Credit Default Swaps and Insurance: Against the Potts Opinion

Little attention has been given to the possibility that CDS transactions might be construed as insurance contracts in English law. This article challenges the widespread “Potts opinion”, which states that CDSs are not insurance, because they do not require the protection buyer to sustain a loss or to have an insurable interest in the subject matter. CDSs often do provide protection against loss that the buyer is exposed to; loss indemnity is not a necessary characterisation of an insurance contract; insurable interest does not form part of the definition of insurance, but is an additional requirement of valid insurance; and what matters is the substance not the form of the contract. The situation in the US and Australia is also briefly considered.

A Sketch of the Phonology and Grammar of Rajbanshi

This dissertation is a synchronic description of the phonology and grammar of two dialects of the Rajbanshi language (Eastern Indo-Aryan) as spoken in Jhapa, Nepal. I have primarily confined the analysis to the oral expression, since the emerging literary form is still in its infancy. The grammatical analysis is therefore based, for the most part, on a corpus of oral narrative text which was recorded and transcribed from three informants from north-east Jhapa. An informant, speaking a dialect from south-west Jhapa cross checked this text corpus and provided additional elicited material. I have described the phonology, morphology and syntax of the language, and also one aspect of its discourse structure. For the most part the phonology follows the basic Indo-Aryan pattern. Derivational morphology, compounding, reduplication, echo formation and onomatopoeic constructions are considered, as well as number, noun classes (their assignment and grammatical function), pronouns, and case and postpositions. In verbal morphology I cover causative stems, the copula, primary and secondary agreement, tense, aspect, mood, auxiliary constructions and non-finite forms. The term secondary agreement here refers to genitive agreement, dative-subject agreement and patient (and sometimes patient-agent) agreement. The breaking of default agreement rules has a range of pragmatic inferences. I argue that a distinction, based on formal, semantic and statistical grounds, should be made between conjunct verbs, derivational compound verbs and quasi-aspectual compound verbs. Rajbanshi has an open set of adjectives, and it additionally makes use of a restricted set of nouns which can function as adjectives. Various particles, and the emphatic and conjunctive clitics are also considered. The syntactic structures studied include: non-declarative speech acts, phrase-internal and clause-internal constituent order, negation, subordination, coordination and valence adjustment. I explain how the future, present and past tenses in Rajbanshi oral narratives do not seem to maintain a time reference, but rather to indicate a distinction between background and foreground information. I call this tense neutralisation .

Essays on the Bioeconomics of the Northern Baltic Fisheries

World marine fisheries suffer from economic and biological overfishing: too many vessels are harvesting too few fish stocks. Fisheries economics has explained the causes of overfishing and provided a theoretical background for management systems capable of solving the problem. Yet only a few examples of fisheries managed by the principles of the bioeconomic theory exist. With the aim of bridging the gap between the actual fish stock assessment models used to provide management advice and economic optimisation models, the thesis explores economically sound harvesting from national and international perspectives. Using data calibrated for the Baltic salmon and herring stocks, optimal harvesting policies are outlined using numerical methods. First, the thesis focuses on the socially optimal harvest of a single salmon stock by commercial and recreational fisheries. The results obtained using dynamic programming show that the optimal fishery configuration would be to close down three out of the five studied fisheries. The result is robust to stock size fluctuations. Compared to a base case situation, the optimal fleet structure would yield a slight decrease in the commercial catch, but a recreational catch that is nearly seven times higher. As a result, the expected economic net benefits from the fishery would increase nearly 60%, and the expected number of juvenile salmon (smolt) would increase by 30%. Second, the thesis explores the management of multiple salmon stocks in an international framework. Non-cooperative and cooperative game theory are used to demonstrate different "what if" scenarios. The results of the four player game suggest that, despite the commonly agreed fishing quota, the behaviour of the countries has been closer to non-cooperation than cooperation. Cooperation would more than double the net benefits from the fishery compared to a past fisheries policy. Side payments, however, are a prerequisite for a cooperative solution. Third, the thesis applies coalitional games in the partition function form to study whether the cooperative solution would be stable despite the potential presence of positive externalities. The results show that the cooperation of two out of four studied countries can be stable. Compared to a past fisheries policy, a stable coalition structure would provide substantial economic benefits. Nevertheless, the status of the salmon stocks would not improve significantly. Fourth, the thesis studies the prerequisites for and potential consequences of the implementation of an individual transferable quota (ITQ) system in the Finnish herring fishery. Simulation results suggest that ITQs would result in a decrease in the number of fishing vessels, but enables positive profits to overlap with a higher stock size. The empirical findings of the thesis affirm that the profitability of the studied fisheries could be improved. The evidence, however, indicates that incentives for free riding exist, and thus the most preferable outcome both in economic and biological terms is elusive.

