Heterogeneity and the formation of risk - sharing coalitions

We offer a new explanation of partial risk sharing based on coalition formation and segmentation of society in a risky environment, without assuming limited commitment and imperfect information. Heterogenous individuals in a society freely choose with whom they will share risk. A partition belonging to the core of the membership game obtains. Perfect risk sharing does not necessarily arise. Focusing on mutual insurance rule and assuming that individuals only differ with respect to risk, we show that the core partition is homophily-based. The distribution of risk affects the number and size of these coalitions. Individuals may pay a lower risk premium in riskier societies. A higher heterogeneity in risk leads to a lower degree of risk sharing. We discuss how the endogenous partition of society into risk-sharing coalitions may shed light on empirical evidence on partial risk sharing. The case of heterogenous risk aversion leads to similar results.

Option pricing in market models driven by telegraph processes with jumps

Esta tesis está dividida en dos partes: en la primera parte se presentan y estudian los procesos telegráficos, los procesos de Poisson con compensador telegráfico y los procesos telegráficos con saltos. El estudio presentado en esta primera parte incluye el cálculo de las distribuciones de cada proceso, las medias y varianzas, así como las funciones generadoras de momentos entre otras propiedades. Utilizando estas propiedades en la segunda parte se estudian los modelos de valoración de opciones basados en procesos telegráficos con saltos. En esta parte se da una descripción de cómo calcular las medidas neutrales al riesgo, se encuentra la condición de no arbitraje en este tipo de modelos y por último se calcula el precio de las opciones Europeas de compra y venta.

Foreign perception of sovereign risk : an event study of the colombian armed conflict

Este paper estudia la relación entre algunos de los eventos más importantes del conflicto colombiano con la percepción extranjera de riesgo soberano, medido por los Credit Default Swaps (CDS) de los bonos del Gobierno Colombiano. Usando dos metodologías relativamente recientes, yo estimo el efecto causal de los eventos de conflicto ampliamente cubierto por los medios internacionales. En primer lugar construyo un grupo de control sintético que funciona como contra factual de la serie real de los CDS colombianos pero en ausencia de eventos de conflicto. Segundo, estimo el efecto acumulado del evento bajo la metodología de retornos anormales acumulados. Los resultados sugieren que los efectos de los eventos de conflicto sobre la percepción extranjera de riesgo soberano dependen de las especificaciones de cada evento.

Modelo telegráfico de valoración de opciones

En este trabajo construimos un modelo de mercado financiero basado en un proceso telegráfico más un proceso de saltos para la valoración de opciones Europeas. Vamos a asumir que el tamaño de los saltos es constante y después que es aleatorio, en ambos casos estos saltos ocurren cuando la tendencia del mercado cambia. Estos modelos capturan la dinámica del mercado en periodos con presencia de ciclos financieros. Mostraremos la estructura del conjunto de medidas neutrales al riesgo, además, de fórmulas explícitas para los precios de las opciones Europeas de venta y compra.

Los conceptos de salud financiera, riesgo y epidemiología en los estados financieros de las compañías del sector de extracción de petróleo crudo y gas natural en Colombia

El presente proyecto tiene como objeto identificar cuáles son los conceptos de salud, enfermedad, epidemiología y riesgo aplicables a las empresas del sector de extracción de petróleo y gas natural en Colombia. Dado, el bajo nivel de predicción de los análisis financieros tradicionales y su insuficiencia, en términos de inversión y toma de decisiones a largo plazo, además de no considerar variables como el riesgo y las expectativas de futuro, surge la necesidad de abordar diferentes perspectivas y modelos integradores. Esta apreciación es pertinente dentro del sector de extracción de petróleo y gas natural, debido a la creciente inversión extranjera que ha reportado, US$2.862 millones en el 2010, cifra mayor a diez veces su valor en el año 2003. Así pues, se podrían desarrollar modelos multi-dimensional, con base en los conceptos de salud financiera, epidemiológicos y estadísticos. El termino de salud y su adopción en el sector empresarial, resulta útil y mantiene una coherencia conceptual, evidenciando una presencia de diferentes subsistemas o factores interactuantes e interconectados. Es necesario mencionar también, que un modelo multidimensional (multi-stage) debe tener en cuenta el riesgo y el análisis epidemiológico ha demostrado ser útil al momento de determinarlo e integrarlo en el sistema junto a otros conceptos, como la razón de riesgo y riesgo relativo. Esto se analizará mediante un estudio teórico-conceptual, que complementa un estudio previo, para contribuir al proyecto de finanzas corporativas de la línea de investigación en Gerencia.

Modelación estocástica y trading algorítmico del spread entre acciones mediante procesos de reversión a la media

Las estrategias de inversión pairs trading se basan en desviaciones del precio entre pares de acciones correlacionadas y han sido ampliamente implementadas por fondos de inversión tomando posiciones largas y cortas en las acciones seleccionadas cuando surgen divergencias y obteniendo utilidad cerrando la posición al converger. Se describe un modelo de reversión a la media para analizar la dinámica que sigue el diferencial del precio entre acciones ordinarias y preferenciales de una misma empresa en el mismo mercado. La media de convergencia en el largo plazo es obtenida con un filtro de media móvil, posteriormente, los parámetros del modelo de reversión a la media se estiman mediante un filtro de Kalman bajo una formulación de estado espacio sobre las series históricas. Se realiza un backtesting a la estrategia de pairs trading algorítmico sobre el modelo propuesto indicando potenciales utilidades en mercados financieros que se observan por fuera del equilibrio. Aplicaciones de los resultados podrían mostrar oportunidades para mejorar el rendimiento de portafolios, corregir errores de valoración y sobrellevar mejor periodos de bajos retornos.

