Credit risk of interest rate swaps : a comparative study of CIR and Monte Carlo simulation approach

This paper compares the credit risk profile for two types of model, the Monte Carlo model used in the existing literature, and the Cox, Ingersoll and Ross (CIR) model. Each of the profiles has a concave or hump-backed shape, reflecting the amortisation and diffusion effects. However, the CIR model generates significantly different results. In addition, we consider the sensitivity of these models of credit risk to initial interest rates, volatility, maturity, kappa and delta. The results show that the sensitivities vary across the models, and we explore the meaning of that variation.

Modeling volatility and changes in the swap spread

We investigate the determinants of changes in U.S. interest rate swap spreads using a model that explicitly allows for volatility interactions between swaps of different terms to maturity. Changes in the swap spread are found to be positively related to interest rate volatility, to changes in the default risk premium in the corporate bond market, and to changes in the liquidity premium for government securities. Swap spread changes are negatively related to changes in the level of interest rates and changes in the slope of the term structure. We also find that there is a strong and significant volatility interaction among spreads for swaps of different maturities and that the process for the conditional variance of the spread is highly persistent across all maturities.

Girls back off mathematics again : the views and experiences of girls in computer based mathematics

The views and experiences of girls in two co-educational mathematics classrooms in which computers were regularly used were researched. Data were collected by observation and videotaping of lessons, questionnaire, and interviews of students and the teachers. In this paper case studies of six girls are presented. Their ‘stories’ reveal a diversity of experiences and views and multiple gender identities. High achieving girls persisted as “outsiders within,” other girls “backed off”, and exceptional girls challenged gender stereotypes. Implications for social justice in mathematics in the age of the super highway are discussed.

The role of board independence in mitigating agency problem II in Australian family firms

We investigate the impact of board independence on earnings management on a sample of family controlled firms listed on the Australian Securities Exchange (ASX). Using panel data over the period 2000–2004, we find evidence of earnings management among family controlled firms in Australia, an environment of high investor protection and private benefits of control. Findings show that a higher proportion of independent directors on boards is effective in reducing earnings management, thereby mitigating agency problems associated with entrenchment and expropriation in family firms. We also find that managers of family firms are less aggressive in managing earnings via discretionary long-term accruals compared to non-family firms.

The volume and volatility relation in the Australian stock market

The thesis studies the volume-volatility relation in the Australian Securities Market. It is concluded that the number of trades is the most important variable driving realized volatility. The average trade size is significant but its explanatory power is only trivial. Order imbalance does not drive volatility in the Australian market.

Regional integration 2.0 : facilitating regional integration and development with collaborative technologies

The current global economic instability and the vulnerability of small nations provide the impetus for greater integration between the countries of the South Pacific region. This exercise is critical for their survival. Past efforts of regional integration in the South Pacific have mostly failed. However, today’s IT collaborative capabilities provide the opportunity to develop a shared IT infrastructure to facilitate integration in the South Pacific. In developing an IT-backed model of regional integration, this study identifies and reports on the antecedents of the current stage for integration in the Pacific. We conducted interviews with twenty five individuals from various sectors and find that while most respondents were optimistic about the potential of IT-backed regional integration, significant challenges exists. The study identifies and discusses these challenges providing policy implications to stakeholders in the regional integration process. The findings will assist in suggesting a model of regional integration 2.0 for the Pacific region.

The direct costs of raising external equity capital for US REIT IPOs

Purpose – The purpose of this paper is to investigate the total direct costs of raising external equity capital for US real estate investment trust (REIT) initial public offerings (IPOs).

Design/methodology/approach – The study provides recent evidence on total direct costs for a comprehensive dataset of 125 US REIT IPOs from 1996 until June 2010. A multivariate OLS regression is performed to determine significant factors influencing the level of total direct costs and also underwriting fees and non-underwriting direct expenses.

