Support in decision-making under uncertainty: a project risk assessment tool development and supplementary advances

A foremost dispute that persists on the contemporary world’s agenda is change. The on-going social/technological/economic changes create a competitive and challenging environment for companies to endure. To benefit from these changes, world economies partially depend on emerging Small and Medium Enterprises (SMEs) and their adaptability skills, and subsequently the development of an integrated capability to innovate has become the prime strategy for most of SMEs to subsist and grow. However, innovation and change are always somewhat bonded to an inherent risk development, which subsequently brings on the necessity of a revision of risk management approaches in innovative processes, whose importance SMEs tend to disregard. Additionally, little efforts have been made to improve and create empirical models, metrics and tools to assist SMEs managing latent risks in their innovative projects. This work seeks to present and discuss a solution to support SMEs in engaging on systematic risk management practices, which consists on an integrated risk assessment and response support web-based tool - Spotrisk® - designed for SMEs. On the other hand, an inherent subjectivity is linked with risk management and identification processes, due to uncertainty trait of its nature, for each individual perceives situations according to his own idiosyncrasy, which brings complications in normalizing risk profiles and procedures. This essay aims to bring insights concerning the support in decision-making processes under uncertainty, by addressing issues related with the risk behavior character among individuals. To address such issues, subjects of neuroscience or psychology are explored and models to identify such character are proposed, as well as models to improve presented tool. This work attempts to go beyond the restrictive aim of endeavoring on technical improvement dissertation, and in embraces an exploratory conceptualization concerning micro, small and medium businesses’ traits regarding risk characters and project risk assessment tools.

Risk parity: True versus naive approach

This paper studies the performance of two different Risk Parity strategies, one from Maillard (2008) and a “naïve” that was already used by market practitioners, against traditional strategies. The tests will compare different regions (US, UK, Germany and Japan) since 1991 to 2013, and will use different ways of volatility. The main findings are that Risk Parity outperforms any traditional strategy, and the “true” (by Maillard) has considerable better results than the “naïve” when using historical volatility, while using EWMA there are significant differences.

Brazilian equity risk premium analysis: A macroeconomic approach

Double Degree Masters in Economics Program from Insper and NOVA School of Business and Economics

Efetividade de um programa de educação baseado na neurofisiologia da dor e exercício aquático em comparação com um programa de exercício aquático isolado em indivíduos com dor lombar crónica