On the design of education conditional cash transfer programs and non education outcomes: the case of teenage pregnancy

We investigate the effect of education Conditional Cash Transfer programs (CCTs) on teenage pregnancy. Our main concern is with how the size and sign of the effect may depend on the design of the program. Using a simple model we show that an education CCT that conditions renewal on school performance reduces teenage pregnancy; the program can increase teenage pregnancy if it does not condition on school performance. Then, using an original data base, we estimate the causal impact on teenage pregnancy of two education CCTs implemented in Bogot´a (Subsidio Educativo, SE, and Familias en Acci´on, FA); both programs differ particularly on whether school success is a condition for renewal or not. We show that SE has negative average effect on teenage pregnancy while FA has a null average effect. We also find that SE has either null or no effect for adolescents in all age and grade groups while FA has positive, null or negative effects for adolescents in different age and grade groups. Since SE conditions renewal on school success and FA does not, we can argue that the empirical results are consistent with the predictions of our model and that conditioning renewal of the subsidy on school success crucially determines the effect of the subsidy on teenage pregnancy

Ownership structure and risk at Colombian banks

The separation between ownership and the control of capital in banks generates differences in the preferences for risk among shareholders and the manager. These differences could imply a corporate governance problem in banks with a dispersed ownership, since owners fail to exert control in the allocation of capital. In this paper we examine the relationship between the ownership structure and risk for Colombian banks. Our results suggest that a high ownership concentration leads to higher levels of risk.

Unemployment insurance in the presence of an informal sector

We study the effect of UI benefits in a typical developing country where the informal sector is sizeable and persistent. In a partial equilibrium environment, ruling out the macroeconomic consequences of UI benefits, we characterize the stationary equilibrium of an economy where policyholders may be employed in the formal sector, short-run unemployed receiving UI benefits or long-run unemployed without UI benefits. We perform comparative static exercises to understand how UI benefits affect unemployed worker´s effort to secure a formal job, their labor supply in the informal sector and leisure time. Our model reveals that an increase in UI benefits generates two opposing effects for the short-run unemployed. First, since search efforts cannot be monitored it generates moral hazard behaviours that lower effort. Second, it generates an income effect as it reduces the marginal cost of searching for a formal job and increases effort.The overall effect is ambiguous and depends on the relative strength of these two effects. Additionally, we show that an increase in UI benefits increases the efforts of long-run unemployed workers. We provide a simple simulation exercise which suggests that the income effect pointed out is not necessarily of second-order importance in comparison with moral hazard strength. This result softens the widespread opinion, usually based on the microeconomic/partial equilibrium argument that the presence of dual labor markets is an obstacle to providing UI in developing countries.

Competition between HMO and PPO: A Two-Sided Market Approach

We set-up a two-sided market framework to model competition between a Prefered Provider Organization (PPO) and a Health Maintenance Organization (HMO). Both health plans compete to attract policyholderson one side and providers on the other side. The PPO, which is characterized by a higher diversity of providers, attracts riskier policyholders. Our two-sided framework allows to examine the consequences of this risk segmentation on the providers’ side, especially in terms of remuneration. The outcome of competition mainly depends on two effects: a demand effect, influenced by the value put by policyholders on providers access and an adverse selection effect, captured by the characteristics of the health risk distribution. If the adverse selection effect is too strong, the HMO gets a higher profit in equilibrium. On the contrary, if the demand effect dominates, the PPO profit is higher in spite of the unfavorable risk segmentation. We believe that our model, by highlighting the two-sided market structure of the health plans’ competition, provides new insights to understand the increase in the PPOs’ market share observed during the last decade in the US.

Investment in transport capacity and regulation of regional monopolies in natural gas commodity markets

This paper develops a model of the regulator-regulated firm relationship in a regional natural gas commodity market which can be linked to a competitive market by a pipeline. We characterize normative policies under which the regulator, in addition to setting the level of the capacity of the pipeline, regulates the price of gas, under asymmetric information on the firm’s technology, and may (or may not) operate (two-way) transfers between consumers and the firm. We then focus on capacity and investigate how its level responds to the regulator’s taking account of the firm’s incentive compatibility constraints. The analysis yields some insights on the role that transport capacity investments may play as an instrument to improve the efficiency of geographically isolated markets.

Does uncertainty cause inertia in decision making? An experimental study of the role of regret aversion and indecisiveness

Previous research has shown that often there is clear inertia in individual decision making---that is, a tendency for decision makers to choose a status quo option. I conduct a laboratory experiment to investigate two potential determinants of inertia in uncertain environments: (i) regret aversion and (ii) ambiguity-driven indecisiveness. I use a between-subjects design with varying conditions to identify the effects of these two mechanisms on choice behavior. In each condition, participants choose between two simple real gambles, one of which is the status quo option. I find that inertia is quite large and that both mechanisms are equally important.