Findings – The study finds economies of scale in total direct costs, underwriting fees and non-underwriting expenses. The equally (value) weighted average total direct costs are 8.33 percent (7.52 percent), consisting of 6.49 percent (6.30 percent) underwriting fees and 1.87 percent (1.22 percent) non-underwriting direct expenses. The study finds a declining trend of total direct costs for post 2000 IPOs which is attributed to the declining trend in both underwriting fees and non-underwriting direct expenses. Offer size is a critical determinant for both total direct costs and their individual components and inversely affects these costs. The total direct costs are found significantly higher for equity REITs than for mortgage REITs and are also significantly higher for offers listed in New York Stock Exchange (NYSE). Underwriting fees appear to be negatively influenced by the offer price, the number of representative underwriters involved in the issue, industry return volatility and the number of potential specific risk factors but positively influenced by prior quarter industry dividend yield and ownership limit identified in the prospectus. After controlling for time trend, the paper finds REIT IPOs incur higher non-underwriting direct expenses in response to higher industry return volatility prior to the offer.

Originality/value – This paper adds to the international REIT IPO literature by exploring a number of new influencing factors behind total direct costs, underwriting fees and non-underwriting direct expenses. The study includes data during the recent GFC period.

Do financial reforms improve the performance of financial holding companies? The case of Taiwan

We examine the performance of financial holding companies (FHCs) in Taiwan after the financial reform that removes the separation of banking, securities, insurance, and other financial services. Using data envelopment analysis, we find that FHCs fail to improve technical efficiencies in the post-reform era. They also do not outperform independent commercial banks after the financial reform. Lower technical efficiency caused by excess operating expenses appears to be the primary source of inefficiency. While scale efficiency may improve as FHCs grow larger, the benefits are marginal and insufficient to offset the potential costs of organizational diseconomies. Our findings suggest that increasing the size and scope of financial activities alone do not necessarily improve the performance of financial firms.

Review of measurements in schools to improve IEQ

An Australian research facility, MABEL (the Mobile Architecture and Built Environment Laboratory) measured several school classrooms for their indoor environmental performance (IEQ) performance. This paper is a reporting of a case study, highlighting the processed measurement of a classroom and its findings. A review of the literature, also reveals particular sectors of IEQ in schools that are worthy of measurement. A primary intention here is to determine the type of IEQ measurements and their evaluation methods together with their corresponding instrumentation. A secondary intention is to highlight particular IEQ discrepancies in existing school classroom design resulting from these case study measurements, suggesting construction and operational conditioning improvements.In particular this research reveals international research on the subject of IEQ in school buildings and confirms the usefulness, urgency and necessity of IEQ measurements, world wide, in this area. As most of the existing literature on the subject seems to fall short of acknowledging all sectors of IEQ, this paper would like to address the importance of multiple IEQ parameters, experienced through on-site measurement case studies. It is suggested that the existing literature intends to target a specific IEQ sector or parameter, predetermining its effect on student absenteeism or reduced performance. In contrast to this, this paper would like to acknowledge the interactive effects of an IEQ index (standard) in general. One of the reasons for this are that such an index still appears to remain in the developmental stages.Various sectors of IEQ measurements, as measured with the MABEL facility, are demonstrated in this paper. They illustrate a cross-section of typical classroom evidence-based problems backed by measurement. A literature review confirms that similar problems in school buildings are evident in other parts of Australia as well as throughout the world, in identical and different climates. A holistic IEQ measurement acknowledges that there may be several outstanding, as well as poor IEQ parameters within the same classroom. Solutions to these poor IEQ results may be remedied, yet, it is the measurement that highlights the periods, degree and extent to which these problems occur. It is suggested here that a holistic approach to IEQ is required and that the development of its measurement standards and reporting are desperately needed.

Costs and benefits of mandatory auditing of for-profit private and not-for-profit companies in Australia

This paper addresses the paucity of research surrounding the mandatory auditing of for-profit private and not-for-profit companies in Australia. We document the various mandatory auditing provisions under the Corporations Act and identify over 22 000 companies that lodge audited accounts with the regulator under federal law. In 2011, 6339 large proprietary companies, 186 small proprietary companies, 2797 foreign-owned companies, 3985 unlisted public companies and 8404 public companies limited by guarantee had an obligation under the Corporations Act to lodge audited accounts. While large proprietary and foreign-owned companies have an option to apply to the Australian Securities and Investment Commission for audit relief, we estimate that less than 10% are granted audit exemption. We document that since 1995 an additional 1500 large proprietary companies that should have lodged under the size provisions of the Corporations Act have been granted exemption from doing so (i.e., grandfathered), although these firms appear to be subject to an annual audit even though they do not lodge accounts. We estimate the costs and discuss the potential public interest and firm-level benefits associated with the mandatory auditing of for-profit private and not-for-profit companies in Australia.

