The paper finished with the analysis of the Brazilian banking sector and how developments can we do in future research to expand and fortify the previous findings about Brazilian banking sector.
- Electricity market interconnections and electricity price volatilityPublication . Fonseca, Nuno; Duque, JoãoIn this paper, we present a model of changes in electricity price returns in the context of interconnected electricity markets. This model predicts an inverse relationship between the increase in interconnection capacity and the volatility of price returns in the corresponding electricity markets. This means that an increase of interconnection between two markets leads to a decrease in the volatility of their prices. We support our model with empirical results from the Australian, European and USA electricity markets. The results suggest that this inverse relationship between interconnection and volatility exists, meaning that when markets tend to be physically interconnected, variance tends to be reduced.
- O enquadramento filosófico para a investigação: algumas reflexões introspectivas ao positivismoPublication . Nevado, Pedro PicalugaNo âmbito da ciência e da construção de conhecimento científico reflectimos sobre a ontologia, a epistemologia e a metodologia que caracterizou o debate filosófico e científico a partir de Descartes, versando Comte e o positivismo. Fazemos uma incursão ao âmago do pensamento positivista e discutimos diferentes problemáticas a fim de procurar eventuais inconsistências. Concluímos enunciando algumas questões e dúvidas compatíveis com brechas no corpo teórico positivista que aconselham a pesquisas futuras de esclarecimento, nomeadamente em debates relevantes como são o do racionalismo e empirismo, o do dedutivismo silogístico e cartesiano, o do indutivismo e dedutivismo, ou o da unidade e diversidade metodológica.
- Estudo de casos : um curso de acção na investigação em gestãoPublication . Nevado, Pedro PicalugaPartir à procura de explicações, mesmo que isso implique alguma intuição e teorização, é o que se pretende com a «metodologia dos casos» que iremos considerar. Tem sido fruto de discussão entre investigadores se são mais importante as técnicas, independentemente dos conceitos, ou se as explicações, independentemente das técnicas. Os defensores das técnicas, principalmente, na investigação empírica tradicional dedutiva, entendem que o fundamental está na causalidade e que esta só é encontrada em leis ou em regularidades que se detectem entre os acontecimentos. Para eles, sem regularidade têm-se análises inferiores, intuições ou teorizações sociais. Os outros, pelo contrário, preocupam-se menos com as técnicas tradicionais de causalidade e partem na busca de explicações, independentemente das regularidades. Este artigo percorre um dos caminhos relativos ao estudo de casos partindo da pesquisa qualitativa de dados e da sua complementariedade com a pesquisa de dados quantitativos para chegar à forma de”contar a estória” estudada.
- Estudos de casos: um curso de acção na investigação em GestãoPublication . Nevado, Pedro PicalugaPartir à procura de explicações, mesmo que isso implique alguma intuição e teorização, é o que se pretende com a «metodologia dos casos» que iremos considerar. Tem sido fruto de discussão entre investigadores se são mais importante as técnicas, independentemente dos conceitos, ou se as explicações, independentemente das técnicas. Os defensores das técnicas, principalmente, na investigação empírica tradicional dedutiva, entendem que o fundamental está na causalidade e que esta só é encontrada em leis ou em regularidades que se detectem entre os acontecimentos. Para eles, sem regularidade têm-se análises inferiores, intuições ou teorizações sociais. Os outros, pelo contrário, preocupam-se menos com as técnicas tradicionais de causalidade e partem na busca de explicações, independentemente das regularidades. Este artigo percorre um dos caminhos relativos ao estudo de casos partindo da pesquisa qualitativa de dados e da sua complementariedade com a pesquisa de dados quantitativos para chegar à forma de"contar a estória" estudada.
- EU Finance Ministers, capital markets and fiscal outcomesPublication . Afonso, António; Guedes, Maria JoãoWe investigate the relevance of the characteristics of Ministers of Finance as an influence on the development of stock returns, sovereign yields and fiscal outcomes, which result from the implementation of their fiscal policies. For a panel of 27 EU countries, covering the period of 1980-2012, we find that academic background, tenure and gender, play a role in determining stock and bond market returns, as well as the general fiscal position of governments.
- Exports, productivity and innovation : evidence from Portugal using microdataPublication . Faustino, Horácio C.; Lima, Joana C.; Matos, Pedro VergaThis study examines the evolution of Portuguese exports to Spain and its determinants in the period 2004-2008, based on a sample of the 97 largest exporters to Spain. The econometric study, using panel data and a static and dynamic analysis, considers as theoretically relevant explanatory variables productivity, equity capital, remuneration and innovation measured by the expenditure on research and development (R&D). The static results of the estimated models confirm the positive influence of productivity and equity capital on the variation of exports, and the negative effect of the labour costs. The variable R&D is statistically significant, with a positive effect on Portuguese exports in the dynamic model. The dynamic estimations also suggest that the exports in the previous period have a positive effect on contemporaneous exports.