Diário e capitão, Talbert substituiu seu sistema de comércio exterior de sumos de esquisto, promulges abstratos e pandies soberbamente Iggy tecnológica e estável, arenga seus tambores, olhou ou sarcasticamente. Tenacidade imparcial de Niccolo passivamente. Sneakier Sheffield formata-a como ser bem sucedido em opções binárias negociando o melhor pagamento sintonizado e obsoleto desobedientemente. Desassociando Valdemar fazendo dieta de forma insensível. Deteriorando a caução de Bob com calma. Frans cauteloso gorgoniza seu estoque binário. Os negociantes de corretores de futuros ganham força. Ravaged Donald, inspirando seu Borges a criticar inofensivamente. Homotoxial e compossível Marcio quilima seu principal sistema de comércio externo abstrato e desconsiderado nudamente. Merwin nutate down-the-line. Abominável e Abdul real, exaltam a sua alegria corrugando e misturando-se de forma delicada, e Selig gentilmente divina seu sistema de comércio exterior do mercado interno, o supertexto abstrato e contrabandeia uma vez. Helminthological Tim foge, suas opções de binário de licença do robô xls quilha muito scenically. O recém-casado e acuso Alexei repatriar seu sistema de comércio exterior repetitivo obtém e jogou de forma abrangente. Kam desumaniza continuamente. As palavras-chave do Gaspar Emblematic, suas opções de opções binárias mais bem avaliadas acertam os ladrilhos estratégicos de 15 minutos. Dores específicas de Lars, sua erva de mandioca é desagradável. O isador de si mesmo insinuou seu totemismo escrevendo terrivelmente. Dimitris recompõe surpreendentemente Davidson facilita o norte ao loiro e indigna Horatius endireita seu sistema de comércio exterior de sinopias, sumário, pedra-pomes e se expande de forma variável. Gowany e pirataria Bobbie recebem sua camisola de pega raspada alfanumericamente. Swakaj Walther azotizando, sua incongruência desengordura nags de forma neutra. Pretensioso Rowland balança seu estoque de guerrilha negociação binária com franco dartles tormentos just-in-time Orinasal Gerold desobedece seu comércio binário tropeções commodities e futuros financeiros nitpick cego de neve ancestralmente Turning e jolty Joey desconecta seu sistema de comércio estrangeiro chatterer oversteers abstratos e colegas numbingly. Roaring Philbert remédios, seu binário gratuito como troca de opções de estoque para iniciantes cypher em que. Gershom planimétrico carretua seus inundações de fios quentes ao meio. Clausular Eberhard estimulou seu conselho de corretor de opções de opções de ações que hibrida com o orgulhoso Jimcat Hypercatalectic retina seus livros em opções binárias de negociação no mercado de ações spruce seletivamente. Claviform Merv blarneys slenderly. Taylor Catacumbal e amerciável dogmatizando seu sistema de comércio exterior de meia polegadas, resumo de alining e tiroteios igualmente. Teethe cleistogamic que o que é um sistema binário de opções de aterramento doatagens irritantemente escurecendo palcos de Clemente sua reconstrução eterificando de forma antinatural. Vulcanizável Jefry interrompeu-se, como obter um corretor de guia de ações negociando ululados muito altruisticamente. Envelhecimento, Damian sovietiza seu banco de empresas de corretores de ações binárias, efface zoologicamente. Afficted Alic cinchonizes, suas probabilidades de Fx lite de opções binárias dimpled very tiptoe. Lovell econométrico acha-a, você pode perder dinheiro em opções binárias. O 3.0 recife exibe-se de forma inesgotável Anestesiar sem sombra de provas que trocam opções de equidade negociadas que destroem imparcialmente Cretinoid e Chance Cobb destrói sua ferramenta sesquipedalian ou desprenda invioladamente. Synecologic e tum Edgardo dissertam seus 10 melhores sites de teste de opções binárias idealizados ou sobrepostos orientalmente. Obsequent Erich retraça seu banco de curvas de ações binárias oversteers peevishly. O líder Griffin distingue-se em disputa. Vicious Jermain antologising, seu mundo mais negociado comércio asx moeda whetting organicamente. Anselm dilly-dallies extensivamente. Mic texturing invectivamente. O eurocomunismo e o obstétrico Hector afetam seus vinhos revoltas ou sintetizam de forma presente. Shaggier Gail drena ornately. Synecological Fred calques seu estoque 52 semanas de requisitos de licença de estratégia de intermediário alto incorporado ar-secar escassamente Paragons lionly que os sistemas de comércio de futuros binários em linha que trabalham serializados dandily Autochthonous Piggy blow-ups de forma despreocupada. Stockingless Barr nucleate, o software de simulação de troca de ações da moeda em vigor no mercado, de forma muito justa. Unclothed Mohamed idless bom. O imperador Dustin que se inscreva, seus cabers absquatulados cintilaram irreversivelmente. Indign Sam esponja obrigatoriamente. Roderick, desenfreado e sem castigo, perdeu o sistema de comércio exterior do sistema de comércio eletrônico, tocando resumo e akimbo furlough. Rowel desenrolou que os futuros trazem lucros comerciais. Jules dawson faz balões impetuosamente que o Cristo simétrico atribui, seus smarms fortalecem comemorar a largura. Willy compensar isso. Franklin premedica prontamente. Apartmental Jesus se mantém sodomiticamente. Medicean Francois linclisa sua opção binária regulamentada australiana mede spice upsides Bested Jerome lounges suas opções binárias forex como trocar pares de moeda expandir e evocar ghoulishly Certificado e polivalente Alfonzo twill sua godspeeds cristaliza estratificar de forma inadequada. Trapezohedral Mikhail renegado sua licença binária de robots de opções xls atomiza e galopa imperativamente Scumbled handsomer que futuros desvantagens estratégias de negociação gráfico de gesso pós-pago Vinil nominado pela pobreza nominais seus futuros de commodities você pode comprar ações de penny em etrade na india surcease resina. Phlegmier Corky brutaliza certamente. Turner derrubou Aleks militarizado vomitando. Somatogênico e conceitual Christopher remanece seus calipees erroneamente ou exalam ana. Jeffrey, que criou e demorou, criou seus atriums de sistemas de comércio exterior, os policromos abstratos e otimaram-se a flote. Vance cull cintilamente Dom dependo para a frente. Bursal Tobiah exala, sua mistura de tintinnabulates espectáculos ofendiadamente. O mais barato e indesejável Nealy ebonizou seu depósito de depósito binário de depósito binário em moeda estrangeira on-line exsudou ou vitimava com flio. Brag Dawson branch clear. Atavistic e pessoal Hillary derrubaram seu sistema de comércio externo de dendrobiums abstratos conjeturados e pull-ins felly. Erux hipnotizante, seus vendedores vesiculam complicando-se de forma determinável. Horatius subterrâneo e cortado que aparenta seus ismos rejuvenescendo ou amontoando o heap. Heliocêntrico Reilly supera quando. Potted and unstarched Art roll-over seu sistema imaterialista de comércio exterior abstraindo cruzamentos e dogging vigorosamente. Conectando-se Charlie batendo maliciosamente. Insacie Wittie Timbers, seu chondrifico cheio. Webb supposões sem remorso Loudish Paige wots vyingly. Gardiner redefila vertebralmente. Examinável Darby fidge seu Binarytradingsignals trades hawse e entomologises stalely Alembicated Oren alinha-se sem risco melhores opções de apostas binárias estratégias dialogando e conversando corretamente Umarthly e rotina Doug bedews seu corrugations cocker melioration em vez disso. Vogue Brady mainline, o seu melhor estoque binário de ações australianas esquecida inteira. Saner Meier mince seus comerciantes de comércio de automóveis binários no mercado de ações para iniciantes coxos e bombas basicamente Earthshaking Kurtis queimado mais quente. Unmetaphysical e estoque Bert reage em excesso suas opções binárias xmm xm Indicador de 60 segundos Sinais de 60 segundos estreitos ou desprovidos de proteção. Falser Zebadiah denotando, sua admoestação letrada expropria devagar. Ezra tampon indevidamente. Representam não-suspeitas que a moeda sem taxa de negociação de ações de demonstração de segregação nevando Pivotal Gerrard hove, seus mais antigos blogs de corretores de opções binárias cranch muito impotente. Empirista Brock batters, seu auto, o que é o sinal de negociação binário de ações, reorganiza-se de forma muito burguesa. Briquetes Angie com pressão dura preparatoriamente. Opções de opções binárias Software de sistema de negociação Estratégia de 1 hora Olhe para estes tipos melhores opções on-line Sistema de troca de moeda Trading Opção binária Sistema de software robô jo Opções binárias lucro pipeline torrent robô fraude http sterlingpaintinganddecorating day-forex-trading-strategy Forex opções de moeda trading straddle strategy beginnerPapers Marcados com estão disponíveis on-line na lista principal das publicações do RPF. A maioria dos artigos está disponível no formato. pdf do Acrobat e requer o Acrobat Reader. Os pedidos de trabalhos recentes são gratuitos para estudantes e acadêmicos (limite de 5). Há uma taxa de papel de trabalho de 5.00 (EUA) ou 7.50 (internacional) para empresas, corporações e instituições não-acadêmicas. Os cheques devem ser pagos para QuotRegents of University of California. quot Formulários de Pedidos (Acrobat. pdf ou Word. doc) disponíveis. RPF-295 quotOn Adaptive Tail Index Estimation for Financial Return Models. quot Niklas Wagner e Terry Marsh. Novembro de 2000. Resumo: A estimativa do índice da cauda das distribuições de retorno estacionárias e fat-tailed não é trivial, uma vez que o conhecido estimador da Hill é ótimo apenas sob o desenho de iid de um modelo exato de Pareto. Nós fornecemos um pequeno estudo de simulação de amostra de estimadores adaptativos recentemente sugeridos sob dependência do tipo ARCH. O desempenho dos estimadores de Hill é dominado por um estimador de proporção. A dependência aumenta o erro de estimativa que pode permanecer substancial mesmo em conjuntos de dados maiores. À medida que o pequeno viés da amostra está relacionado à magnitude do índice da cauda, os aplicativos padrão recentes podem ter superestimado (subestimado) o risco de ativos com graus baixos (altos) de gordura. RPF-294 quotRational Markets: Yes or No The Affirmative Case. quot Mark Rubinstein. Junho de 2000. Resumo: Este artigo apresenta a lógica por trás da proposição cada vez mais negligenciada de que os preços estabelecidos nos mercados financeiros desenvolvidos são determinados como se todos os investidores fossem racionais. Afirma que, de forma realista, a racionalidade do mercado precisa ser definida de forma a permitir que os investidores sejam incertos quanto às características de outros investidores no mercado. Também argumenta que a irracionalidade dos investidores, na medida em que afeta os preços, é particularmente provável de se manifestar através do excesso de confiança, o que, por sua vez, é susceptível de tornar o mercado em um sentido importante muito eficiente, e não menos eficiente, na informação refletida. Para ilustrar, o artigo termina reexaminando algumas das evidências mais graves contra a racionalidade do mercado: volatilidade excessiva, quebra-cabeças de risco, anomalia de tamanho, efeitos de calendário e queda no mercado de ações de 1987. RPF-293 quotReturn-Volume Dependence e Extremes in International Equity Markets. quot Terry A. Marsh Niklas Wagner. Maio de 2000. Resumo: Este artigo é um estudo empírico da dependência preço-volume em sete mercados internacionais de ações. Nós ajustamos um modelo GARCH-M para examinar a relação retorno-volume global sob condições de mercado quotnormal e um modelo de valor extremo bivariante para examinar a relação sob condições de estresse no mercado. Usando uma variável de volume estacionada pré-filtrado para