Climate change impacts : challenges for aquaculture

In spite of all the debates and controversies, a global consensus has been reached that climate change is a reality and that it will impact, in diverse manifestations that may include increased global temperature, sea level rise, more frequent occurrence of extreme weather events, change in weather patterns, etc., on food production systems, global biodiversity and overall human well being. Aquaculture is no exception. The sector is characterized by the fact that the organisms cultured, the most diverse of all farming systems and in the number of taxa farmed, are all poikilotherms. It occurs in fresh, brackish and marine waters, and in all climatic regimes from temperate to tropical. Consequently, there are bound to be many direct impacts on aquatic farming systems brought about by climate change. The situation is further exacerbated by the fact that certain aquaculture systems are dependent, to varying degrees, on products such as fishmeal and fish oil, which are derived from wild-caught resources that are subjected to reduction processes. All of the above factors will impact on aquaculture in the decades to come and accordingly, the aquatic farming systems will begin to encounter new challenges to maintain sustainability and continue to contribute to the human food basket. The challenges will vary significantly between climatic regimes. In the tropics, the main challenges will be to those farming activities that occur in deltaic regions, which also happen to be hubs of aquaculture activity, such as in the Mekong and Red River deltas in Viet Nam and the Ganges-Brahamaputra Delta in Bangladesh. Aquaculture in tropical deltaic areas will be mostly impacted by sea level rise, and hence increased saline water intrusion and reduced water flows, among others. Elsewhere in the tropics, inland cage culture and other aquaculture activities could be impacted by extreme weather conditions, increased upwelling of deoxygenated waters in reservoirs, etc., requiring greater vigilance and monitoring, and even perhaps readiness to move operations to more conducive areas in a waterbody. Indirect impacts of climate change on tropical aquaculture could be manifold but are perhaps largely unknown. The reproductive cycles of a great majority of tropical species are dependent on monsoonal rain patterns, which are predicted to change. Consequently, irrespective of whether cultured species are artificially propagated or not, changes in reproductive cycles will impact on seed production and thereby the whole grow-out cycle and modus operandi of farm activities. Equally, such impacts will be felt on the culture of those species that are based on natural spat collection, such as that of many cultured molluscs. In the temperate region, global warming could raise temperatures to the upper tolerance limits of some cultured species, thereby making such culture systems vulnerable to high temperatures. New or hitherto non-pathogenic organisms may become virulent with increases in water temperature, confronting the sector with new, hitherto unmanifested and/or little known diseases. One of the most important indirect effects of climate change will be driven by impacts on production of those fish species that are used for reduction, and which in turn form the basis for aquaculture feeds, particularly for carnivorous species. These indirect effects are likely to have a major impact on some key aquaculture practices in all climatic regimes. Limitations of supplies of fishmeal and fish oil and resulting exorbitant price hikes of these commodities will lead to more innovative and pragmatic solutions on ingredient substitution for aquatic feeds, which perhaps will be a positive result arising from a dire need to sustain a major sector. Aquaculture has to be proactive and start addressing the need for adaptive and mitigative measures. Such measures will entail both technological and socio-economic approaches. The latter will be more applicable to small-scale farmers, who happen to be the great bulk of producers in developing countries, which in turn constitute the “backbone’ of global aquaculture. The sociological approaches will entail the challenge of addressing the potential climate change impacts on small farming communities in the most vulnerable areas, such as in deltaic regions, weighing the most feasible adaptive options and bringing about the policy changes required to implement these adaptive measures economically and effectively. Global food habits have changed over the years. We are currently in an era where food safety and quality, backed up by ecolabelling, are paramount; it was not so 20 years ago. In the foreseeable future, we will move into an era where consumer consciousness will demand that farmed foods of every form will have to include in their labeled products the green house gas (GHG) emissions per unit of produce. Clearly, aquaculture offers an opportunity to meet these aspirations. Considering that about 70 percent of all finfish and almost 100 percent of all molluscs and seaweeds are minimally GHG emitting, it is possible to drive aquaculture as the most GHG-friendly food source. The sector could conform to such demands and continue to meet the need for an increasing global food fish supply. However, to achieve this, a paradigm shift in our seafood consumption preferences will be needed.

