1,721,006 research outputs found
Immunization in an affine term structure framework
No full textIn this work I deal with affine term structure models (ATSM), namely models where the valuation function P of a default-free zero-coupon bond (ZCB) is exponentially affine in a vector of stochastic state variables (or risk factors). After a short introduction to ATSMs, I will deal with ZCB's portfolio multifactor immunization. Non trivial problems arise. No special difficulties appears in finding a suitable immunization strategy in one factor models, but all become hard to deal withas soon as the dimensions of the model grow. The problem may admit no solution even with two factors only
A characterization of S-shaped utility functions displaying loss aversion
Full text linkThis paper deals with utility (or value) function for reference dependent models. A new characterization of S-shaped utility functions displaying loss aversion is put forward. Then it is used to analyze some standard forms commonly used in the literature. It is shown that, unless some parameters' restrictions are imposed, power and exponential S-shaped utilities can lead to prefer fair symmetric games to the status quo and do not display loss aversion. Finally two new examples of simple S-shaped utility functions exhibiting loss aversion are presented
Loss aversion and perceptual risk aversion
No full textWe prove that, in cumulative prospect theory, the weak loss aversion for S-shaped value functions is equivalent to a notion of risk aversion that we define from the perceptual point of view. No additional assumption or condition on the probability distortion is needed.
It is demonstrated that a power S-shaped value function does not satisfy weak loss aversion, i.e., a decision maker is risk seeking with respect to some mixed sign lotteries
Proposed Coal Power Plants and Coal-To-Liquids Plants: Which Ones Survive and Why?
No full textThe increase of oil and natural gas prices since the year 2000 stimulated the planning and construction of new coal-fired electricity generating plants and coal-to-liquids (CTL) plants in the US. However, many of these projects have been canceled or abandoned since 2007. Using a set of 145 proposed coal power plants and 25 CTL plants, the determinants that influence the decision to abandon a project or to proceed with it are examined using binary data models and 20 regressors. In the case of coal power plants, the number of searches performed on Google relating to coal power plants, the project duration and the prices of alternative fuels for electricity generation are found to be statistically significant at the 5% level. As for CTL plants, the political affiliation of the state governor is the only variable significant at the 5% level across several model specifications. An out-of-sample exercise confirms these findings. These results also hold with robustness checks considering alternative Google search keywords, the potential effects of the recession between 2008 and 2009 and the inclusion of the two dimensions of the Dynamic-Weighted Nominate (DWN) database
Discretete-time affine term structure models: an econometric formulation
No full textDiscrete-time Affine Term Structure Models can be expressed in
AR (1)-ARCH form, but it is not possible to get a non-negative vari-
ance equations simply by restricting the parameters. In this paper
we resort to a distribution assumption in order to assure the variance
to be non-negative. We present a complete formulation for one-factor
and multi-factor models with Gamma conditional noise distribution.
This way we get a well defined volatility process that avoids any prob-
lem both in generating processes and in computing the conditional
likelihoods of observations. The log-likelihood function is derived
for one- and multi-factor specifications. Moreover, we implement a
one-factor estimation both with simulated and US interest rate data.
Finally, we compare the estimation results with a standard ATSM
with Gaussian disturbances
A simple method for unconstrained optimization without using derivatives
No full textA simple derivative free optimization method is presented. Some examples are provided showing the speed and the accuracy of the method
Short Selling in Emerging Markets: A Comparison of Market Performance during the Global Financial Crisis
No full textThe paper reviews short selling practices in emerging markets. Many emerging countries do not allow short selling, this fact can affect market liquidity. We compare market return and risk indicatora across different countries from May 2002 to November 2010. Moreover, we show that market crash impact is generally weak in countries where short selling is allowed
On the Relationships between Absolute Prudence and Absolute Risk Aversion
No full textThis paper shows how, under a few standard assumptions on the utility function, the monotonicity of absolute risk aversion (ara) and of absolute prudence (ap) are connected. We get some general Propositions on the behaviour of the two functions regarding the positions and the number of their critical points. We also examine some cases where the shape of ap allows to completely determine that of ara
Discretete-time affine term structure models: an ARCH formulation
No full textDiscrete-time affine term structure models can be expressed in AR(1)-ARCH form but it is not possible to get a non-negative variance equation only by restricting the parameters. In this paper, we use distribution assumption in order to assure the variance to be non-negative. We present a complete formulation for one-factor and multi-factor models with inverse Gaussian conditional innovations distribution. Moreover, we derive the
log-likelihood functions and implement a two-factor empirical specification analysis, both with simulated and US interest rate data. We compare the estimation and forecasting results with a AR(1)-GARCH(1,1) model
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