Optimizing counterparty credit risk portfolio by reducing exposure at default variance

Rahoitusyhtiöt pitävät omaa pääomaa taseessa harvinaisen suuria markkinamuutoksia varten ja tämän pääoman määrä on ohjattu valvontaviranomaisten toimesta. Euroopassa Basel akordi antaa suuntaviivat näille säädöksille. 2007 vuoden finanssikriisin jälkeen rahoitusyhtiöt sekä valvojat ovat olleet entistä kiinnostuneempia pääoman riittävyydestä. Tutkimuksia riskistä, säädöksistä ja pääomavaateen madaltamisesta on tehty aikaisemmin, mutta tässä tutkimuksessa keskitytään vaateen jatkuvan muutoksen suuruuteen. Tutkimus sisältää hypoteettisen vastapuoliriski portfolion, jossa on mukana valuuttajohdannaisia. Tätä portfoliota simuloidaan eri tavoin, jotta nähtäisiin kuinka suuri vaikutus portfolion koostumuksella voi olla pääomavaateen varianssiin. Jos tämä muuttuja on merkittävä, pitäisikö rahoitusyhtiöiden yrittää pienentää muutosta, jotta yhtiöiden varapääoman määrää voitaisiin alentaa? Tutkimuksessa on myös haastateltu Suomen johtavia vastapuoliriski asiantuntijoita, jotta nähtäisiin rahoitusalan oma näkemys asian merkittävyydestä. Tutkimusmenetelminä toimivat haastattelut sekä numeerinen analyysi hypoteettisella portfoliolla. Kaupat tähän vastapuoliriski portfolioon on luotu 14 vuoden ajalle ja se sisältää ainoastaan valuuttajohdannaisia viidessä eri valuutassa. Riski lasketaan markkina-arvo menetelmällä, joista lasketaan VaR-mallilla tulevaisuuden riski nettoutuksen kera. Portfolion rakennetta muutetaan simuloinneissa, jotta nähtäisiin vaikutus tulevaisuuden riskeille, joita käytetään edustamaan pääomavaateen määrää ja sen vaihtelua yli ajan. Portfolioiden riskejä lasketaan myös rasituskokeiden avulla, jotta tuloksista saataisiin mahdollisimman todenmukaisia. Analyyttinen osuus tutkimuksesta näyttää sen, että tämän kaltainen optimointi on suuresti riippuvainen alkuperäisestä portfoliosta, jonka määrittää yleisesti rahoitusyhtiön myyntistrategia. Yleisesti ottaen pääomavaateen varianssin muutos voi simuloinneissa olla melko suurta, varsinkin jos mukaan huomioidaan rasitus testit, puuttuvat tuotteet sekä muut pääomavaateen laskentaan huomioitavat seikat. Haastatteluissa saatiin selville millainen optimointi voisi olla mahdollista todellisuudessa. Huomattiin myös että tämän kaltainen ajattelumalli on jo huomattu alalla ennestään. Jon Gregory jopa mainitsi, että jotkin rahoitusyhtiöt ovat enemmän kiinnostuneita muutosten pienentämisestä kuin itse pääomavaateen suuruudesta. Näyttääkin siltä, että tämän aihepiiri vaatisi entistä enemmän tutkimusta, sillä sitä ei ennestään vielä ole, ja rahoitusyhtiöt ovat jo alkaneet etsimään uusia keinoja selvitäkseen rahoitusalalla, joka on yhä entisestään kilpailullisempi.