Suomen maatalouden tuottamat kasvihuonekaasujen päästöt eri politiikkaskenaarioissa

Climate change is the single biggest environmental problem in the world at the moment. Although the effects are still not fully understood and there is considerable amount of uncertainty, many na-tions have decided to mitigate the change. On the societal level, a planner who tries to find an eco-nomically optimal solution to an environmental pollution problem seeks to reduce pollution from the sources where reductions are most cost-effective. This study aims to find out how effective the instruments of the agricultural policy are in the case of climate change mitigation in Finland. The theoretical base of this study is the neoclassical economic theory that is based on the assumption of a rational economic agent who maximizes his own utility. This theoretical base has been widened towards the direction clearly essential to the matter: the theory of environmental eco-nomics. Deeply relevant to this problem and central in the theory of environmental economics are the concepts of externalities and public goods. What are also relevant are the problems of global pollution and non-point-source pollution. Econometric modelling was the method that was applied to this study. The Finnish part of the AGMEMOD-model, covering the whole EU, was used for the estimation of the development of pollution. This model is a seemingly recursive, partially dynamic partial-equilibrium model that was constructed to predict the development of Finnish agricultural production of the most important products. For the study, I personally updated the model and also widened its scope in some relevant matters. Also, I devised a table that can calculate the emissions of greenhouse gases according to the rules set by the IPCC. With the model I investigated five alternative scenarios in comparison to the base-line scenario of Agenda 2000 agricultural policy. The alternative scenarios were: 1) the CAP reform of 2003, 2) free trade on agricultural commodities, 3) technological change, 4) banning the cultivation of organic soils and 5) the combination of the last three scenarios as the maximal achievement in reduction. The maximal achievement in the alternative scenario 5 was 1/3 of the level achieved on the base-line scenario. CAP reform caused only a minor reduction when com-pared to the base-line scenario. Instead, the free trade scenario and the scenario of technological change alone caused a significant reduction. The biggest single reduction was achieved by banning the cultivation of organic land. However, this was also the most questionable scenario to be real-ized, the reasons for this are further elaborated in the paper. The maximal reduction that can be achieved in the Finnish agricultural sector is about 11 % of the emission reduction that is needed to comply with the Kyoto protocol.

Essays on Microcredit in Rural Bangladesh

This thesis is a collection of three essays on Bangladeshi microcredit. One of the essays examines the effect of microcredit on the cost of crime. The other two analyze the functioning mechanism of microcredit programs, i.e. credit allocation rules and credit recovery policy. In Essay 1, the demand for microcredit and its allocation rules is studied. Microcredit is claimed to be the most effective means of supplying credit to the poorest of the poor in rural Bangladesh. This fact has not yet been examined among households who demand microcredit. The results of this essay show that educated households are more likely to demand microcredit and its demand does not differ by sex. The results also show that microcredit programs follow different credit allocation rules for male and female applicants. Education is an essential characteristic for both sexes that credit programs consider in allocating credit. In Essay 2, the focus is to establish a link between microcredit and the incidence of rural crime in Bangladesh. The basic hypothesis is that microcredit programs jointly hold the group responsibility which provides an incentive for group members to protect each other from criminal gang in order to safeguard their own economic interests. The key finding of this essay is that the average cost of crime for non-borrowers is higher than that for borrowers. In particular, 10% increase in the credit reduces the costs of crime by 4.2%. The third essay analyzes the reasons of high repayment rate amid Bangladeshi microcredit programs. The existing literature argues that credit applicants are able to screen out the high risk applicants in the group formulation stage using their superior local information. In addition, due to the joint liability mechanism of the programs, group members monitor each others economic activities to ensure the minimal misuse of credit. The arguments in the literature are based on the assumption that once the credit is provided, credit programs have no further role in ensuring that repayments are honored by the group. In contrast, using survey data this essay documents that credit programs use in addition organizational pressures such as humiliation and harassment the non-payer to recover the unpaid installments. The results also show that the group mechanisms do not have a significant effect in recovering default dues.