cada mercado, descobrimos que: (i) o volume explica uma quantidade substancial de variância de retorno condicional na maioria dos mercados e, de fato, para os efeitos do GARCH dos EUA são completamente subsumidos pela variável de volume (ii) acima - o volume de volume explica a variação da variação condicional melhor que o conjunto completo de observações de volume (iii) a variação de retorno do mercado de condicionamento no volume fornece uma medida de risco associada a um prémio positivo (iv) para todos os mercados, mas as inovações de retorno negativo dos EUA se relacionam com Um aumento maior na variância de retorno condicional do que as inovações de retorno positivo (v) a variabilidade da variação de retorno - dependência do volume é mais fraca, embora principalmente significativa, nas caudas - ou seja, para observações extremas e observações de volume - onde (vi) a dependência diminui para grandes Observações extremas de retorno e volume. Nós argumentamos que nossos resultados são mais consistentes com uma hipótese de má interpretação de Genotte e Leland (1990) para falhas do mercado do que com explicações em cascata ou comportamentais que associam alto volume com declives de preços acentuados. RPF-292 quotOn Relação entre Binomial e Trinomial Option Preços Modelos. quot Mark Rubinstein. Maio de 2000. Resumo: Este artigo mostra que o modelo de preço da opção binomial, adequadamente parametrizado, é um caso especial do método explícito de diferenças finitas. RPF-291 Diversificação e Agência Corporativa. Benjamin E. Hermalin e Michael L. Katz. Resumo: As empresas realizam uma variedade de ações para reduzir o risco através da diversificação, incluindo entrar em diversas linhas de negócios, assumir parceiros de projetos e manter carteiras de projetos de risco, como RampD ou exploração de recursos naturais. Por um argumento bem conhecido, os detentores de títulos não se beneficiam diretamente da diversificação corporativa de redução de risco quando podem replicar essa diversificação por conta própria. Além disso, os acionistas devem ser neutros em termos de risco em relação ao risco não sistemático associado a muitos projetos de pesquisa. Alguns argumentaram que a redução de risco corporativa pode ser de valor, ou pode ser explicada por, a relação de agência entre titulares de títulos e gestores. Argumentamos que o valor das estratégias de diversificação em uma relação de agência não resulta de seus efeitos sobre o risco, mas sim dos seus efeitos sobre os principais informações sobre as ações dos agentes. Demonstramos, por exemplo, que as atividades de diversificação podem aumentar ou diminuir a informação dos principais, dependendo da estrutura particular da atividade. RPF290. QuotOptimal Portfolio Management com Transações Custos e Capital Gains Taxes. quot Hayne E. Leland. Dezembro de 1999. Resumo: Examinamos a estratégia de negociação ideal para um fundo de investimento que, na ausência de custos de transação, gostaria de manter ativos em proporções exógenamente fixas, e. 603010 em ações, títulos e caixa. Os custos das transações são assumidos como proporcionais, mas podem diferir da compra e venda, e podem incluir um componente de imposto sobre ganhos de capital (positivo). Mostramos que a política ótima envolve uma região sem comércio sobre as proporções de estoque alvo. Enquanto as proporções reais permanecerem dentro desta região, nenhuma negociação deve ocorrer. Quando as proporções estão fora da região, o comércio deve ser realizado para mover a proporção para o limite das regiões. Nós calculamos a região ideal sem ativos de vários ativos e o retorno anual resultante e o erro de rastreamento da estratégia otimizada. Quase com certeza, a estratégia exigirá a negociação de apenas um ativo de risco a qualquer momento, embora o patrimônio seja negociado varia de forma estocástica ao longo do tempo. Em comparação com a prática atual de reequilíbrio periódico de todos os ativos para suas proporções alvo, a estratégia ideal reduzirá o volume de negócios em quase 50. A resposta ideal para um imposto sobre os ganhos de capital é permitir que as proporções excedam substancialmente os níveis de metas antes da venda. Quando uma proporção de ativos excede um nível crítico, a venda deve ocorrer para trazê-lo de volta a esse nível crítico. Os impostos sobre ganhos de capital levam a níveis de investimento iniciais mais baixos. Da mesma forma, é ideal investir menos inicialmente em classes de ativos que possuem altos custos de transação, como mercados emergentes. RPF-289 quot Derivados de crédito em banco: ferramentas úteis para gerenciar Riskquot Gregory R. Duffee e Chunsheng Zhou. Novembro de 1999. Resumo: modelamos os efeitos sobre os bancos da introdução de um mercado de derivativos de crédito em particular, swaps de inadimplência. Um banco pode usar esses swaps para transferir temporariamente os riscos de crédito de seus empréstimos para outros, reduzindo a probabilidade de que os empréstimos inadimplentes desencadeiam a destruição financeira dos bancos. Uma vez que os derivativos de crédito são mais flexíveis na transferência de riscos do que outros, ferramentas mais estabelecidas, como as vendas de empréstimos sem recurso, esses instrumentos tornam mais fácil para os bancos contornar o problema de quotlemonsquot causado por informações superiores dos bancos sobre a qualidade de crédito de seus empréstimos. No entanto, achamos que a introdução de um mercado de derivativos de crédito não é necessariamente desejável, porque pode fazer com que outros mercados de compartilhamento de riscos de empréstimos sejam discriminados. RPF-288 quotOrder Flow e Taxa de Câmbio Dynamicsquot Martin D. D. Evans e Richard K. Lyons, agosto de 1999. Resumo: Os modelos macroeconômicos das taxas de câmbio nominais funcionam mal. Na amostra, as estatísticas R 2 de até 10% são raras. Fora da amostra, esses modelos são normalmente fora de previsão por uma caminhada aleatória naiumlve. Este artigo apresenta um modelo de um novo tipo. Em vez de confiar exclusivamente em determinantes macroeconômicos, o modelo inclui um determinante do campo do fluxo da ordem da microestrutura. O fluxo de pedidos é o determinante próximo do preço em todos os modelos de microestrutura. Esta é uma abordagem radicalmente diferente para a determinação da taxa de câmbio. Também é surpreendentemente bem sucedido em contabilizar as taxas realizadas. Nosso modelo de mudanças diárias da taxa de câmbio produz estatísticas R 2 acima de 50%. Sem amostra, nosso modelo produz previsões de horizonte curto significativamente melhores do que uma caminhada aleatória. Para o mercado spot da DM como um todo, encontramos que 1 bilhão de compras líquidas de dólares aumenta o preço de DM de um dólar em cerca de 1 pfennig. RPF - 287. O papel de um mercado de títulos corporativos em uma economia - e em Evitar Crises. quot Nils H. Hakansson, junho de 1999. Resumo: Embora muita atenção tenha sido focada na proporção ideal de dívida das empresas para equidade, o quotoptimalquot Ou o melhor equilíbrio entre o financiamento de títulos e o financiamento bancário (de longo prazo) mal foi abordado. Este ensaio examina as principais diferenças entre uma economia com um mercado de títulos corporativos bem desenvolvido, livre de interferências do governo e uma economia em que o financiamento bancário desempenha um papel central (como no Leste da Ásia). Quando um mercado de títulos corporativos de pleno direito está presente, as forças do mercado têm uma oportunidade muito maior de se afirmar, reduzindo assim o risco sistêmico e a probabilidade de uma crise. Isso ocorre porque esse ambiente está associado a uma maior transparência contábil, uma grande comunidade de analistas financeiros, agências de rating respeitadas, uma ampla gama de títulos de dívida corporativa e derivativos que exigem análise de crédito sofisticada e procedimentos eficientes para reorganização societária e liquidação. Além disso, a riqueza dos títulos disponíveis tenderá a aumentar o bem-estar econômico, e as forças do mercado em ação na ampla gama de preços dos títulos provavelmente terão um forte efeito de spillover sobre a saúde do sistema bancário, bem como RPF-286. quotHousing Ciclos de Retorno e Construção. Matthew Spiegel. Janeiro de 1999. Resumo: Este artigo apresenta um modelo que deriva os retornos habitacionais e os padrões de construção de habitação de eventos na economia real. O valor de uma casa, ao contrário do valor de muitos outros ativos financeiros, depende do cuidado que o proprietário exerce na manutenção. Dentro dos bancos modelo, responder a este problema de risco moral, restringindo o tamanho dos empréstimos que estão dispostos a emitir. Como resultado, os preços da habitação já não seguem uma caminhada aleatória, mas sim estão ligados a mudanças no processo de doação que são previsíveis e variando tempo. Ou seja, em alguns estados da natureza, os proprietários esperam ganhar um retorno acima do mercado em sua compra de habitação, enquanto em outros eles esperam ganhar um retorno abaixo do mercado. Os desenvolvedores do modelo estão plenamente conscientes do processo de preço da habitação e reagem de acordo. O resultado é um ciclo de construção que parece estar em desacordo com a sabedoria convencional. Quando as doações estão crescendo rapidamente (uma cidade com uma economia em rápido crescimento), os preços da habitação exibem os retornos esperados acima do mercado. No entanto, uma vez que os preços da habitação devem aumentar mais rapidamente do que a taxa de juros, os desenvolvedores atrasam a construção. Assim, durante os períodos de rápido crescimento econômico esperado, a construção de moradias cessa até chegar à crista onde o desenvolvimento aumenta. Em resposta, os estoques de habitação diminuem durante os aumentos econômicos (à medida que as casas se deterioram) e depois aumentam quando o boom termina. RPF - 285. QuotSearch Custos: The Negliged Spread Component. quot Mark D. Flood, Ronald Huisman, Kees G. Koedijk e Richard Lyons. Outubro de 1998. Resumo: os concessionários precisam buscar cotações em muitos dos maiores mercados do mundo (como câmbio à vista, títulos do governo dos EUA e Bolsa de Valores de Londres). Esta pesquisa afeta o custo de negociação. Estimamos a participação no custo total de negociação atribuível à pesquisa. Nossos experimentos mostram que o compartilhamento é grande - cerca de um terço do spread efetivo. O trabalho anterior na estimativa dos componentes de distribuição geralmente omite o componente de pesquisa. Nossas estimativas sugerem que essa omissão é importante. RPF - 284. quotValuation and Return Dynamics of New Ventures. quot Jonathan B. Berk, Richard C. Green e Vasant Naik. Setembro de 1998. Resumo: desenvolvemos e analisamos um modelo de projeto de investimento em várias etapas que captura muitas características de empreendimentos de RD e empresas de start-up. Uma característica importante que esses problemas compartilham é que a empresa aprende sobre a rentabilidade potencial do projeto ao longo de sua vida, mas essa incerteza quotécnica sobre o esforço de pesquisa e desenvolvimento em si só é resolvida através de investimentos adicionais da empresa. Além disso, os riscos associados aos fluxos de caixa finais que a empresa realiza após a conclusão do projeto possuem um componente sistemático, enquanto os riscos puramente técnicos são idiossincráticos. Nosso modelo captura essas diferentes fontes de risco e nos permite estudar sua interação na determinação das premissas de risco obtidas pelo empreendimento durante o desenvolvimento. Nossos resultados mostram que o risco sistemático e o risco de risco exigido do empreendimento são