Fiscal adjustments and sovereign default in different government systems

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Economics from the NOVA – School of Business and Economics

Fiscal adjustments and sovereign default in different government systems

This paper extends the model of Spolaore (2004) about adjustments in di erent government systems for the context of scal adjustments and sovereign default. We introduce asymmetry between groups in income and preferences towards scal reforms. Default a ects di erently each group and becomes a possibility if reforms are not enacted after public nance solvency shocks, in uencing the political game according to its likelihood. With the extensions, new situations which were not possible with the previous framework arise. After the exposition of the model, the Argentine default in 2001 provides an example of the political con icts addressed by the model.

The sovereign CDS-Bond basis: From a crisis perspective

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

Effect of European Sovereign debt crisis on banks’ stock market performances: application to Portuguese data

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

Sovereign debt and CRAs: Where does the power lie?

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Management from the NOVA – School of Business and Economics

Collateral, default penalties and infinite horizon equilibrium

Pascoa and Seghir (2009) noticed that when collateralized promises become subject to utility penalties on default, Ponzi schemes may occur. However, equilibrium exists in some interesting cases. Under low penalties, equilibrium exists if the collateral does not yield utility (for example, when it is a productive asset or a security). Equilibrium exists also under more severe penalties and collateral utility gains, when the promise or the collateral are nominal assets and the margin requirements are endogenous: relative inflation rates and margin coefficients can make the income effects dominate the penalty effects. An equilibrium refinement avoids no-trade equilibria with unduly repayment beliefs. Our refinement differs from the one used by Dubey, Geanakoplos and Shubik (2005) as it does not eliminate no trade equilibria whose low delivery rates are consistent with the propensity to default of agents that are on the verge of selling.

The impact of the European sovereign debt crisis on the recovering from the financial crisis: Equity returns of the banking sector

This paper analyses, through a dynamic panel data model, the impact of the Financial and the European Debt crisis on the equity returns of the banking system. The model is also extended to specifically investigate the impact on countries who received rescue packages. The sample under analysis considers eleven countries from January 2006 to June 2013. The main conclusion is that there was in fact a structural change in banks’ excess returns due to the outbreak of the European Debt Crisis, when stock markets were still recovering from the Financial Crisis of 2008.

Long-run performance of sovereign rating changes

This paper examines the impact of Sovereign rating changes on the aggregate stock and bond market returns both in emerging and developed countries. Rating downgrades in emerging markets are associated with significant negative wealth effects both in the stock and bond markets. Moreover, the effects of rating downgrades persist up to six-months after the event. In contrast, upgrades in emerging markets convey no information. Rating changes in developed markets have no significant impact on either stock and bond market returns. Rating agencies act pro-cyclically, downgrading countries in bad times and, consequently, contributing to the instability in emerging markets.

Credit default swap (CDS) prediction model & trading strategy

This project focuses on the study of different explanatory models for the behavior of CDS security, such as Fixed-Effect Model, GLS Random-Effect Model, Pooled OLS and Quantile Regression Model. After determining the best fitness model, trading strategies with long and short positions in CDS have been developed. Due to some specifications of CDS, I conclude that the quantile regression is the most efficient model to estimate the data. The P&L and Sharpe Ratio of the strategy are analyzed using a backtesting analogy, where I conclude that, mainly for non-financial companies, the model allows traders to take advantage of and profit from arbitrages.

Trading the differences in expectations between the CDS and bond markets

This paper uses the framework developed by Vrugt (2010) to extract the recovery rate and term-structure of risk-neutral default probabilities implied in the cross-section of Portuguese sovereign bonds outstanding between March and August 2011. During this period the expectations on the recovery rate remain firmly anchored around 50 percent while the instantaneous default probability increases steadily from 6 to above 30 percent. These parameters are then used to calculate the fair-value of a 5-year and 10- year CDS contract. A credit-risk-neutral strategy is developed from the difference between the market price of a CDS of the same tenors and the fair-value calculated, yielding a sharpe ratio of 3.2

Cross sectional default probabilities in european corporate bonds

This study attempts to identify basis-trading opportunities in the European banking sector by comparing two different measures for the market’s assessment of risk: market-observed CDS spreads and model-implied Z-spreads. Using a sample of 10 banks, over a period of 3 years following the European banking crisis, it can be concluded that there were arbitrage opportunities in the sector, as evidenced by the derived negative bases.

Semantics of logic programs with explicit negation

After a historical introduction, the bulk of the thesis concerns the study of a declarative semantics for logic programs. The main original contributions are: ² WFSX (Well–Founded Semantics with eXplicit negation), a new semantics for logic programs with explicit negation (i.e. extended logic programs), which compares favourably in its properties with other extant semantics. ² A generic characterization schema that facilitates comparisons among a diversity of semantics of extended logic programs, including WFSX. ² An autoepistemic and a default logic corresponding to WFSX, which solve existing problems of the classical approaches to autoepistemic and default logics, and clarify the meaning of explicit negation in logic programs. ² A framework for defining a spectrum of semantics of extended logic programs based on the abduction of negative hypotheses. This framework allows for the characterization of different levels of scepticism/credulity, consensuality, and argumentation. One of the semantics of abduction coincides with WFSX. ² O–semantics, a semantics that uniquely adds more CWA hypotheses to WFSX. The techniques used for doing so are applicable as well to the well–founded semantics of normal logic programs. ² By introducing explicit negation into logic programs contradiction may appear. I present two approaches for dealing with contradiction, and show their equivalence. One of the approaches consists in avoiding contradiction, and is based on restrictions in the adoption of abductive hypotheses. The other approach consists in removing contradiction, and is based in a transformation of contradictory programs into noncontradictory ones, guided by the reasons for contradiction.

Estimation of vegetation carbon stock in Portugal using land use/ land cover data

Dissertation submitted in partial fulfilment of the requirements for the Degree of Master of Science in Geospatial Technologies

Hox genes control the specification of global vertebral domains

Dissertação apresentada para obtenção do grau de doutor em Biologia pelo Instituto de Tecnologia Química e Biológica da Universidade Nova de Lisboa