Essays on the Economics of Intellectual Property Rights

Väitöskirjassani tarkastelen informaatiohyödykkeiden ja tekijänoikeuksien taloustiedettä kahdesta eri perspektiivistä. Niistä ensimmäinen kuuluu endogeenisen kasvuteorian alaan. Väitöskirjassani yleistän ”pool of knowledge” -tyyppisen endogeenisen kasvumallin tilanteeseen, jossa patentoitavissa olevalla innovaatiolla on minimikoko, ja jossa uudenlaisen tuotteen patentoinut yritys voi menettää monopolinsa tuotteeseen jäljittelyn johdosta. Mallin kontekstissa voidaan analysoida jäljittelyn ja innovaatioilta vaaditun ”minimikoon” vaikutuksia hyvinvointiin ja talouskasvuun. Kasvun maksimoiva imitaation määrä on mallissa aina nolla, mutta hyvinvoinnin maksimoiva imitaation määrä voi olla positiivinen. Talouskasvun ja hyvinvoinnin maksimoivalla patentoitavissa olevan innovaation ”minimikoolla” voi olla mikä tahansa teoreettista maksimia pienempi arvo. Väitöskirjani kahdessa jälkimmäisessä pääluvussa tarkastelen informaatiohyödykkeiden kaupallista piratismia mikrotaloustieteellisen mallin avulla. Informaatiohyödykkeistä laittomasti tehtyjen kopioiden tuotantokustannukset ovat pienet, ja miltei olemattomat silloin kun niitä levitetään esimerkiksi Internetissä. Koska piraattikopioilla on monta eri tuottajaa, niiden hinnan voitaisiin mikrotaloustieteen teorian perusteella olettaa laskevan melkein nollaan, ja jos näin kävisi, kaupallinen piratismi olisi mahdotonta. Mallissani selitän kaupallisen piratismin olemassaolon olettamalla, että piratismista saatavan rangaistuksen uhka riippuu siitä, kuinka monille kuluttajille piraatti tarjoaa laittomia hyödykkeitä, ja että se siksi vaikuttaa piraattikopioiden markkinoihin mainonnan kustannuksen tavoin. Kaupallisten piraattien kiinteiden kustannusten lisääminen on mallissani aina tekijänoikeuksien haltijan etujen mukaista, mutta ”mainonnan kustannuksen” lisääminen ei välttämättä ole, vaan se saattaa myös alentaa laillisten kopioiden myynnistä saatavia voittoja. Tämä tulos poikkeaa vastaavista aiemmista tuloksista sikäli, että se pätee vaikka tarkasteltuihin informaatiohyödykkeisiin ei liittyisi verkkovaikutuksia. Aiemmin ei-kaupallisen piratismin malleista on usein johdettu tulos, jonka mukaan informaatiohyödykkeen laittomat kopiot voivat kasvattaa laillisten kopioiden myynnistä saatavia voittoja jos laillisten kopioiden arvo niiden käyttäjille riippuu siitä, kuinka monet muut kuluttajat käyttävät samanlaista hyödykettä ja jos piraattikopioiden saatavuus lisää riittävästi laillisten kopioiden arvoa. Väitöskirjan viimeisessä pääluvussa yleistän mallini verkkotoimialoille, ja tutkin yleistämäni mallin avulla sitä, missä tapauksissa vastaava tulos pätee myös kaupalliseen piratismiin.

ISO 13567 - The Proposed International Standard for Structuring Layers in Computer Aided Building Design