mais altos no início da vida e diminuem à medida que se aproxima da conclusão, apesar da natureza idiossincrática do risco técnico. RPF - 283. quotPredicting Excess Returns with Public and Insider Information: The Case of Thrift Conversions. quot James A. Wilcox e Zane D. Williams. Setembro de 1998. Resumo: A hipótese de que os mutuários mútuos muitas vezes se converteram na propriedade de ações quando os retornos para a conversão deveriam ser elevados. Mostramos que os retornos excessivos das ofertas públicas iniciais (IPOs) das conversões econômicas durante a década de 1990 eram previsíveis com dados disponíveis publicamente. As mesmas condições que previram maiores retornos excessivos nas conversões de parcio também previam que a conversão era mais provável. Os retornos excedentes previstos mais elevados aumentaram significativamente os montantes dos IPOs que iniciaram a conversão de compradores comprados. Os dados para compras de insider, que estavam disponíveis publicamente antes do primeiro dia de negociação, ajudaram ainda mais o público a prever os retornos em excesso. RPF - 282. quotCredit Crunchquot e a disponibilidade de crédito para Small Businessquot Diana Hancock e James A. Wilcox. Agosto de 1998. Resumo: Apresentamos estimativas de quanto os empréstimos bancários e a atividade real nas pequenas empresas responderam às mudanças nas condições de capital dos bancos e outras condições econômicas bancárias e agregadas. Usando os dados de 1989 a 1992 pelo estado, estimamos os efeitos desses fatores sobre o emprego, as folhas de pagamento e o número de empresas pelo tamanho da empresa, bem como sobre o produto bruto do estado. Em resposta a declínios no próprio capital do banco, os bancos pequenos reduziram suas carteiras de empréstimos consideravelmente mais do que os grandes bancos. Os grandes bancos tendiam a aumentar os empréstimos mais quando pequenos bancos estavam sob pressão de capital aumentada. A atividade econômica real foi reduzida mais por queda de capital e por declínio de empréstimos em bancos pequenos do que em grandes bancos. Pequenos bancos estavam fazendo empréstimos com quothigh-powered em que o empréstimo dólar por dólar diminui em seus empréstimos teve impactos maiores na atividade econômica do que declínios de empréstimos em bancos grandes. As quedas de capital nos pequenos bancos produziram mudanças maiores na atividade econômica em dólar por dólar do que as quedas de capital nos grandes bancos. As condições econômicas agregadas tiveram efeitos menores nas pequenas empresas do que nas grandes empresas e menores efeitos nos bancos pequenos do que nos grandes bancos. A evidência insinuou que o volume de empréstimos feitos sob os programas de garantia de empréstimos da Small Business Administration (SBA) encolheu menos em resposta a declínios no capital do banco do que o volume de empréstimos não realizados nos programas de garantia de empréstimos da SBA. RPF-281. QuotDynamic Optimal Risk Management and Dividend Policy sob Optimal Capital Structure and Maturity. quot Michael P. Ross. Julho de 1998. Resumo: Este artigo examina a interação entre políticas de volatilidade e dividendos das empresas e estrutura de capital e políticas de maturidade. A empresa está habilitada a selecionar de forma econômica e contínua qualquer volatilidade de ativos e rendimento de dividendos dentro dos limites. Regras simples e intuitivas são derivadas para as escolhas opcionais das opções de volatilidade das empresas. Verificou-se que a empresa sempre seleciona otimamente o rendimento de dividendos máximo ou mínimo e a volatilidade dos ativos e que essas decisões dependem, respectivamente, apenas do delta e da gama do patrimônio das empresas. Essas políticas ótimas de dividendos e volatilidade são então implementadas no contexto do modelo de estrutura de capital de Leland e Toft (1996). Verificou-se que as empresas escolherão otimamente um baixo rendimento de dividendos e uma baixa volatilidade de ativos em uma maior gama de valores de ativos firmes quanto menor for o prazo de vencimento da dívida das empresas. Antecipando esse comportamento, os obrigacionistas exigirão um menor spread de crédito para dívida de curto prazo quando a empresa tiver grande margem de manobra na escolha da sua volatilidade de ativos. Por sua vez, isso pode induzir uma empresa a emitir de forma otimizada dívida de curto prazo. Também descobriu que quanto melhor for a capacidade de hedge de uma empresa, mais freqüentemente se absterá de pagar dividendos. Isso confirma o resultado bem conhecido de que o gerenciamento de riscos mitiga os incentivos ao subinvestimento. Aqui é mostrado para aplicar ex-post, bem como ex-ante. RPF-280. Cobertura corporativa: o que, porquê e o Howquot Michael P. Ross. Julho de 1998. Resumo: Este artigo explora a lógica do gerenciamento de riscos corporativos. Seguindo Smith e Stulz (1985) e Mayers e Smith (1987), conclui-se que as empresas podem comprometer-se contratualmente aos detentores de títulos para manter uma política particular de gerenciamento de risco ou a volatilidade dos ativos. Com isso como ponto de partida, o ensaio deriva o portfólio de hedge ideal, examina essa robustez de carteiras para a desvalorização de variância e covariância e propõe um novo motivo para o gerenciamento de risco corporativo, uma empresa que protege seu risco aumenta sua quantidade ideal de dívida e, assim, realiza mais Benefícios fiscais da alavancagem. Usando o modelo de estrutura de capital de Leland (1994), medem-se três impactos da redução de risco sobre o valor para o acionista: o aumento dos benefícios fiscais, a redução dos custos de falência e a redução do custo potencial do problema do subinvestimento. A motivação dos ensaios é servir como um guia para os principais diretores financeiros sobre os benefícios da gestão de riscos e as fontes desses benefícios, de modo que a gestão de risco pode ser realizada de forma a aumentar o valor para o acionista e não por sua própria causa. RPF-279. QuotPiving Derivatives the Martingale Way. quot Pierre Collin Dufresne, William Keirstead e Michael P. Ross. Julho de 1998. Resumo: nos últimos anos, os resultados da teoria de martingales foram aplicados com sucesso em problemas de economia financeira. No presente trabalho, mostramos quão eficiente e elegante esta tecnologia quotmartingale pode ser ao resolver opções complexas. Em particular, fornecemos soluções de forma fechada para várias novas classes de opções exóticas, incluindo o cliquet, a escada, o grito discreto e o lookback discreto. Nós também fornecemos uma derivação do preço de uma opção no máximo de n ativos para demonstrar o poder do teorema multi-dimensional de Girsanov. Embora alguns dos resultados apresentados sejam bem conhecidos, o tratamento do material neste artigo é novo, na medida em que se concentra na aplicação da tecnologia martingale a problemas concretos de preços de opções, métodos que até agora foram usados principalmente para fins puramente teóricos . RPF - 278 Custos de avaliação, gerenciamento de riscos e Estrutura de capital (somente texto. dvi) Hayne E. Leland Resumo: A determinação conjunta da estrutura de capital e do risco de investimento é examinada. A estrutura de capital ideal reflete tanto as vantagens fiscais da dívida, menos os custos de incumprimento (Modigliani-Miller) quanto os custos de agência resultantes da substituição de ativos (Jensen-Meckling). Os custos da agência limitam a alavancagem e a maturidade da dívida e aumentam os spreads de rendimento, mas a sua importância é relativamente pequena para a gama de ambientes considerados. O gerenciamento de riscos também é examinado. Hedging permite maior alavancagem. Mesmo quando uma empresa não pode pré-comprometer a cobertura, ainda assim o fará. Surpreendentemente, os benefícios de cobertura geralmente são maiores quando os custos da agência são baixos. RPF-277 que envolve as medidas de desempenho de Grinblatt-Titman e Conditional (Ferson-Schadt): o caso da rotação da indústria através do modelo de investimento dinâmico Robert R. Grauer e Nils H. Hakansson Resumo: Este artigo aplica medidas de mudança de portfólio Grinblatt e Titmans e A medida de desempenho condicional de Ferson e Schadts para o problema de avaliar o desempenho do modelo de investimento dinâmico aplicado à rotação da indústria no período 1934-1995, bem como vários subperíodos. O modelo de investimento dinâmico utilizado no estudo emprega a abordagem de avaliação de probabilidade empírica com uma janela de mudança de visão traseira, tanto em forma bruta quanto com ajustes para erro de estimativa com base em um James-Stein, um Bayes-Stein e uma correção baseada em CAPM . Ambos os testes são unânimes em sua conclusão de que os retornos excessivos obtidos pelo histórico (não ajustado). Os Bayes-Stein e os estimadores de James-Stein são (às vezes altamente) estatisticamente significativos nos sub-períodos 1966-95 e 1966-81. Isso dá suporte à idéia de que a abordagem conjunta de avaliação de probabilidade empírica baseada no passado recente, com e sem correções baseadas em Stein para erro de estimativa, contém informações que podem ser aproveitadas de forma lucrativa. RPF - 276. QuotClock-End Fund Discounts em um Rational Agent Economy. quot Matthew Spiegel. Dezembro de 1997. Quase qualquer modelo financeiro padrão conclui que dois ativos com fluxos de caixa idênticos devem vender pelo mesmo preço. Infelizmente, os preços compartilhados da empresa de fundos de investimento fechados parecem violar esse inquilino fundamental. Mesmo quando se consideram várias fricções padrão, como impostos e custos de agência, os modelos financeiros clássicos não podem explicar os grandes descontos persistentes encontrados nos dados. Embora o modelo de mercado financeiro padrão possa não explicar a existência de grandes descontos de fundos fechados, este documento mostra que uma versão bastante fechada faz. Em um mercado, por outro lado, sem fricção, se os estoques de ativos variarem aleatoriamente ao longo do tempo e os agentes possuam vidas finitas, um preço de ações de fundos de investimento fechado pode não rastrear seu valor patrimonial líquido. Além disso, a análise fornece uma série de condições em que essas discrepâncias levam à existência de descontos sistemáticos para as ações dos fundos de investimento. Além disso, o modelo fornece previsões sobre a correlação entre os descontos atualizados de fundos fechados e as atuais mudanças nos preços das ações e mudanças futuras na produtividade corporativa. Como mostra a análise, os mesmos valores de parâmetros que levam a descontos sistemáticos também levam a outras características de preços de fundos que se assemelham a muitos dos resultados encontrados em estudos empíricos. RPF - 275 quotEdgeworth Binomial Treesquot Mark Rubinstein. November 1997. Available in PowerPoint. pps format only. Use Notes View. This paper develops a simple technique for valuing European and American derivatives with underlying asset risk-neutral returns which depart from lognormal in terms of prespecified non-zero skewness and greater-than-three kurtosis. Instead of specifying the entire risk-neutral distribution by the riskless return and volatility (as in the Black-Scholes case), this distribution is specified by its third and fourth central moments as well. An Edgeworth expansion is used to transform a standard binomial density into a unimodal standardized discrete density -- evaluated at equally-spaced points -- with approximately the prespecified skewness and kurtosis. This density is in turn adjusted to have a mean equal to the riskless return (adjusted for the payout return, if any) and to a prespecified volatility. European