RESUMO: Introdução e Objetivos: O exercício é uma das modalidades mais utilizadas no tratamento da Dor Lombar Crónica (DLC) mas também a mais recomendada pela literatura atual. Apesar de efetivo, o exercício não parece responder às características cognitivas e comportamentais identificadas nesta população. Assim, existem recomendações para que seja coadjuvado por educação de forma a minimizar a influência nos resultados de variáveis como o medo do movimento. Porém não é conhecido o real impacto nos resultados de um programa educacional quando acrescentado a um programa de exercício. O objetivo deste estudo foi investigar os efeitos de um programa de exercício aquático coadjuvado por educação baseada na neurofisiologia da dor (grupo experimental) comparado a um programa de exercício aquático isolado (grupo controlo), ao nível da intensidade da dor, incapacidade funcional e medo do movimento, em indivíduos com DLC. Metodologia: Sessenta e dois indivíduos com DLC foram aleatoriamente distribuídos pelo grupo experimental (n= 30) e pelo grupo controlo (n= 32). Os participantes de ambos os grupos realizaram um programa de 6 semanas constituído por 12 sessões de exercício aquático. No caso do grupo experimental foram realizadas duas sessões de educação baseada na neurofisiologia da dor (EBN) antes do programa de exercício aquático. As medidas de avaliação primárias foram a intensidade da dor (Escala Visual Análoga) e a incapacidade funcional (Quebec Back Pain Disability Scale). Secundariamente avaliou-se o medo do movimento através da Tampa Scale of Kinesiophobia. Os participantes foram avaliados antes da intervenção, 3 semanas após o início do programa de exercício aquático, no final da intervenção e 3 meses após o final da intervenção. Resultados: Foram encontradas melhorias significativas no final da intervenção ao nível da intensidade da dor e incapacidade funcional em ambos os grupos. Após 3 meses, apenas o grupo experimental apresentou melhorias significativas nas variáveis primárias. Na comparação entre grupos, os resultados foram favoráveis ao grupo experimental para a intensidade da dor nas avaliações após a intervenção (p= 0,032) e após 3 meses (p= 0,007). Quanto à incapacidade funcional e medo do movimento não se verificaram diferenças significativas entre grupos em nenhum momento. Também as medidas de relevância clínica utilizadas (tamanho do efeito; risco relativo; number needed to treat) favoreceram o grupo experimental. Conclusões: Os resultados mostram que um programa de exercício aquático e EBN foi mais efetivo na melhoria da intensidade da dor a curto e médio prazo do que um programa de exercício aquático isolado. Apesar de serem necessárias mais investigações sobre este tema, este estudo demonstra que a EBN pode otimizar os resultados quando associada a outras intervenções ativas como o exercício aquático.----------------ABSTRACT: Introduction and Objectives: Exercise is one of the most used modalities in the treatment of Chronic Low Back Pain (CLBP) but also the most recommended in current literature. Although it’s effective, exercise does not seem to respond to the cognitive and behavioural characteristics identified in this population. Thus, it is recommended to be assisted by education in order to minimize the influence of variables on the results such as the fear of movement. However, the real impact on the results of an educational program when added to an exercise program is not known. The aim of this study was to investigate the effects of a program of aquatic exercise and neurophysiology pain education (experimental group) compared to aquatic exercise program alone (control group), on the outcomes of pain intensity, functional disability and fear of movement in individuals with CLBP. Methodology: Sixty two individuals with CLBP were randomly distributed in the experimental group (n = 30) and in the control group (n = 32). Participants in both groups performed a 6-week program consisting of 12 sessions of aquatic exercise. In the case of the experimental group two sessions of neurophysiology pain education (NPE) were performed before the aquatic exercise program. The primary outcomes were pain intensity (Visual Analogue Scale) and functional disability (Quebec Back Pain Disability Scale). Secondarily, the fear of movement through the Tampa Scale of Kinesiophobia was assessed. Participants were assessed before the intervention, three weeks after the start of the aquatic exercise program, at the end of the intervention and 3 months after the end of the intervention. Results: Significant improvements were found at the end of the intervention in both groups in what intensity of pain and functional disability were concerned. After 3 months, only the experimental group showed significant improvements in the primary outcomes. Comparing both groups, the results favoured to the experimental group for intensity of pain scores after the intervention (p = 0.032) and after 3 months (p = 0.007). The functional disability and fear of movement had no significant differences between groups at any time. In addition, the measures of clinical relevance used (size effect; relative risk; number needed to treat) favoured the experimental group. Conclusions: The results show that a program of aquatic exercise and NPE were more effective in improving pain intensity at a short and medium term than an aquatic exercise program alone. Although more research on this topic is needed, this study demonstrates that the NPE can optimize results when combined with other active interventions such as aquatic exercise.

Market risk charge of the trading book: a comparison of the Basel II and Basel III

This paper aims to investigate if the market capital charge of the trading book increased in Basel III compared to Basel II. I showed that the capital charge rises by 232% and 182% under the standardized and internal model, respectively. The varying liquidity horizons, the calibration to a stress period, the introduction of credit spread risk, the restrictions on correlations across risk categories and the incremental default charge boost Basel III requirements. Nevertheless, the impact of Expected shortfall at 97.5% is low and long term shocks decrease the charge. The standardized approach presents advantages and disadvantages relative to internal models.

Momentum risk: An approach following the correlations between active stocks

The momentum anomaly has been widely documented in the literature. However, there are still many issues where there is no consensus and puzzles left unexplained. One is that strategies based on momentum present a level of risk that is inconsistent with the diversification that it offers. Moreover, recent studies indicate that this risk is variable over time and mostly strategy-specific. This work project hypothesises and proves that this evidence is explained by the portfolio constitution of the momentum strategy over time, namely the covariance and correlation between companies in the top and down deciles and across them.

Modeling and forecasting value-at-risk for the Portuguese stock market

The aim of this work project is to find a model that is able to accurately forecast the daily Value-at-Risk for PSI-20 Index, independently of the market conditions, in order to expand empirical literature for the Portuguese stock market. Hence, two subsamples, representing more and less volatile periods, were modeled through unconditional and conditional volatility models (because it is what drives returns). All models were evaluated through Kupiec’s and Christoffersen’s tests, by comparing forecasts with actual results. Using an out-of-sample of 204 observations, it was found that a GARCH(1,1) is an accurate model for our purposes.