Reviving the role of regulators in Bangladesh capital market

The capital market is visualised as a tool for economic development through mobilisation of scattered resources and their allocation to appropriate areas. The liquidity, solvency and efficiency of the economic system of a country can be better accomplished by capital market, when the banks and financial institutions of the country are reluctant to provide long-term and medium term resources for industrialisation and privatisation.

Banks have been traditionally major sources of all types of credits particularly industrial credits. Not only the banks these days are restricted to finance long-term credits due to short-term nature of the deposit- base of these banks, but also are struggling to overcome their liquidity problems. On the other hand, the development of financial institutions, the traditional suppliers of the long-term funds for private industry, is lying dormant due to the problems of profitability, liquidity and solvency of these institutions. Under this circumstances, the capital market beckons as the only major source of finance for industrialisation and privatisation. But the existing state of the capital market is hardly in a position to play as the mobiliser of resources for economic development.

Therefore, the country`s capital market needs structural change as well as proper regulation which are likely to improve the confidence of investors-both local and foreign and to boost the functions of capital market as well. The major regulators in Bangladesh capital market are Securities and Exchange Commission (SEC), Stock Exchanges, Registrar of Joint Stock Companies (RJSC) and ICB. In addition, the government has recently given permission to set up merchant banks to provide their support towards the growth, development and consolidation of capital market.

Novel polymer-ceramic composites for protection against ballistic fragments

For the first time, internally reinforced aggregate polymer ceramic composites were evaluated against fragment simulating projectiles (FSPs) of various calibers to investigate their ballistic impact response. Samples were prepared by mechanically mixing B4C and cBN over a range of ratios and combinations with either thermosetting phenolic or epoxy resin and aramid pulp. Dry mixtures were then molded in a closed die using a heated platen press. The resulting tiles were then mounted as ‘‘strike faces’’ to an aramid backing material using an epoxy resin. Backed targets were tested in a fully instrumented firing range against 5.56 mm FSPs to test ballistic limit. A further series of tests using 7.62, 12.5, and 20 mm FSPs was conducted to examine round deformation across a range of fragments calibers. Round deformations were measured after impact and plotted against shot velocity. It was found that the polymer ceramic composite materials were effective round deformers and, like sintered ceramic strike faces, demonstrated improved ballistic performance at an equivalent areal density and impressive multihit capability.

Nest site selection by sea turtles

The distribution of 38 nests of loggerhead turtles (Caretta caretta) on beaches on Sanibel and Captiva islands, south-western Florida (26°26'N 82°16'W), and of 70 first digging attempts by green turtles (Chelonia mydas) on Ascension Island (7°57'S 14°22'W), was quantified. For loggerhead turtles on Sanibel and Captiva, nests were clumped close to the border between the open sand and the supra-littoral vegetation that backed the beaches. This spatial pattern of nests was closely reproduced by assuming simply that turtles crawled a random distance above the most recent high water line prior to digging. In contrast, green turtles on Ascension Island clumped their first digging attempts on the uneven beach above the springs high water line, crawling up to 80 m to reach this beach zone.

International housing market analysis based on housing commencements

Additions to the aggregate housing stock are a broad measure of the state of an economy and overall level of confidence in a particular region over a designated period. This is due to the direct and indirect effect (e.g. employment in the housing construction industry) upon on the local economy and is linked to the confidence of local households in the future direction of housing investment, the level of housing affordability by households as related to employment levels and the relationship between supply and demand in each region. Another consideration is the ability of the government to monitor and successfully intervene in the operation of the household market (e.g. mortgage interest rates) with the intent of restricting an over-supply situation which may take years to fully recover. The analysis in this section examines new housing commencements for Scotland, Australia, USA and Canada over an extended time period with the specific focus placed on the periods before, during and after the high profile global financial crisis in 2007-2008. The graph in Figure 1 was adapted from data sourced from The Scottish Government (2013) and covers the 15-year period between 1998 and 2012. With the exception of 1999 there were been relatively few years with substantial additions to the housing market. However, the effect of the GFC can clearly be observed post 2007 although by 2012 there was relatively change from the previous year.