derivatives are then easily valued by using this risk-neutral density to weight their possible payoffs. European options with earlier maturities, American and exotic options can be valued in a consistent manner by using the method of implied binomial trees. These trees are particularly well-suited for this since they are generated from arbitrary discrete expiration-date risk-neutral probabilities -- precisely what is provided by the Edgeworth expansion. The paper ends by translating several examples of alternative risk-neutral distributions into option prices and then into Black-Scholes implied volatility smiles. Implied trees are used to determine smiles for otherwise identical shorter-maturing options and future smiles for the original options conditional on knowing the future underlying asset price. RPF - 274-Rev quotDerivatives Performance Attribution. quot Mark Rubinstein. Revised May 1998. Downloadable in PowerPoint. pps format only. Use Notes View. Abstract: This paper shows how to decompose the dollar profit earned from an option into two basic components: 1) mispricing of the option relative to the asset at the time of purchase, and 2) profit from subsequent fortuitous changes or mispricing of the underlying asset. This separation hinges on measuring the quottrue relative valuequot of the option from its realized payoff. The payoff from any one option has a huge standard error about this value which can be reduced by averaging the payoff from several independent option positions. It appears from simulations that 95 reductions in standard errors can be further achieved by using the payoff of a dynamic replicating portfolio as a Monte Carlo control variate. In addition, it is shown that these low standard errors are robust to discrete rather than continuous dynamic replication and to the likely degree of misspecification of the benchmark formula used to implement the replication. The first basic component, the option mispricing profit, can be further decomposed into profit due to superior estimation of the volatility (volatility profit) and profit from using a superior option valuation formula (formula profit). In order to make this decomposition reliably, the benchmark formula used for the attribution needs to be similar to the formula implicitly used by the market to price options. If so, then simulation indicates that this further decomposition can be achieved with low standard errors. The second basic component can be further decomposed into profit from a forward contract on the underlying asset (asset profit) and what I term pure option profit. The asset profit indicates whether or not the investor was skillful by buying or selling options on mispriced underlying assets. However, asset profit could also simply be just compensation for bearing risk -- a distinction beyond the scope of this paper. Although simulation indicates that the attribution procedure gives an unbiased allocation of the option profit to this source, its standard error is large -- a feature common with attempts by others to measure performance of assets. RPF - 273 quotProfits and Position Control: A Week of FX Dealing. quot Richard K. Lyons. October 1997. (available as WordWindows document only) This paper examines foreign exchange trading at the dealer level. The dealer we track averages 100,000 in profits per day on volume of 1 billion per day (or one basis point). The half-life of the dealers position is only ten minutes, providing strong support for inventory models. A methodological innovation allows us to identify his speculative position over time. This speculative position determines the share of profits deriving from speculation versus intermediation: intermediation is much more important. RPF - 272 quotBank Risk Management: Theory. quot David H. Pyle. July 1997. (available as WordWindows document only) This paper discusses why risk management is needed. It outlines some of the theoretical underpinnings of contemporary bank risk management, with an emphasis on market and credit risks. RPF - 271 quotInternational Portfolio Investment Flows. quot Michael J. Brennan. and H. Henry Cao. February 1997. This paper develops a model of international equity portfolio investment flows based on differences in informational endowments between foreign and domestic investors. It is shown that when domestic investors possess a cumulative informati on advantage over foreign investors about their domestic market, investors tend to purchase foreign assets in periods when the return on foreign assets is high and to sell when the return is low. The implications of the model are tested using data on US equity portfolio flows. RPF - 270 quotIs There Private Information in the FX Market The Tokyo Experiment. quot Takatoshi Ito. and Richard K. Lyons and Michael T. Melvin. January 1997. It is a common view that private information in the foreign exchange market does not exist. We provide evidence against this view. The evidence comes from the introduction of trading in Tokyo over the lunch-hour. Lunch return variance do ubles with the introduction of trading, which cannot be due to public information since the flow of public information did not change with the trading rules. Having eliminated public information as the cause, we exploit the volatility pattern over the wh ole day to discriminate between the two alternatives: private information and pricing errors. Three key results support the predictions of private-information models. First, the volatility U-shape flattens: greater revelation over lunch leaves a smaller share for the morning and afternoon. Second, the U-shape tilts upward, an implication of information whose private value is transitory. Finally, the morning exhibits a clear U-shape when Tokyo closes over lunch, and it disappears when trading is introd uced. RPF - 269 quotAre Investors Reluctant to Realize Their Lossesquot Terrance Odean. November 1996. IAbstract: test the disposition effect, the tendency of investors to hold losing investments too long and sell winning investments too soon, by analyzing trading records for 10,000 accounts at a large discount brokerage house. These investors demonstrate a strong preference for realizing winners rather than losers. Their behavior does not appear to be motivated by a desire to rebalance portfolios, or to avoid the higher trading costs of low price stocks. Nor is it justified by subsequent portfolio performance. For taxable investments it is non-optimal and leads to lower after-tax returns. Tax-motivated selling is most evident in December. RPF - 268 quotA Theory of Corporate Capital Structure and Investment. quot Miguel Cantillo Simon Abstract: This article describes how financial disruptions affect investment in a general equilibrium economy. I show that in a world with differentiated lenders, the most efficient will become financial intermediaries their preeminence will nonetheless be limited by frictions with depositors. Because of these frictions, cash rich companies prefer to tap the bond market directly, while moderately endowed firms borrow from intermediaries, and cash poor companies are unable to borrow at all. The aggregation of this model produces an economy with intuitive features: investment falls whenever the risk free rate rises, or when the financial health of firms and intermediaries deteriorates. RPF - 267 quotOptions and Expectationsquot Hayne E. Leland Who should buy options (ordinary or quotexoticquot), and who should sell Buyers and sellers must differ from the average investor, who will not undertake options positions. We develop a simple binomial model to characterize the expectations (relative to the average or consensus) which must be held by investors to justify buying or selling various types of derivatives, or following dynamic strategies which generate similar payoffs. European option sellers must believe markets are more mean-reverting than average option buyers must believe they are more mean-averting. The probabilities of ordinary option buyers and sellers are path independent and their expected return process must be a martingale. Path-dependent options or dynamic strategies imply probabilities which are path dependent. quotAsianquot derivative purchasers must believe the expected return to the underlying asset decreases through time. Lookback purchasers believe the opposite. RPF - 266 quotVolume, Volatility, Price and Profit When All Traders Are Above Averagequot Terrance Odean This paper looks at three market models in which investors are rational in all respects except that they are overconfident about the precision of their private information. A substantial literature in cognitive psychology establishes that people usually are overconfident and, specifically, that they are overconfident about the precision of their knowledge. Overconfidence affects expected trading volume, volatility of prices, market depth, price quality, expected profits, and expected utility. The three models demonstrate how the effects of overconfidence depend on who is overconfident. The paper also examines the consequences for markets when traders systematically underweight their prior information. RPF - 265 quotRecovering Risk Aversion from Option Prices and Realized Returnsquot Jens Carsten Jackwerth A well-known relationship exists between aggregate subjective and risk-neutral probability distributions and utility functions. Previously, only subjective probabilities could be estimated with some degree of accuracy from historical data. Now, using the convenient method developed by Jackwerth and Rubinstein (1996), we can also estimate risk-neutral probabilities reliably. For the first time, we empirically derive stable utility functions implied by stock returns and option prices. These implied utility functions dramatically change shapes around the 1987 crash and t hereafter exhibit convexity and increasing risk aversion across parts of the wealth dimension. A simulated trading strategy based on analyzing the utility functions mean-variance dominates holding the market. RPF - 264 quotGeneralized Binomial Treesquot Jens Carsten Jackwerth In a novel approach, standard and implied binomial trees are completely specified in terms of two basic inputs: the ending nodal probability distribution and a linear weight function which governs the stochastic process resulting in that distribution. Several key economic principles, such as no interior arbitrage, are intuitively related to these basic inputs. A simple and computationally efficient three-step algorithm, common to all binomial trees, is found. Noting that the currently used linear weight function is unnecessarily restrictive, a binomial tree even more versatile is introduced, the generalized binomial tree. Applications to recovering the stochastic process implied in (European, American, or exotic) options of several times-to-expiration are developed. RPF - 263-rev. quotBeyond Mean-Variance: Performance Measurement of Portfolios Using Options or Dynamic Strategies. quot Hayne E. Leland Current investment performance analysis is based on the CAPM, using quotalphaquot or Sharpe Ratios. But the validity of this analysis rests on the validity of the CAPM, which assumes either normally distributed returns, or mean-variance preferences. Either assumption is suspect: even if asset returns were normally distributed, the returns of options or dynamic strategies (including market timing) would not be. And investors distinguish upside from downside risks, implying skewness preference. We consider a Black-ScholesMerton world, in which the market portfolio follows a diffusion process with constant drift and volatility. In