Contagion in financial networks: a network theory and agent-based approaches to modeling the spread of risk in financial systems

Esta dissertação estuda a propagação de crises sobre o sistema financeiro. Mais especi- ficamente, busca-se desenvolver modelos que permitam simular como um determinado choque econômico atinge determinados agentes do sistema financeiro e apartir dele se propagam, transformando-se em um problema sistêmico. A dissertação é dividida em dois capítulos,além da introdução. O primeiro capítulo desenvolve um modelo de propa- gação de crises em fundos de investimento baseado em ciência das redes.Combinando dois modelos de propagação em redes financeiras, um simulando a propagação de perdas em redes bipartites de ativos e agentes financeiros e o outro simulando a propagação de perdas em uma rede de investimentos diretos em quotas de outros agentes, desenvolve-se um algoritmo para simular a propagação de perdas através de ambos os mecanismos e utiliza-se este algoritmo para simular uma crise no mercado brasileiro de fundos de investimento. No capítulo 2,desenvolve-se um modelo de simulação baseado em agentes, com agentes financeiros, para simular propagação de um choque que afeta o mercado de operações compromissadas.Criamos também um mercado artificial composto por bancos, hedge funds e fundos de curto prazo e simulamos a propagação de um choque de liquidez sobre um ativo de risco securitizando utilizado para colateralizar operações compromissadas dos bancos.

Extreme poverty and development: the role of state in the assurance of minimal existence conditions

This paper follows the idea of Amartya Sen, Nobel Prize of economic, about the role of State in the assurance of minimal existence condition, and aim to answer how countries of Latin America (specifically Brazil) and countries of Europe (specifically United Kingdom) deal with the assurance of this minimal existence conditions. According to Amartya Sen’s view, development must be seen as a process of expanding substantive freedoms, such expansion being the primary purpose of each society and the main mean of development. Substantive freedoms can be considered as basic capabilities allocated to individuals whereby they are entitled to be architects of their own lives, providing them conditions to “live as they wish”. These basic capabilities are divided by Amartya Sen in 5 (five) kinds of substantive freedoms, but for this article’s purpose, we will consider just one of this 5 (five) kinds, specifically the Protective Safety capability. Protective Safety capability may be defined as the assurance of basic means of survival for individuals who are in extreme poverty, at risk of starvation or hypothermia, or even impending famine. Among the means available that could be used to avoid such situations are the possibility of supplemental income to the needy, distributing food and clothing to the needy, supply of energy and water, among others. But how countries deal whit this protective safety? Aiming to answer this question, we selected the problem of “fuel poverty” and how Brazil and United Kingdom solve it (if they solve), in order to assess how the solution found impacts development. The analysis and the comparison between these countries will allow an answer to the question proposed.

Tail risk in the hedge fund industry

The dissertation goal is to quantify the tail risk premium embedded into hedge funds' returns. Tail risk is the probability of extreme large losses. Although it is a rare event, asset pricing theory suggests that investors demand compensation for holding assets sensitive to extreme market downturns. By de nition, such events have a small likelihood to be represented in the sample, what poses a challenge to estimate the e ects of tail risk by means of traditional approaches such as VaR. The results show that it is not su cient to account for the tail risk stemming from equities markets. Active portfolio management employed by hedge funds demand a speci c measure to estimate and control tail risk. Our proposed factor lls that void inasmuch it presents explanatory power both over the time series as well as the cross-section of funds' returns.