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.

Extreme observations and diversification in Latin American emerging equity markets

In this paper, we focus on the tails of the unconditional distribution of Latin American emerging markets stock returns. We explore their implications for portfolio diversification according to the safety tirst principIe, tirst proposed by Roy (1952). We tind that the Latin American emerging markets have signiticantly fatter tails than industrial markets. especially, the lower tail of the distrihution. We consider the implication of the safety tirst principIe for a U .S. investor who creates a diversitied portfolio using Latin American stock markets. We tind that a U.S. investor gains by adding Latin American equity markets to her purely domestic portfolio. For different parameter specitications. we finu a more realistic asset allocation than the one suggested by the Iiterature haseu on the traditional mean-variance framework.

Bayesian analysis of extreme events with threshold estimation

The aim of this paper is to analyze extremal events using Generalized Pareto Distributions (GPD), considering explicitly the uncertainty about the threshold. Current practice empirically determines this quantity and proceeds by estimating the GPD parameters based on data beyond it, discarding all the information available be10w the threshold. We introduce a mixture model that combines a parametric form for the center and a GPD for the tail of the distributions and uses all observations for inference about the unknown parameters from both distributions, the threshold inc1uded. Prior distribution for the parameters are indirectly obtained through experts quantiles elicitation. Posterior inference is available through Markov Chain Monte Carlo (MCMC) methods. Simulations are carried out in order to analyze the performance of our proposed mode1 under a wide range of scenarios. Those scenarios approximate realistic situations found in the literature. We also apply the proposed model to a real dataset, Nasdaq 100, an index of the financiai market that presents many extreme events. Important issues such as predictive analysis and model selection are considered along with possible modeling extensions.