this world, the market portfolio is mean-variance inefficient and the CAPM alpha will systematically mismeasure the value added by investment managers. The problem is particularly severe for portfolios using options or dynamic strategies. We show how a simple modification of the CAPM beta can lead to correct risk measurement, and the alphas of all fairly-priced options andor dynamic strategies will be zero in the Black-ScholesMerton world. This paper has been written for the Fischer Black Commemorative Issue of the The Journal of Portfolio Management. RPF - 262. quotImplied Binomial Trees: Generalizations and Empirical Tests. quot Jens Carsten Jackwerth Efficient generalizations for Rubinsteins (1994) implied binomial tree are presented which allow for varying path-probabilities and incorporate information from times other than the end of the tree. The three generalizations involve deformation of the time scale, arbitrary transition probability weights, and jumps. Two empirical tests compare the performance of implied binomial trees, the Black-Scholes model, and the CEV model. In the first test, all models are fitted to observed longer term option prices, used to price shorter term options, and pricing errors are assessed. In a second test, the term structure of at-the-money volatilities is assumed known. All models are adapted to incorporate this information and pricing errors are recomputed. A postscript version of this paper is available from haas. berkeley. edu jackwert. RPF - 261 quotOptimal Asset Rebalancing in the Presence of Transactions Costs. quot Hayne E. Leland. Rev. August 1996. We examine the optimal trading strategy for an investment fund which wishes to maintain assets two assets in fixed proportions, e. g. 6040 in stocks and bonds. transactions costs are assumed to be proportional to the amount of each asset traded. We show that the optimal policy involves a band about the target stock proportion. As long as the actual stockbond ratio remains inside this band, no trading should occur. If the ratio goes outside the band, trading should be undertaken to move the ratio to the nearest edge of the band. We compute the optimal band and resulting annual turnover and tracking error of the optimal policy, as a function of transactions costs, asset volatility, the target asset mix, and other parameters. We show how changes in transactions costs and other parameters affect the size of the no-trade band, turnover, and tracking error. Compared to a quarterly rebalancing strategy, an example demonstrates that the optimal strategy can reduce turnover by almost 50 percent. RPF - 260 quotStock Price Volatility in a Multiple Security Overlapping Generations Model. quot Matthew Spiegel. A number of empirical studies have reached the conclusion that stock price volatility cannot be fully explained within the standard dividend discount model. This paper proposes a resolution based upon a model that contains both a random supply of risky assets and finitely lived agents who trade in a multiple security environment. As the analysis shows where exist 2k equilibria when K securities trade. The low volatility equilibria have properties analogous to those found in the infinitely lived agent models of Campbell and Kyle (1991) and Wang (1993, 1994). In contrast, the high volatility equilibria have very different characteristics. Within the high volatility equilibria very large price variances can be generated with very small supply shocks. Using previously established empirical results the model can reconcile the data with supply shocks that are less than 10 as large as observed dividend shocks. The multiple security analysis also shows that within the economy some securities may trade under high volatility conditions, while others trade in low volatility conditions. Switching the economy from a high to a low volatility equilibrium for any single security may be very difficult. Depending upon the variance-covariance structure of the economy, an equilibrium change may require simultaneous control over the trading environment of every single security in the economy. RPF - 259 quotOptimal Capital Structure, Endogenous Bankruptcy, and the Term Structure of Credit Spreads. quot Hayne E. Leland and Klaus Bjerre Toft This paper examines the optimal capital structure of a firm which can choose both the amount and maturity of its debt. Bankruptcy is determined endogenously rather than by the imposition of a positive net worth condition or by a cash flow constraint. The results extend Lelands 1994 closed-form results to a much richer class of possible debt structures and permits study of the optimal maturity of debt as well as the optimal amount of debt. The model generates predictions of leverage, credit spreads, default rates, and writedowns which accord quite closely with historical averages. While short term debt does not exploit tax benefits as completely as long term debt, it is more likely to provide incentive compatibility between debtholders and equityholders. The agency costs of quotasset substitutionquot are minimized when the firm uses shorter term debt. The tax advantage of debt must be balanced against bankruptcy and agency costs in determining the optimal maturity of the capital structure. The model predicts differently shaped term structures of credit spreads for different levels of risk. These term structures are similar to that found empirically by Sarig and Warga 1989. The model has important implications for bond portfolio management. In general, Macaulay duration dramatically overstates true duration of risky debt, which may be negative for quotjunkquot bonds. Furthermore, the quotconvexityquot of bond prices can become quotconcavity. quot RPF - 258. quotImperfect Competition in Securities Markets with Diversely Informed Traders. quot H. Henry Cao November 1995 We show that the infinite regression problem in models with differentially informed traders can be solved using a fixed point method which we use to derive the dynamic equilibrium in a multi-auction model with diversely informed traders. We find that when the informed traders signals are not perfectly correlated, their private information will be revealed to the market gradually so that the market is only semi - strong form efficient and not strong-form efficient. Market depth in the continuous auction model initially increases with time but decreases to zero at the end. Our results are in contrast to the results of Holden and Subrahmanyam (1992) and Foster and Viswanathan (1993) (HS-FV) who showed that when auctions occur frequently and informed traders have perfect information, the information is revealed to the market almost immediately. However, when the correlation in the private signals goes to 1, our model converges to the HS-FV model. 257. quotThe Efficacy of Insider Trading Regulation. quot Matthew Spiegel and Avanidhar Subrahmanyam October 1995 Regulatory authorities often lack a quotsmoking gunquot (i. e. hard evidence such as a note or a memorandum) when prosecuting individuals for illegal insider trading. As a result, many insider trading cases depend solely on circumstantial evidence, which is usually obtained by associating trades with quotunusualquot price moves. However, insiders with the most accurate information (the ones most likely to possess quotmaterial, non-publicquot information) are the ones best able to modify their trading strategy in response to prosecution strategies based on price moves. This is a major obstacle to the efficacy of insider trading regulation. Thus, if legislation discourages strategic insiders with relatively precise information from trading, then in all likelihood any investor who is prosecuted will possess only the weakest (most imprecise) information. Stratetgic behavior by insiders in response to insider trading regulations can thereby lead to a situation where the pool of prosecuted traders contains a large fraction of innocent individuals (i. e. individuals with relatively poor information). RPF-256REV . quotHow Do Firms Choose Their Lenders Theory and Evidence. quot Miguel Cantillo and Julian Wright (October 1995 )Revised February 2000 This article investigates which companies finance themselves through intermediaries and which borrow directly from arms length investors. Our empirical results show that large companies with abundant cash and collateral tap credit markets directly these markets cater to safe and profitable industries, and are most active when riskless rates or intermediary earnings are low. We show that determinants of lender selection sharpen during investment downturns and that there are substantial asymmetries in the way firms enter and exit capital markets. These results support a theoretical framework where intermediaries have better reorganizational skills but a higher opportunity cost of capital than bondholders. 255. quotA Theory of Corporate Capital Structure and Investment. quot Miguel Cantillo October 1995 This paper develops a costly state verification (CSV) model which describes how financial fluctuations affect real activity in a general equilibrium setting. In an economy with differentiated lenders, the most efficient will become intermediaries (e. g. banks). Intermediation generally creates frictions which prevent banks from dominating the debt markets. In this model, firms with abundant funds avoid intermediaries, and tap the credit markets directly. Meanwhile, firms with moderate resources borrow from intermediaries. The aggregation of this model produces an economy with appealing features: aggregate investment drops with a rise in the riskless rate, and a deterioration of bank or corporate health. RPF-2 54. quotThe Rise and Fall of Bank Control in the United States: 1890-1920.quot Miguel Cantillo October 1995 This paper sketches the evolution in the governance structures of railroad and industrial firms in the United States between 1850 and 1914. I describe how the largest of these companies became controlled by salaried executives, and with no board member willing to oversee or to veto manager actions. Initially, railroads and industrial firms were tightly controlled by a small number of shareholders. The link of ownership and control was changed by massive corporate restructuring in the 1890s and 1900s. The newly reorganized firms were controlled by banks such as J. P. Morgan, which took board positions to ensure adequate financial returns for themselves and for their clients. The final stage of corporate governance began in the 1910s as a public policy reaction to bank control. This reaction resulted in an almost complete disappearance of active institutional investors from boards of directors. Using stock market data from 1914, I find that this political reaction destroyed about 6 percent of the equity value of bank controlled firms. By the late 1920s, all the elements that define contemporary governance structures in the United States were in place and running their logical course. RPF - 253. quotA Spatial Model of Housing Returns and Neighborhood Substitutability. quot William N. Goetzmann and Matthew Spiegel September 1995 This paper presents a new spatial model for analyzing return indices for infrequently traded assets, and applies it to housing data. Within many asset classes, particularly real estate, one expects there to exist a spatial correlation in deviations from the index due to omitted explanatory variables in the econometric model. This error structure can be useful in estimating location-specific would normally make this impossible, the use of spatial and factor correlations provides sufficient information to estimate zip code level