Virus Infections in Early Childhood, Cow’s Milk Formula Exposure and Genetic Predisposition in the Development of Diabetes-Associated Autoimmunity

Varhaislapsuuden virusinfektioiden, lehmänmaitopohjaisen äidinmaitovastikeen ja geneettisen alttiuden merkitys diabetekseen liittyvän autoimmuniteetin kehittymisessä Tyypin 1 diabetes on autoimmuunisairaus, joka syntyy haiman insuliinia tuottavien beta-solujen tuhouduttua elimistön oman immuunipuolustusjärjestelmän hyökkäyksen seurauksena. Sekä perimän että ympäristötekijöiden arvellaan vaikuttavan tautiprosessiin, mutta taudin tarkkaa syntymekanismia ei tunneta. Tutkimuksen tarkoituksena oli selvittää varhaislapsuuden ympäristötekijöiden vaikutusta beta-soluautoimmuniteetin syntyyn, erityispaino tutkimuksessa oli ympäristötekijöiden yhteisvaikutuksessa sekä geneettisten riskitekijöiden ja ympäristötekijöiden vuorovaikutuksessa. Varhaislapsuudessa sairastettu sytomegalovirus- tai enterovirusinfektio ei lisännyt beta-soluautoimmuniteetin riskiä lapsilla, joilla on geneettisesti kohonnut riski sairastua tyypin 1 diabetekseen. Ennen puolen vuoden ikää sairastettu rotavirusinfektio lisäsi hieman tyypin 1 diabetekseen liittyvän autoimmuniteetin riskiä. Tarkemmassa analyysissa varhaislapsuuden enterovirusinfektio osoittautui kuitenkin autovasta-aineiden muodostumisen riskitekijäksi niiden lasten joukossa, jotka olivat saaneet lehmänmaitopohjaista äidinmaidon vastiketta ensimmäisten elinkuukausien aikana. Tämä löydös viittaa enterovirusinfektion ja lehmänmaitopohjaisen vastikkeen yhteisvaikutukseen tyypin 1 diabetekseen liittyvän autoimmuniteetin synnyssä. Löydösten mukaan PTPN22 geenin C1858T polymorfismi vaikuttaa CD4+ T solujen aktivaatioon ja proliferaatiovasteeseen, 1858T alleeliin liittyy alentunut T-soluresepto-rivälitteinen aktivaatio. 1858T alleelin kantajuuteen liittyy lisäksi lisääntynyt autovasta-aineiden ja kliinisen diabeteksen ilmaantuvuus. Tämä yhteys rajoittui yksilöihin, jotka olivat altistuneet lehmänmaitopohjaiselle vastikkeelle ennen kuuden kuukauden ikää. Tulosten mukaan sekä ympäristötekijöiden väliset yhteisvaikutukset että perimä vaikuttavat yksittäisen ympäristötekijän merkitykseen tyypin 1 diabetekseen liittyvän autoimmuniteetin synnyssä. Nämä yhteisvaikutukset ympäristötekijöiden kesken ja perimän ja ympäristötekijöiden välillä selittävät aiemmin julkaistujen tulosten ristiriittaisuutta tutkimuksissa, joissa on analysoitu vain yhden ympäristötekijän vaikutusta diabeteksen ilmaantuvuuteen.