Layering is a widely used method for structuring data in CAD-models. During the last few years national standardisation organisations, professional associations, user groups for particular CAD-systems, individual companies etc. have issued numerous standards and guidelines for the naming and structuring of layers in building design. In order to increase the integration of CAD data in the industry as a whole ISO recently decided to define an international standard for layer usage. The resulting standard proposal, ISO 13567, is a rather complex framework standard which strives to be more of a union than the least common denominator of the capabilities of existing guidelines. A number of principles have been followed in the design of the proposal. The first one is the separation of the conceptual organisation of information (semantics) from the way this information is coded (syntax). The second one is orthogonality - the fact that many ways of classifying information are independent of each other and can be applied in combinations. The third overriding principle is the reuse of existing national or international standards whenever appropriate. The fourth principle allows users to apply well-defined subsets of the overall superset of possible layernames. This article describes the semantic organisation of the standard proposal as well as its default syntax. Important information categories deal with the party responsible for the information, the type of building element shown, whether a layer contains the direct graphical description of a building part or additional information needed in an output drawing etc. Non-mandatory information categories facilitate the structuring of information in rebuilding projects, use of layers for spatial grouping in large multi-storey projects, and storing multiple representations intended for different drawing scales in the same model. Pilot testing of ISO 13567 is currently being carried out in a number of countries which have been involved in the definition of the standard. In the article two implementations, which have been carried out independently in Sweden and Finland, are described. The article concludes with a discussion of the benefits and possible drawbacks of the standard. Incremental development within the industry, (where ”best practice” can become ”common practice” via a standard such as ISO 13567), is contrasted with the more idealistic scenario of building product models. The relationship between CAD-layering, document management product modelling and building element classification is also discussed.

Political Risk in Credit Evaluation: Empirical Studies and Survey Results

Financing trade between economic agents located in different countries is affected by many types of risks, resulting from incomplete information about the debtor, the problems of enforcing international contracts, or the prevalence of political and financial crises. Trade is important for economic development and the availability of trade finance is essential, especially for developing countries. Relatively few studies treat the topic of political risk, particularly in the context of international lending. This thesis explores new ground to identify links between political risk and international debt defaults. The core hypothesis of the study is that the default probability of debt increases with increasing political risk in the country of the borrower. The thesis consists of three essays that support the hypothesis from different angles of the credit evaluation process. The first essay takes the point of view of an international lender assessing the credit risk of a public borrower. The second investigates creditworthiness assessment of companies. The obtained results are substantiated in the third essay that deals with an extensive political risk survey among finance professionals in developing countries. The financial instruments of core interest are export credit guaranteed debt initiated between the Export Credit Agency of Finland and buyers in 145 countries between 1975 and 2006. Default events of the foreign credit counterparts are conditioned on country-specific macroeconomic variables, corporate-specific accounting information as well as political risk indicators from various international sources. Essay 1 examines debt issued to government controlled institutions and conditions public default events on traditional macroeconomic fundamentals, in addition to selected political and institutional risk factors. Confirming previous research, the study finds country indebtedness and the GDP growth rate to be significant indicators of public default. Further, it is shown that public defaults respond to various political risk factors. However, the impact of the risk varies between countries at different stages of economic development. Essay 2 proceeds by investigating political risk factors as conveivable drivers of corporate default and uses traditional accounting variables together with new political risk indicators in the credit evaluation of private debtors. The study finds links between corporate default and leverage, as well as between corporate default and the general investment climate and measeures of conflict in the debtor country. Essay 3 concludes the thesis by offering survey evidence on the impact of political risk on debt default, as perceived and experienced by 103 finance professionals in 38 developing countries. Taken together, the results of the thesis suggest that various forms of political risk are associated with international debt defaults and continue to pose great concerns for both international creditors and borrowers in developing countries. The study provides new insights on the importance of variable selection in country risk analysis, and shows how political risk is actually perceived and experienced in the riskier, often lower income countries of the global economy.

Screening Cycles

We demonstrate how endogenous information acquisition in credit markets creates lending cycles when competing banks undertake their screening decisions in an uncoordinated way, thereby highlighting the role of intertemporal screening externalities induced by lending market competition as a structural source of instability. We show that uncoordinated screening behavior of competing banks may be not only the source of an important financial multiplier, but also an independent source of fluctuations inducing business cycles. The screening cycle mechanism is robust to generalizations along many dimensions such as the lending market structure, the lending rate determination and the imperfections in the screening technology.