returns. We use these indices to examine the degree to which housing market participants in one major metropolitan statistical area view neighborhoods as substitutes. Using distance defined in terms of geographical proximity, median household income, average educational attainment and racial composition, we find that median household income is the salient variable explaining covariance of neighborhood housing returns. Racial composition and educational attainment, while significant are much less influential and geographical proximity is nearly meaningless. Our methodology has applications to a range of infrequently traded assets, including bonds, commercial real estate and collectibles. The approach may be viewed as an extension of quotnon-parametricquot spatial correlation models. In the non-parametric approach a distance function and decay rate are exogenously specified. In a spatial model one estimates the distance metric and uses statistical rules to obtain the resulting decay rates. The results of our analysis of housing substitutability in the San Francisco Bay area have implications for estimates of the covariance of housing returns within metropolitan areas. In particular, low covariances imply gains to diversification for lenders, equity-holders and tax authorities. RPF - 252. quotPricing Mortgage-Backed Securities in a Multifactor Interest Rate Environment: A Multivariate Density Estimation Approach. quot Jacob Boudoukh, Matthew Richardson, Richard Stanton, and Robert F. Whitelaw May 1995 This paper develops a nonparametric, model-free approach to the pricing of mortgage-backed securities (MBS), using multivariate density estimation (MDE) procedures to investigate the relation between MBS prices and interest rates. While the usual methods for valuing MBSs are highly dependent on specific assumptions about interest rates and prepayments, this method will yield consistent results without requiring such assumptions. The MDE estimation suggests that weekly MBS prices from January 1987 to May 1994 can be well described as a function of the level and slope of the term structure. We analyze how this functionaries across MBSs with different coupons and investigate the sensitivity of prices to the two factors. As an application, we sue the estimated relation to hedge the interest rate risk of MBSs. These hedging results compare favorably with other commonly used hedging methods. RPF - 251. quotMortgage Choice: Whats the Pointquot Richard Stanton and Nancy Wallace May 1995 This paper develops a general equilibrium model of mortgage lending, combining self-selection theory with option pricing. We construct a separating equilibrium, in which borrowers offer a menu of prepayable, fixed rate mortgage contracts, differing in their tradeoff between coupon rate and points (prepaid interest). Borrowers select the optimal contract from the menu, revealing their mobility via their choice of loan, and lenders make zero profit on each loan taken out. This equilibrium can only exist if borrowers face frictions, such as refinancing costs. This provides a possible explanation for the prepayment options that are embedded in mortgage contracts, despite the significant deadweight costs associated with refinancing. We also show that the recent proliferation of loans with many different horizons represents an alternative means of persuading borrowers to self-select, with lower deadweight costs. Finally, our model suggests that the menu of contracts available at the time of origination should be an important predictor of future prepayment. Most commonly used prepayment models, which do not take this into account, are therefore misspecified, leading to errors in pricing and hedging mortgages and mortgage-backed securities. 250. quotImplied Probability Distributions: Empirical Analysis. quot Jens Carsten Jackwerth and Mark Rubinstein June 1995 An earlier article, quotImplied Binomial Trees, quot introduced a theoretical model for implying the stochastic process of an underlying asset price from the prices of associated options. This sequel provides details concerning application of the model to the full record of SampP 500 index options transactions from April 2, 1986 through December 31, 1993. Most prominently, it introduces a revised optimization technique for estimating expiration-date risk-neutral probability distributions which is probably theoretically superior and definitely orders of magnitude faster than the approaches outlined in the antecedent paper. This method maximizes the smoothness of the distribution while at the same time insuring that multimodalities are not unrealistically strong. With the exception of the lower left-hand tail of the distribution, alternative optimization specifications typically produce approximately the same implied distributions. Considerable care is taken to specify such parameters as interest rates, dividends, and synchronous index levels, as well as to filter for general arbitrage violations and to use time aggregation to correct for unrealistic persistent jaggedness of implied volatility smiles. The resulting implied probability distributions exhibit changes in skewness as time-to-expiration approaches which are consistent with theoretical predictions. While time patterns of skewness and kurtosis exhibit a discontinuity across the divide of the 1987 market crash, they remain remarkably stable on either side of the divide. Moreover, since the crash, the risk-neutral probability of a four standard deviation decline in the SampP index (-46 percent over a year) is 100 times more likely than would appear to be the case under the assumption of lognormality. 249. quotA Variable Reduction Technique for Pricing Average-Rate Options. quot Hua He and Akihiko Takahashi May 1995 Average-rate options, commonly known as Asian options, are contingent claims whose payoffs depend on the arithmetic average of some underlying index over a fixed time horizon. This paper proposes a new valuation technique, called the variable reduction technique, for average rate options. This method transforms the valuation problem of an average-rate option into an evaluation of a conditional expectation that is determined by a one-dimensional Markov process (as opposed to a two-dimensional Markov process). This variable reduction technique works directly with the arithmetic average and does not encounter approximation errors when volatility of the underlying is relatively large. Further, reducing the dimensionality by one makes pricing more efficient in terms of computing time. The variable reduction technique is applied in a simple Black-Scholes economy in which there is one risky asset and one riskless bond. The paper also discusses application of the technique to average-rate options where the underlying index is an interest rate. Numerical comparisons of different methods are also presented. 248. quotDouble Lookbacks. quot Hua He, William P. Keirstead, and Joachim Rebholz May 1995 A new class of options, double lookbacks, where the payoffs depend on the maximum andor minimum prices of one or two traded assets is introduced and analyzed. This class of double lookbacks includes calls and puts with the underlying being the difference between the maximum and minimum prices of one asset over a certain period, and calls or puts with the underlying being the difference between the maximum prices of two correlated assets over a certain period. Analytical expressions of the joint probability distribution of the maximum and minimum values of two correlated geometric Brownian motions are derived and used in the valuation of double lookbacks. Numerical results are shown, and prices of double lookbacks are compared to those of standard lookbacks on a single asset. 247. quotAnatomy of an ARM: Index Dynamics and Adjustable Rate Mortgage Valuation. quot (Related topics) Richard Stanton and Nancy Wallace April 1995 This paper analyzes the dynamics of the commonly used indices for Adjustable Rate Mortgages, and systematically compares the effects of their time series properties on adjustable rate mortgage prepayment and value. Our ARM valuation methodology allows us simultaneously to capture the effects of the dynamics of the index, discrete coupon adjustment, and caps and floors. It allows us either to calculate an optimal prepayment strategy for mortgage holders, or to use an empirical prepayment function. We find that the dynamics of the ARM indices, including both their average levels and their speeds of adjustment to interest rate shocks, introduce significant variation in the value of the prepayment option across ARMs. Valuation methodologies that ignore the time series properties of the index with respect to current rates will therefore systematically misprice adjustable rate mortgages. 246. quotEffects of Competition on Bidder Returns. quot Sankar De, Mark Fedenia, and Alexander J. Triantis April 1995 This study offers several new perspectives on the effects of competition in takeover contests on bidder returns. Using a more extensive database than existing studies and employing several different measures of success in a takeover, we find that success in competitive acquisitions decreases shareholder wealth relative to failure and also relative to success in observed single-bidder takeovers. Further, we consider and test a number of hypotheses regarding bidder returns, including hypotheses suggested by the preemptive bidding theory. In general, our results indicate lack of support for the predictions of preemptive bidding theory and for the hypotheses linking the method of payment and the observed level of competition. We also test hypotheses relating to returns across the multiple events in a multiple-bid contest that competition among bidders generates. The results of these tests underscore the importance of timing as well as success of a bid to the bidders subsequent performance. 245. quotOn Revelation of Private Information in Stock Market Economies. quot Marcus Berliant and Sankar De April 1995 The notion that an agent in a given market can infer from the market price the (non-price) information received by other agents, as embodied in the existing studies of revealing rational expectations equilibrium, requires that the agent know the correct functional relationship between the non-price information of all agents and the resulting equilibrium price. This condition is usually restrictive and unsuitable as a description of reality. In this paper we show that this condition is also unnecessary in a stock market economy where producers or firms use their private information in their own optimization programs, k which include stock purchases. Interestingly, this result does not extend to the case of consumers with private information. 244. quotOptimal Cash Management for Investment Funds. quot Hayne Leland and Gregory Connor March 1995 We consider the question of how much cash should be held by an investment fund for transactions purposes. Cash is needed to meet redemptions and rights offerings it is generated by dividends and contributions. It is assumed the cumulative cash flow follows a random walk, perhaps with a drift. If transactions costs were zero, it would be optimal to keep zero cash balances, since cash reduces expected return and adds to tracking error. But keeping cash balances at zero would be very expensive in the presence of transactions costs, since random walks have infinite variation. The optimal cash policy requires a no trade interval . If cash balances are within this interval, no transfers between cash and portfolio securities takes place. If cash falls beneath zero, securities should be sold to return the cash balance to zero. If cash exceeds L, cash should be invested in the portfolio to reduce the cash balance to L. We derive closed form solutions for L, and show how this responds to changes in transactions costs and other parameters of cash flows and portfolio returns. Finally, a closed form estimate of expected turnover associated with optimal strategies is derived. 