Essays on pricing of risk and international linkage of Russian stock market

Last two decades have seen a rapid change in the global economic and financial situation; the economic conditions in many small and large underdeveloped countries started to improve and they became recognized as emerging markets. This led to growth in the amounts of global investments in these countries, partly spurred by expectations of higher returns, favorable risk-return opportunities, and better diversification alternatives to global investors. This process, however, has not been without problems and it has emphasized the need for more information on these markets. In particular, the liberalization of financial markets around the world, globalization of trade and companies, recent formation of economic and regional blocks, and the rapid development of underdeveloped countries during the last two decades have brought a major challenge to the financial world and researchers alike. This doctoral dissertation studies one of the largest emerging markets, namely Russia. The motivation why the Russian equity market is worth investigating includes, among other factors, its sheer size, rapid and robust economic growth since the turn of the millennium, future prospect for international investors, and a number of important major financial reforms implemented since the early 1990s. Another interesting feature of the Russian economy, which gives motivation to study Russian market, is Russia’s 1998 financial crisis, considered as one of the worst crisis in recent times, affecting both developed and developing economies. Therefore, special attention has been paid to Russia’s 1998 financial crisis throughout this dissertation. This thesis covers the period from the birth of the modern Russian financial markets to the present day, Special attention is given to the international linkage and the 1998 financial crisis. This study first identifies the risks associated with Russian market and then deals with their pricing issues. Finally some insights about portfolio construction within Russian market are presented. The first research paper of this dissertation considers the linkage of the Russian equity market to the world equity market by examining the international transmission of the Russia’s 1998 financial crisis utilizing the GARCH-BEKK model proposed by Engle and Kroner. Empirical results shows evidence of direct linkage between the Russian equity market and the world market both in regards of returns and volatility. However, the weakness of the linkage suggests that the Russian equity market was only partially integrated into the world market, even though the contagion can be clearly seen during the time of the crisis period. The second and the third paper, co-authored with Mika Vaihekoski, investigate whether global, local and currency risks are priced in the Russian stock market from a US investors’ point of view. Furthermore, the dynamics of these sources of risk are studied, i.e., whether the prices of the global and local risk factors are constant or time-varying over time. We utilize the multivariate GARCH-M framework of De Santis and Gérard (1998). Similar to them we find price of global market risk to be time-varying. Currency risk also found to be priced and highly time varying in the Russian market. Moreover, our results suggest that the Russian market is partially segmented and local risk is also priced in the market. The model also implies that the biggest impact on the US market risk premium is coming from the world risk component whereas the Russian risk premium is on average caused mostly by the local and currency components. The purpose of the fourth paper is to look at the relationship between the stock and the bond market of Russia. The objective is to examine whether the correlations between two classes of assets are time varying by using multivariate conditional volatility models. The Constant Conditional Correlation model by Bollerslev (1990), the Dynamic Conditional Correlation model by Engle (2002), and an asymmetric version of the Dynamic Conditional Correlation model by Cappiello et al. (2006) are used in the analysis. The empirical results do not support the assumption of constant conditional correlation and there was clear evidence of time varying correlations between the Russian stocks and bond market and both asset markets exhibit positive asymmetries. The implications of the results in this dissertation are useful for both companies and international investors who are interested in investing in Russia. Our results give useful insights to those involved in minimising or managing financial risk exposures, such as, portfolio managers, international investors, risk analysts and financial researchers. When portfolio managers aim to optimize the risk-return relationship, the results indicate that at least in the case of Russia, one should account for the local market as well as currency risk when calculating the key inputs for the optimization. In addition, the pricing of exchange rate risk implies that exchange rate exposure is partly non-diversifiable and investors are compensated for bearing the risk. Likewise, international transmission of stock market volatility can profoundly influence corporate capital budgeting decisions, investors’ investment decisions, and other business cycle variables. Finally, the weak integration of the Russian market and low correlations between Russian stock and bond market offers good opportunities to the international investors to diversify their portfolios.

Exposure to Tobacco Smoke and Markers of Subclinical Atherosclerosis in Children and Adolescents. The STRIP Study.

Background: Measurement of serum cotinine, a major metabolite of nicotine, provides a valid marker for quantifying exposure to tobacco smoke. Exposure to tobacco smoke causes vascular damage by multiple mechanisms, and it has been acknowledged as a risk factor for atherosclerosis. Multifactorial atherosclerosis begins in childhood, but the relationship between exposure to tobacco smoke and arterial changes related to early atherosclerosis have not been studied in children. Aims: The aim of the present study was to evaluate exposure to tobacco smoke with a biomarker, serum cotinine concentration, and its associations with markers of subclinical atherosclerosis and lipid profile in school-aged children and adolescents. Subjects and Methods: Serum cotinine concentration was measured using a gas chromatographic method annually between the ages 8 and 13 years in 538-625 children participating since infancy in a randomized, prospective atherosclerosis prevention trial STRIP (Special Turku coronary Risk factor Intervention Project). Conventional atherosclerosis risk factors were measured repeatedly. Vascular ultrasound studies were performed among 402 healthy 11-year-old children and among 494 adolescents aged 13 years. Results: According to serum cotinine measurements, a notable number of the school aged children and adolescents were exposed to tobacco smoke, but the exposure levels were only moderate. Exposure to tobacco smoke was associated with decreased endothelial function as measured with flow-mediated dilation of the brachial artery, decreased elasticity of the aorta, and increased carotid and aortic intima-media thickness. Longitudinal exposure to tobacco smoke was also related with increased apolipoprotein B and triglyceride levels in 13-year-old adolescents, whose body mass index and nutrient intakes did not differ. Conclusions: These findings suggest that exposure to tobacco smoke in childhood may play a significant role in the development of early atherosclerosis. Key Words: arterial elasticity, atherosclerosis, children, cotinine, endothelial function, environmental tobacco smoke, intima-media thickness, risk factors, ultrasound