Technology-related peso problems in stock returns

Although empirical evidence suggests the contrary, many asset pricing models assume stock returns to be symmetrically distributed. In this paper it is argued that the occurrence of negative jumps in a firm's future earnings and, consequently, in its stock price, is positively related to the level of network externalities in the firm's product market. If the ex post frequency of these negative jumps in a sample does not equal the ex ante assessed probability of occurrence, the sample is subject to a peso problem. The hypothesis is tested for by regressing the skewness coefficient of a firm’s realised stock return distribution on the firm’s R&D intensity, i.e. the ratio of the firm’s research and development expenditure to its net sales. The empirical results support the technology-related peso problem hypothesis. In samples subject to such a peso problem, the returns are biased up and the variance is biased down.

Optimization of sample preparation for next-generation sequencing with Illumina Genome Analyzer II

The growing interest for sequencing with higher throughput in the last decade has led to the development of new sequencing applications. This thesis concentrates on optimizing DNA library preparation for Illumina Genome Analyzer II sequencer. The library preparation steps that were optimized include fragmentation, PCR purification and quantification. DNA fragmentation was performed with focused sonication in different concentrations and durations. Two column based PCR purification method, gel matrix method and magnetic bead based method were compared. Quantitative PCR and gel electrophoresis in a chip were compared for DNA quantification. The magnetic bead purification was found to be the most efficient and flexible purification method. The fragmentation protocol was changed to produce longer fragments to be compatible with longer sequencing reads. Quantitative PCR correlates better with the cluster number and should thus be considered to be the default quantification method for sequencing. As a result of this study more data have been acquired from sequencing with lower costs and troubleshooting has become easier as qualification steps have been added to the protocol. New sequencing instruments and applications will create a demand for further optimizations in future.

Jätteenkeräyksen ja -siirron yhteiskunnalliset kustannukset Punavuoressa – Tarkastelussa seka-, bio-, kartonki- ja paperijäte

Tämän pro gradu -tutkielman tarkoituksena on määrittää jätteenkeräyksen ja -siirron yhteiskunnalliset kustannukset valitulla tutkimusalueella Helsingin Punavuoressa. Jätteenkeräyksen ja -siirron kustannukset vastaavat suuruudeltaan merkittävää osaa jätehuollon kokonaiskustannuksista, minkä vuoksi kustannusten tutkimiselle ja tarkastelulle löytyy kysyntää. Lisäksi keräyksen ja siirron kustannukset saattavat vaihdella suuresti johtuen erilaisista kaupunkirakenteista,keräysmenetelmistä ja teknologioista, joten tapaustarkastelun avulla pystytään selvittämään yksityiskohtaisesti alueen jätteenkeräyksen ja -siirron kustannukset. Tutkimusalue Helsingin Punavuoressa on yksi Suomen tiheimmin asutuista alueista, missä jätteidenkeräystä hankaloittaa kapeat kadut, useat sisäpihoille sijoitetut jätehuoneet ja vilkas liikenne. Erityispiirteidensä vuoksi jätteenkeräys- ja siirto aiheuttaa tutkimusalueella yksityisten kustannusten lisäksi myös useita ulkoisvaikutuksia muun muassa ilmansaasteiden ja viihtyvyyshaittojen muodossa. Tässä työssä lasketaan jätteenkeräyksen ja -siirron yhteiskunnalliset kustannukset neljän eri jätelajin osalta huomioimalla sekä yksityiset kustannustekijät että ulkoiskustannuksina syntyvien päästöjen kustannukset. Työn aineistona on käytetty erilaisia kustannuslaskelmien kirjallisuuslähteitä, asiantuntija-arvioita ja tutkimusalueella tehtyjä kellotusmittauksia. Alueen kellotusmittauksiin perustuvalla aikaperusteisella laskentatavalla jätteenkeräyksen ja -siirron jätetonnikohtaisiksi keskimääräisiksi kustannuksiksi saatiin 73 €/t. Kustannuksissa havaittiin kuitenkin suuria jätelajikohtaisia eroja, jolloin keräyksen ja siirron kustannukset heittelivät 49–125 €/t välillä. Suuret jätelajikohtaiset kustannuserot ovat selitettävissä pitkälti jätteiden koostumuksella, koska kevyiden ja paljon tilaa vievien jätelajien jätetonnikohtaiset kustannukset olivat suurimpia. Teoriataustan ja lähdeaineiston perusteella saadut tulokset myös osoittavat, että jätteenkeräyksen ja siirron kustannuksista huomioitujen ulkoiskustannusten osuus on häviävän pieni verrattuna yksityisten kustannusten tasoon.