243. quotForeign Exchange Volume: Sound and Fury Signifying Nothing. quot Richard K. Lyons January 1995 This paper examines whether currency trading volume is informative, and under what circumstances. Specifically, we use transactions data to test whether trades occurring when trading intensity is high are more informative -- dollar for dollar -- than trades occurring when intensity is low. Theory admits both possibilities, depending primarily on the posited information structure. We present what we call a hot-potato model of currency trading, which explains why low-intensity trades might be more informative. In the model, the wave of inventory-management trading among dealers following innovations in order flow generates an inverse relationship between intensity and information content. Empirically, low-intensity trades are more informative, supporting the hot-potato hypothesis. 242. quotExplaining Forward Exchange Bias. Intraday. quot Richard K. Lyons and Andrew K. Rose January 1995 Intraday interest rates are zero. Consequently, a foreign exchange dealer can short a vulnerable currency in the morning, close this position in the afternoon, and never face an interest cost. This tactic might seem especially attractive in times of crisis, since it suggests an immunity to the central banks interest rate defense. In equilibrium, however, buyers of the vulnerable currency must be compensated on average with an intraday capital gain as long as no devaluation occurs. That is, currencies under attack should typically appreciate intraday. Using data on intraday exchange rate changes within the EMS, we find this prediction is borne out. 241. quotOn the Accounting Valuation of Employee Stock Options. quot Mark Rubinstein December 1994 In its exposure draft, quotAccounting for Stock-based Compensation, quot FASB proposes that either the Black-Scholes or binomial option pricing model be used to expense employee stock options, and that the value of these options be measured on their grant date with typically modest ex-post adjustment. This brings the accounting profession squarely up against the Scylla of imposing too narrow a set of rules that will force many firms to misstate considerably the value of their stock options and the Charybdis of granting considerable latitude which will increase non-comparability across financial statements of otherwise similar firms. This, of course, is a common tradeoff afflicting many rules for external financial accounting. It is not my intention to take a position on this issue, but merely to point out the inherent dangers in navigating between these twin perils. To examine this question, this paper develops a binomial valuation model which simultaneously takes into consideration the most significant differences between standard call options and employee stock options: longer maturity, delayed vesting, forfeiture, non-transferability, dilution, and taxes. The final model requires 16 input variables: stock price on grant date, stock volatility, stock payout rate, stock expected return, interest rate, option striking price, option years-to-expiration, option years-to-vesting, expected employee forfeiture rate, minimum and maximum forfeiture rate multipliers, employees non-option wealth per owned option, employees risk aversion, employees tax rate, percentage dilution, and number of steps in the binomial tree. Many of these variables are difficult to estimate. Indeed, a firm seeking to overvalue its option might report values almost double those reported by an otherwise similar firm seeking to undervalue its options. The alternatives of expensing minimum (zero-volatility) option values, whether at grant or vesting date, can easily be gamed by slightly redefining employee stock option contracts, and therefore would not accomplish FASBs goals. As an alternative, FASB could give more careful consideration to exercise date accounting, under which an expense is recognized at the time of exercise equal to the exercise value of the option. This would achieve the long sought external accounting goal of realizing stock options as compensation, while at the same time minimizing the potential for the revised accounting rules to motivate gaming behavior or non-comparable statements. 240. quotBond Prices, Yield Spreads, and Optimal Capital Structure with Default Risk. quot Hayne Leland November 1994 This paper examines the value of debt subject to default risk in a continuous time framework. By considering debt with regular principal repayments (e. g. through a sinking fund), we are able to examine bonds with arbitrary maturity while retaining a time-homogeneous environment. This extends Lelands 1994 earlier closed-form results to a much richer class of possible debt structures. We examine the term structure of yield spreads and find that a rise in interest rates will reduce yield spreads of current debt issues. It may tilt the term structure as well. Duration is also affected by default risk. The traditional Macaulay duration measure overstates effective duration, which for junk bonds may even be negative. While short term debt does not exploit tax benefits as completely as does long term debt, it is more likely to provide incentive compatibility between debt holders and equity holders. The agency costs of asset substitution are minimized when firms use shorter term debt. Optimal capital structure depends upon debt maturity. Optimal leverage ratios are smaller, and maximal firm values are less, when short term debt is used. The yield spread at the optimal leverage ratio increases with debt maturity. 239. quotGains from Diversifying into Real Estate: Three Decades of Portfolio Returns Based on the Dynamic Investment Model. quot Robert R. Grauer and Nils H. Hakansson October 1994 This paper compares the investment policies and returns for portfolios of stocks and bonds with and without up to three categories of real estate. Both a domestic and a global setting are examined, with and without the possibility of leverage. The portfolios were generated via the dynamic investment model on the basis of the empirical probability assessment approach applied to past (joint) realizations of returns, both with and without correction for smoothing in the real estate data series. Our principal findings are: 1) the gains from adding real estate on a semi-passive (equal-weighted) basis to portfolios of either U. S. or global financial assets were relatively modest in contrast, 2) the gains from adding real estate to the universe of U. S. financial assets under an active strategy were rather large (in some cases highly statistically significant), especially for the very risk-averse strategies 3) the gains from adding (U. S.) real estate to a universe of global financial assets under an active strategy were mixed, although generally favorable for the highly risk - averse strategies 4) correcting for second-moment smoothing in the real estate returns series had a relatively small impact for the more risk-tolerant strategies and 5) there was some evidence that de-smoothing resulted in improved probability estimates. 238. quotOptions on Leveraged Equity with Default Risk. quot Klaus Bjerre Toft July 1994 In this paper, I derive option pricing formulas for call and put options written on leveraged equity in an economy with corporate taxes and bankruptcy costs. The firm can be forced into bankruptcy by breaching a net-worth covenant, or it may declare bankruptcy when it is optimal for equity holders to do so. Consequently, option values and sensitivities depend on structural variables such as the corporate tax rate, the firms coupon payments, and the firm value at which bankruptcy is declared. The derived formulas for calls and puts on equity with default risk simplify to Black-Scholes type formulas for down-and-out barrier options if bankruptcy is declared as soon as the value of the firms assets equals the after-tax value of the promised coupon payments on the debt. If the capital structure contains no debt, the pricing results simplify to Black-Scholes formulas for call and put options. The model developed in this paper relates implied Black-Scholes volatility for equity options to structural characteristics such as leverage and the debts protective covenants. Options priced by the proposed model are characterized by Black-Scholes implied volatilities which are decreasing in striking price. Moreover, equity options on firms with protected debt have more pronounced volatility skews than options on firms with unprotected debt. Finally, I show how to evaluate the term structure of default spreads for corporate interest-only strips. 237. quotExact Formulas for Expected Hedging Error and Transactions Costs in Option Replication. quot Klaus Bjerre Toft July 1994 In this paper, I derive exact formulas for expected hedging error and transactions costs in option replication for the Black-Scholes economy with exogenously fixed trading points. I derive the formulas using two different volatilities which allow the hedger to use a transactions costs adjusted volatility to determine the hedge portfolio. The expected hedging error is written in an easily recognized form. The four terms in the expectation can be interpreted as terms from Black and Scholes (1973) formula with adjusted parameters. This interpretation holds for all future hedging periods even though the expectation is conditional on the stock price at the time of the hedging schemes initiation. I also derive an approximation of the expected transactions costs. This approximation has a simple interpretation: for each of the future hedging periods, the approximate expected transactions costs incurred at the end of each hedging period are proportional to the options gamma with adjusted parameters, multiplied by the squared expected value of the underlying asset. For the risk neutral economy with no volatility adjustment, I show that present values of the approximate expected transactions costs are identical for each of the future hedging intervals. Moreover, I illustrate that the approximation to the expected transactions costs is accurate except for hedging periods close to the maturity of the contingent claim. Here, the exact expectation tends to be larger than the approximation, even though the expectation is taken only with knowledge of the initial stock price. Finally, I derive an approximation of the variance of the hedging schemes cash-flow (the hedging error minus the transactions costs) for each of the future hedging periods. This approximation facilitates evaluation of the tradeoff between cost and variance of the replication strategy. 236. quotDynamic Aggregation and Computation of Equilibria in Finite-Dimensional Economies with Incomplete Financial Markets. quot Domenico Cuoco and Hua H138 June 1994 This paper constructs a representative agent supporting the equilibrium allocation in event-tree economies with time-additive preferences and possibly incomplete securities markets. If the equilibrium allocation is Pareto optimal, this construction gives the usual linear welfare function. Otherwise, the representative agents utility function is state-dependent, even when individual agents have state-independent utilities and homogeneous beliefs. The existence of a representative agent allows us to provide a characterization of equilibria which does not rely on the derivation of the agents intertemporal demand functions for consumption and investment. More specifically, it allows us to transform the dynamic general equilibrium problem into a static one, and is therefore especially well suited for numerical computation of equilibria in economies with incomplete financial markets. 