Biotransformation and endocrine disruptive effects of contaminants in ringed seals - implications for monitoring and risk assessment

Marine mammals are exposed to persistent organic pollutants (POPs), which may be biotransformed to metabolites some of which are highly toxic. Both POPs and their metabolites may lead to adverse health effects, which have been studied using various biomarkers. Changes in endocrine homeostasis have been suggested to be sensitive biomarkers for contaminant-related effects. The overall objective of this doctoral thesis was to investigate biotransformation capacity of POPs and their potential endocrine disruptive effects in two contrasting ringed seal populations from the low contaminated Svalbard area and from the highly contaminated Baltic Sea. Biotransformation capacity was studied by determining the relationships between congener-specific patterns and concentrations of polychlorinated biphenyls (PCBs), organochlorine pesticides (OCPs), polybrominated diphenyl ethers (PBDEs) and their hydroxyl (OH)- and/or methylsulfonyl (MeSO₂)-metabolites, and catalytic activities of hepatic xenobiotic-metabolizing phase I and II enzymes. The results suggest that the biotransformation of PCBs, PBDEs and toxaphenes in ringed seals depends on the congener-specific halogen-substitution pattern. Biotransformation products detected in the seals included OH-PCBs, MeSO₂-PCBs and –DDE, pentachlorophenol, 4-OHheptachlorostyrene, and to a minor extent OH-PBDEs. The effects of life history state (moulting and fasting) on contaminant status and potential biomarkers for endocrine disruption, including hormone and vitamin homeostasis, were investigated in the low contaminated ringed seal population from Svalbard. Moulting/fasting status strongly affected thyroid, vitamin A and calcitriol homeostasis, body condition and concentrations of POPs and their OH-metabolites. In contrast, moulting/fasting status was not associated with variations in vitamin E levels. Endocrine disruptive effects on multiple endpoints were investigated in the two contrasting ringed seal populations. The results suggest that thyroid, vitamin A and calcitriol homeostasis may be affected by the exposure of contaminants and/or their metabolites in the Baltic ringed seals. Complex and non-linear relationships were observed between the contaminant levels and the endocrine variables. Positive relationships between circulating free and total thyroid hormone concentration ratios and OH-PCBs suggest that OH-PCBs may mediate the disruption of thyroid hormone transport in plasma. Species differences in thyroid and bone-related effects of contaminants were studied in ringed and grey seals from low contaminated references areas and from the highly contaminated Baltic Sea. The results indicate that these two species living at the same environment approximately at the same trophic level respond in a very different way to contaminant exposure. The results of this thesis suggest that the health status of the Baltic ringed seals has still improved during the last decade. PCB and DDE levels have decreased in these seals and the contaminant-related effects are different today than a decade ago. The health of the Baltic ringed seals is still suggested to be affected by the contaminant exposure. At the present level of the contaminant exposure the Baltic ringed seals seem to be at a zone where their body is able to compensate for the contaminant-mediated endocrine disruption. Based on the results of this thesis, several recommendations that could be applied on monitoring and assessing risk for contaminant effects are provided. Circulating OH-metabolites should be included in monitoring and risk assessment programs due to their high toxic potential. It should be noted that endogenous variables may have complex and highly variable responses to contaminant exposure including non-linear responses. These relationships may be further confounded by life history status. Therefore, it is highly recommended that when using variables related to endocrine homeostasis to investigate/monitor or assess the risk of contaminant effects in seals, the life history status of the animal should be carefully taken into consideration. This applies especially when using thyroid, vitamin A or calcitriolrelated parameters during moulting/fasting period. Extrapolations between species for assessing risk for contaminant effects in phocid seals should be avoided.