Systemic risk for financial institutions in UK

Marginal Expected Shortfall (MES) is an approach used to measure the systemic risk financial institutions face. It estimates how significantly systemic events (poor market performance, out of 1.6 times Standard Deviation borders) are expected to affect market capitalization of a particular firm. The concept was developed in the late 2000s and is widely used for cross-country comparisons of financial firms. For the purposes of generalization of this technique it is often used with market data containing non-domestic currencies for some financial firms. That may lead to results having currency noise in them as it is shown for 77 UK financial firms in our analysis between 2001 and 2014.

Enterprise risk management adoption: An empirical investigation of its effects on firm performance

Enterprise Risk Management (ERM) is gaining relevance among financial and non-financial companies but its benefits still are uncertain. This paper aims at investigating the relationship between ERM adoption and firm performance based on a sample of 1130 non-financial companies belonging to the STOXX® index. A content analysis of individual accounts is performed to distinguish adopters, and a regression analysis explores the effect of ERM adoption on firm performance, proxied by Tobin’s Q. The findings suggest that there is a statistical significant positive effect of ERM adoption on firm performance, meaning that firms are benefiting from the implementation of this process.

Social impact bond feasibility study: Children and youth at risk: the Projecto Família program

Social impact bonds are an increasingly popular method of unlocking typical social investment barriers and fuelling social innovation. This feasibility study aims to understand whether a social impact bond is a suitable tool for decreasing unnecessary foster care placements in Portugal, which have been proven to cause significant social and financial damage to societies. This research question is answered through a financial model which combines the costs of this social problem with Projecto Família’s intervention model, a leading intensive family preservation service. Main findings suggest using SIB funding for a 5-year project with the goal of generating the proper impact measurement metrics lacking in the field.

Risk of employing an evolvable production system

Nowadays manufacturing companies are facing a more challenging environment due to the unpredictability of the markets in order to survive. Enterprises need to keep innovating and deliver products with new internal or external characteristics. There are strategies and solutions, to different organisational level from strategic to operational, when technology is growing faster in operational level, more specifically in manufacturing system. This means that companies have to deal with the changes of the emergent manufacturing systems while it can be expensive and not easy to be implement. An agile manufacturing system can help to cope with the markets changeability. Evolvable Production Systems (EPS) is an emergent paradigm which aims to bring new solutions to deal with changeability. The proposed paradigm is characterised by modularity and intends to introduce high flexibility and dynamism at shop floor level through the use of the evolution of new computational devices and technology. This new approach brings to enterprises the ability to plug and unplug new devices and allowing fast reformulation of the production line without reprogramming. There is no doubt about the advantages and benefits of this emerging technology but the feasibility and applicability is still under questioned. Most researches in this area are focused on technical side, explaining the advantages of those systems while there are no sufficient works discussing the implementation risks from different perspective, including business owner. The main objective of this work is to propose a methodology and model to identify, classify and measure potential risk associated with an implementation of this emergent paradigm. To quantify the proposed comprehensive risk model, an Intelligent Decision system is developed employing Fuzzy Inference System to deal with the knowledge of experts, as there are no historical data and sufficient research on this area. The result can be the vulnerability assessment of implementing EPS technology in manufacturing companies when the focus is more on SMEs. The present dissertation used the experts’ knowledge and experiences, who were involved in FP7 project IDEAS, which is one of the leading projects in this area.

Introducing spin-off stocks into the NSP’s risk parity strategy

Field lab: Nova Student Portfolio

Introducing risk parity on momentum and carry portfolios

The momentum and carry anomalies have been extensively documented in the literature. However, there are still many issues relating to the risks associated to them that are left unexplained. One is the fact that an investor holds for too long the most volatile assets, both under momentum and carry strategies. Therefore, they present a level of risk and a probability of extreme events to happen inconsistent. This work project hypothesizes and proves the introduction of risk parity rules on the weights of the portfolios do increase risk rewarding of carry strategies. However, it fails under momentum strategies.

Macroeconomic risk in commodities market

The thesis studies the presence of macroeconomic risk in the commodities futures market. I present strong evidence that there is a strong relationship between macroeconomic risk and individual commodities future returns. Furthermore, long-only trading strategies seem to be strongly exposed to systematic risk, while long-short trading strategies (based on basis, momentum and basis-momentum) are found to present no such risk. Instead, I found a strong sentiment exposure in the portfolio returns of these long-short strategies, mainly during recessions. The advantages of following long-short strategies become even clearer when analyzing different macroeconomic regimes.