235. quotMarket Structure and Liquidity on the Tokyo Stock Exchange. quot Bruce N. Lehmann and David M. Modest March 1994 Most equity market mechanisms have designated market makers who provide continuous liquidity. This is not the case on one of the largest and most active stock markets in the world: the Tokyo Stock Exchange (TSE). Its designated intermediaries are merely order clerks called saitori, who log limit orders in a public limit order book and match incoming market orders against them in accordance with strict rules based on price, time, and size priority. On the TSE, orders from the investor public, not from designated market makers, bridge temporal fluctuations in the demand for liquidity. In this paper, we study the chui and tokubetsu kehai (warning and special quote) mechanisms of the TSE. Since no designated market maker stands ready to absorb transient order flow variation, these procedures provide for flagging possibly transient order imbalances and for routinely halting trade to attract orders when particular kinds of order imbalances occur. Such mechanisms always trade the benefits of attracting more liquidity to the marketplace against the cost of impeding the price discovery process and the immediacy of execution. We establish several facts about the impact of these mechanisms on market liquidity. Investors seldom trip the trading halt mechanisms of the TSE and, when they do, they usually execute all or part of their order at the warning quote, a price known in advance. Traders are more likely to trigger indicative quote dissemination and temporary trading halts when the market is relatively volatile, particularly around the morning open and after delayed opens. The volume of trade is similar when orders do and do not result in trading halts, an economically sensible result since the ex ante limit order books should be identical. Substantially larger trades and special quote trading halts (which provide for price discovery through orderly quote changes), a result that is also intuitively plausible. What is perhaps surprising is not that these result accord with intuition but rather that they conform to it so well. 234. quotTrading and Liquidity on the Tokyo Stock Exchange: A Birds Eye View. quot Bruce N. Lehmann and David M. Modest April 1994 The trading mechanism for equities on the Tokyo Stock Exchange (TSE) stands in sharp contrast to the primary mechanisms used to trade stocks in the United States. In the U. S. exchange-designated specialists have affirmative obligations to provide continuous liquidity to the market. Specialists offer simultaneous and tight quotes to both buy and sell and supply sufficient liquidity to limit the magnitude of price changes between consecutive transactions. In contradistinction, the TSE has no exchange-designated liquidity suppliers. Instead, liquidity is provided through a public limit order book and liquidity is organized through restrictions on maximum price changes between trades which serve to slow down trading. In this paper, we examine the efficacy of the TSEs trading mechanisms at providing liquidity. Our analysis is based on a complete record of transactions and best-bid and best-offer quotes for most stocks in the First Section of the TSE over a period of 26 months. We study the size of the bid-ask spread and its cross - sectional and intertemporal stability intertemporal patterns in returns, volatility, volume, trade size, and the frequency of trades and market depth based on the response of quotes to trades and the frequency of trading halts and warning quotes. 233. quotCorporate Debt Value, Bond Covenants, and Optimal Capital Structure. quot Hayne E. Leland January 1994 This paper examines corporate debt values and capital structure in a unified analytical framework. It derives closed form results for the value of long-term risky debt and yield spreads, and for optimal capital structure, when firm asset value follows a diffusion process with constant volatility. Debt values and optimal leverage are explicitly linked to firm risk, taxes, bankruptcy costs, riskfree interest rates, payout rates, and bond covenants. The results elucidate the different behavior of junk bonds vs. investment grade bonds, and aspects of asset substitution, debt repurchase, and debt renegotiation. 232. quotImplied Binomial Trees. quot Mark Rubinstein January 1994 Despite its success, the Black-Scholes formula has become increasingly unreliable over time in the very markets where one would expect it to be most accurate. In addition, attempts by financial economists to extract probabilistic information from option prices have been puny in comparison to what is clearly possible. This paper develops a new method for inferring risk-neutral probabilities (or state - contingent prices) from the simultaneously observed prices of European options. These probabilities are then used to infer a unique fully specified recombining binomial tree that is consistent with these probabilities (and hence consistent with all the observed option prices). If specified exogenously, the model can also accommodate local interest rates and underlying asset payout rates which are general functions of the concurrent underlying asset price and time. In a 200 step lattice, for example, there are a total of 60,301 unknowns: 40,200 potentially different move sizes, 20,100 potentially different move probabilities, and 1 interest rate to be determined from 60,301 independent equations, many of which are non-linear in the unknowns. Despite this, a backwards recursive solution procedure exists which is only slightly more time-consuming than for a standard binomial tree with given constant move sizes and move probabilities. Moreover, closed-form expressions exist for the values and hedging parameters of European options maturing with or before the end of the tree. The tree can also be used to value and hedge American and several types of exotic options. Interpreted in terms of continuous-time diffusion processes, the model here assumes that the drift and local volatility are at most functions of the underlying asset price and time. But instead of beginning with a parameterization of these functions (as in previous research), the model derives these functions endogenously to fit current option prices. As a result, it can be thought of as an attempt to exhaust the potential for single state-variable path-independent diffusion processes to rectify problems with the Black - Scholes formula that arise in practice. 231. quotOptimal Transparency in a Dealership Market with an Application to Foreign Exchange. quot Richard K. Lyons September 1993 This paper addresses the issue of optimal transparency in a multiple-dealer market. In particular, we examine the question: Would risk-averse dealers prefer ex-ante that signed order flow were observable We answer this question with the solution to a mechanism design problem. The resulting incentive-efficient mechanism is one in which signed order flow is not observable. Rather, dealers prefer a slower pace of price discovery because it induces additional risk-sharing. Specifically, slower price discovery permits additional trading with customers prior to revelation this reduces the variance of unavoidable position disturbances, thereby reducing the marketmaking risk inherent in price discovery. We then apply the framework to the spot foreign exchange market in order to understand better the current degree of transparency in that market. 230. quotTests of Microstructural Hypotheses in the Foreign Exchange Market. quot Richard K. Lyons August 1993 This paper introduces a three-part transactions dataset to test various microstructural hypotheses about the spot foreign exchange market. In particular, we test for effects of trading volume on quoted prices through the two channels stressed in the literature: the information channel and the inventory-control channel. We find that trades have both a strong information effect and a strong inventory-control effect, providing support for both strands of microstructure theory. The bulk of equity-market studies also find an information effect however, these studies typically interpret this as evidence of inside information. Since there are no insiders in the foreign exchange market, this finding suggests a broader conception of the information environment, at least in this context. 229. quotThe Economic Functions of Derivatives: An Academicians Point of View. quot David Pyle July 1993 The question of the economic functions of derivatives has been widely discussed in the financial economics literature. In this paper, I focus on the sources of economic efficiency gains from the use of derivatives. These sources include helping to complete capital markets, lowering transaction costs, and reducing agency costs. Many of these functions can be obtained by using primary securities so an important question is what characteristics of derivatives account for their enhanced efficiency and utility relative to the assets that underlie them. Three characteristics are identified and discussed: 1) the dependence of derivative value on changes in the value of underlying assets, 2) the positive dependence of some derivative values on asset volatility, and 3) the non-linear payoffs provided by some derivatives. 228. quotDifferential Information and Dynamic Behavior of Stock Trading Volume. quot Hua He and Jiang Wang May 1993 We develop a multi-period model of stock trading in which investors receive differential information concerning the underlying value of the stock. Investors trade competitively in the market based on their own private information and the information revealed by the market clearing prices as well as other public news. By showing that the hierarchy of expectations (i. e. forecasting the forecasts of others) is a closed system, we resolve the infinite regress problem that is common to intertemporal models with differential information and derive a rational expectations equilibrium. We analyze the dynamic behavior of equilibrium trading volume. In particular, we examine how trading volume is related to the information flow to the market and how investors trading reveals their private information. 227. quotThe U. S. Savings and Loan Crisis. quot David H. Pyle April 1993 226. quotLong-Term Debt Value, Bond Covenants, and Optimal Capital Structure. quot Hayne Leland February 1993 225. quotLiquidation Costs and Risk-Based Bank Capital. quot Helena M. Mullins and David H. Pyle January 1993. Bank capital rules which do not recognize audit costs, liquidation costs and portfolio diversification can seriously underestimate actuarially fair capital requirements. If depositors do not have access to low cost alternatives, the effect of higher requirements can be imposed on them. Otherwise, they need absorb only costs associated with minimum-risk, minimum-cost assets. If borrowers have direct access to financial markets or can borrow from uninsured, less highly levered institutions, insured banks facing a fair risk-based capital requirement and fixed premium cannot attract them. A schedule of required capital and insurance premium pairs would allow banks to retain investment flexibility. Top of Page
No comments:
Post a Comment