Homogeneous Assays for Simplified Screening of HLA-conferred Genetic Disease Risk

The increasing incidence of type 1 diabetes has led researchers on a quest to find the reason behind this phenomenon. The rate of increase is too great to be caused simply by changes in the genetic component, and many environmental factors are under investigation for their possible contribution. These studies require, however, the participation of those individuals most likely to develop the disease, and the approach chosen by many is to screen vast populations to find persons with increased genetic risk factors. The participating individuals are then followed for signs of disease development, and their exposure to suspected environmental factors is studied. The main purpose of this study was to find a suitable tool for easy and inexpensive screening of certain genetic risk markers for type 1 diabetes. The method should be applicable to using whole blood dried on sample collection cards as sample material, since the shipping and storage of samples in this format is preferred. However, the screening of vast sample libraries of extracted genomic DNA should also be possible, if such a need should arise, for example, when studying the effect of newly discovered genetic risk markers. The method developed in this study is based on homogeneous assay chemistry and an asymmetrical polymerase chain reaction (PCR). The generated singlestranded PCR product is probed by lanthanide-labelled, LNA (locked nucleic acid)-spiked, short oligonucleotides with exact complementary sequences. In the case of a perfect match, the probe is hybridised to the product. However, if even a single nucleotide difference occurs, the probe is bound instead of the PCR product to a complementary quencher-oligonucleotide labelled with a dabcyl-moiety, causing the signal of the lanthanide label to be quenched. The method was applied to the screening of the well-known type 1 diabetes risk alleles of the HLA-DQB1 gene. The method was shown to be suitable as an initial screening step including thousands of samples in the scheme used in the TEDDY (The Environmental Determinants of Diabetes in the Young) study to identify those individuals at increased genetic risk. The method was further developed into dry-reagent form to allow an even simpler approach to screening. The reagents needed in the assay were in dry format in the reaction vessel, and performing the assay required only the addition of the sample and, if necessary, water to rehydrate the reagents. This allows the assay to be successfully executed even by a person with minimal laboratory experience.

The probabilistic risk analysis of external hazards of an interim storage for spent nuclear fuel

Tässä diplomityössä tehtiin Olkiluodon ydinvoimalaitoksella sijaitsevan käytetyn ydinpolttoaineen allasvarastointiin perustuvan välivaraston todennäköisyysperustainen ulkoisten uhkien riskianalyysi. Todennäköisyysperustainen riskianalyysi (PRA) on yleisesti käytetty riskien tunnistus- ja lähestymistapa ydinvoimalaitoksella. Työn tarkoituksena oli laatia täysin uusi ulkoisten uhkien PRA-analyysi, koska Suomessa ei ole aiemmin tehty vastaavanlaisia tämän tutkimusalueen riskitarkasteluja. Riskitarkastelun motiivina ovat myös maailmalla tapahtuneiden luonnonkatastrofien vuoksi korostunut ulkoisten uhkien rooli käytetyn ydinpolttoaineen välivarastoinnin turvallisuudessa. PRA analyysin rakenne pohjautui tutkimuksen alussa luotuun metodologiaan. Analyysi perustuu mahdollisten ulkoisten uhkien tunnistamiseen pois lukien ihmisen aikaansaamat tahalliset vahingot. Tunnistettujen ulkoisten uhkien esiintymistaajuuksien ja vahingoittamispotentiaalin perusteella ulkoiset uhat joko karsittiin pois tutkimuksessa määriteltyjen karsintakriteerien avulla tai analysoitiin tarkemmin. Tutkimustulosten perusteella voitiin todeta, että tiedot hyvin harvoin tapahtuvista ulkoisista uhista ovat epätäydellisiä. Suurinta osaa näistä hyvin harvoin tapahtuvista ulkoisista uhista ei ole koskaan esiintynyt eikä todennäköisesti koskaan tule esiintymään Olkiluodon vaikutusalueella tai edes Suomessa. Esimerkiksi salaman iskujen ja öljyaltistuksen roolit ja vaikutukset erilaisten komponenttien käytettävyyteen ovat epävarmasti tunnettuja. Tutkimuksen tuloksia voidaan pitää kokonaisuudessaan merkittävinä, koska niiden perusteella voidaan osoittaa ne ulkoiset uhat, joiden vaikutuksia olisi syytä tutkia tarkemmin. Yksityiskohtaisempi tietoisuus hyvin harvoin esiintyvistä ulkoisista uhista tarkentaisi alkutapahtumataajuuksien estimaatteja.

Work-related crisis exposure : psychological trauma and PTSD in news journalists

I avhandlingen undersöktes hur journalister själva reagerar efter att ha arbetat med en plötslig krissituation, samt vilka faktorer som kan bidra till en förhöjd risk för allvarliga långsiktiga stressymptom. Temat undersöktes (1) genom att se på hur journalisters tidigare erfarenheter av krisuppdrag och traumatiska upplevelser i privatlivet var relaterade till stressymptom (posttraumatiskt stressyndrom, sekundär traumatisk stress, depression och utmattningssyndrom), och (2) genom att studera riskfaktorer i en identifierad typ av kris, de finländska skolskjutningarna 2007-08. Avhandlingens resultat baserades på enkätsvar från finländska nyhetsjournalister (N = 503) och intervjuer med personer som jobbat på plats vid skolskjutningar (N = 28). En klar majoritet av journalisterna hade inte allvarliga långsiktiga stressymptom vid tiden för undersökningen. De som varit på ett tidigare krisuppdrag där man bevittnat många obehagliga detaljer hade fler allvarliga stressymptom. En annan riskfaktor var att ha ett förflutet med fler traumatiska händelser i privatlivet. Bland de som arbetat med skolskjutningar var starka kortsiktiga reaktioner, t.ex. hjälplöshet och chock, relativt vanliga. Reaktionerna hörde ändå oftast till den normala återhämtningsprocessen, och ledde inte till en långsiktig försämring av måendet. Journalister som i hög grad identifierade sig med krisen, t.ex. personer med egna barn, hade större risk för att drabbas av allvarliga symptom på lång sikt. Detsamma gällde de som på plats upplevt journalistiska etiska dilemman, t.ex. att beordras av överordnade till uppdrag som gick emot egna principer. För att förebygga psykisk stress bland journalister är det viktigt att inom branschen sprida kunskap om stressreaktioner och utveckla rekommendationer för etisk krisjournalistik. Därmed kan journalister få bättre verktyg för att minimera risken att via sitt yrkesutövande orsaka ytterligare skada åt krisdrabbade.

Foreign exchange exposure management in a fuel procurement company operating in the commodity markets

Fluctuating commodity prices, foreign exchange rates and interest rates are causing changes in cash flows, market value and the companies’ profit. Most of the commodities are quoted in US dollar. Companies with non-dollar accounting face a double risk in the form of the commodity price risk and foreign exchange risk. The objective of this Master’s thesis is to find out how companies under commodity should manage foreign exchange exposure. The theoretical literature is based on foreign exchange risk, commodity risk and foreign exchange exposure management. The empirical research is done by using constructive modelling of a case company in the oil industry. The exposure is model with foreign exchange net cash flow and net working capital. First, the factors affecting foreign exchange exposure in case company are analyzed, then a model of foreign exchange exposure is created. Finally, the models are compared and the most suitable method is defined. According to the literature, foreign exchange exposure is the foreign exchange net cash flow. However, the results of the study show that foreign exchange risk can be managed also with net working capital. When the purchases, sales and storage are under foreign exchange risk, the best way to manage foreign exchange exposure is with combined net cash flow and net working capital method. The foreign exchange risk policy of the company defines the appropriate way to manage foreign exchange risk.