Price discovery of credit spreads in tranquil and crisis periods

In this paper we investigate the price discovery process in single-name credit spreads obtained from bond, credit default swap (CDS), equity and equity option prices. We analyse short term price discovery by modelling daily changes in credit spreads in the four markets with a vector autoregressive model (VAR). We also look at price discovery in the long run with a vector error correction model (VECM). We find that in the short term the option market clearly leads the other markets in the sub-prime crisis (2007-2009). During the less severe sovereign debt crisis (2009-2012) and the pre-crisis period, options are still important but CDSs become more prominent. In the long run, deviations from the equilibrium relationship with the option market still lead to adjustments in the credit spreads observed or implied from other markets. However, options no longer dominate price discovery in any of the periods considered. Our findings have implications for traders, credit risk managers and financial regulators.

CASCADE: An Agent Based Framework For Modeling The Dynamics Of Smart Electricity Systems

The Complex Adaptive Systems, Cognitive Agents and Distributed Energy (CASCADE) project is developing a framework based on Agent Based Modelling (ABM). The CASCADE Framework can be used both to gain policy and industry relevant insights into the smart grid concept itself and as a platform to design and test distributed ICT solutions for smart grid based business entities. ABM is used to capture the behaviors of diff erent social, economic and technical actors, which may be defi ned at various levels of abstraction. It is applied to understanding their interactions and can be adapted to include learning processes and emergent patterns. CASCADE models ‘prosumer’ agents (i.e., producers and/or consumers of energy) and ‘aggregator’ agents (e.g., traders of energy in both wholesale and retail markets) at various scales, from large generators and Energy Service Companies down to individual people and devices. The CASCADE Framework is formed of three main subdivisions that link models of electricity supply and demand, the electricity market and power fl ow. It can also model the variability of renewable energy generation caused by the weather, which is an important issue for grid balancing and the profi tability of energy suppliers. The development of CASCADE has already yielded some interesting early fi ndings, demonstrating that it is possible for a mediating agent (aggregator) to achieve stable demandfl attening across groups of domestic households fi tted with smart energy control and communication devices, where direct wholesale price signals had previously been found to produce characteristic complex system instability. In another example, it has demonstrated how large changes in supply mix can be caused even by small changes in demand profi le. Ongoing and planned refi nements to the Framework will support investigation of demand response at various scales, the integration of the power sector with transport and heat sectors, novel technology adoption and diffusion work, evolution of new smart grid business models, and complex power grid engineering and market interactions.

Institutional investors: arbitrageurs or rational trend chasers?

This paper studies the relationship between institutional investor holdings and stock misvaluation in the U.S. between 1980 and 2010. I find that institutional investors overweigh overvalued and underweigh undervalued stocks in their portfolio, taking the market portfolio as a benchmark. Cross-sectionally, institutional investors hold more overvalued stocks than undervalued stocks. The time-series studies also show that institutional ownership of overvalued portfolios increases as the portfolios' degree of overvaluation. As an investment strategy, institutional investors' ride of stock misvaluation is neither driven by the fund flows from individual investors into institutions, nor industry-specific. Consistent with the agency problem explanation, investment companies and independent investment advisors have a higher tendency to ride stock misvaluation than other institutions. There is weak evidence that institutional investors make positive profit by riding stock misvaluation. My findings challenge the models that view individual investors as noise traders and disregard the role of institutional investors in stock market misvaluation.

STABILITY ANALYSIS WITH APPLICATIONS OF A TWO-DIMENSIONAL DYNAMICAL SYSTEM ARISING FROM A STOCHASTIC MODEL FOR AN ASSET MARKET

We analyze the stability properties of equilibrium solutions and periodicity of orbits in a two-dimensional dynamical system whose orbits mimic the evolution of the price of an asset and the excess demand for that asset. The construction of the system is grounded upon a heterogeneous interacting agent model for a single risky asset market. An advantage of this construction procedure is that the resulting dynamical system becomes a macroscopic market model which mirrors the market quantities and qualities that would typically be taken into account solely at the microscopic level of modeling. The system`s parameters correspond to: (a) the proportion of speculators in a market; (b) the traders` speculative trend; (c) the degree of heterogeneity of idiosyncratic evaluations of the market agents with respect to the asset`s fundamental value; and (d) the strength of the feedback of the population excess demand on the asset price update increment. This correspondence allows us to employ our results in order to infer plausible causes for the emergence of price and demand fluctuations in a real asset market. The employment of dynamical systems for studying evolution of stochastic models of socio-economic phenomena is quite usual in the area of heterogeneous interacting agent models. However, in the vast majority of the cases present in the literature, these dynamical systems are one-dimensional. Our work is among the few in the area that construct and study analytically a two-dimensional dynamical system and apply it for explanation of socio-economic phenomena.

Den nya kassaregisterlagen

The government appointed in 2004 a special investigator with the objective to investigate the possibility of introducing a new law concerning implementation of obligatory cash registers with certain certification. This resulted in SOU 2005:35 ”Krav på kassaregister - Effektivare utredning av skattebrott” (Proposition 2006/07: 105). Following advice received from the respondents, the government has drafted a bill submitted to parliament in March 2007. Government bill 2006/07: 105 proposals for new law on cash registers, and submitted to parliament 2007th Act (2007:592) on the cash register was adopted by parliament in March that year and came into force on 1 January 2010. Earlier great opportunities for tax cheating has been available by various methods so as to simply not punch in a sale at the checkout, use the training function type, use receipt copies, manipulate register functions on its program level, using alternative programming etc. These opportunities are eliminated in the certified cash registers. Respondent traders believed the most part has not changed the competition or that the change will be relatively small. They also thought it was too early to see any change at this time. A tendency among traders we have asked is that they feel negatively for the costs it imposes, with the new registry and that they are skeptical about the expected impact of the law, among others due to the scarce resources spent on follow-up. The Swedish tax agency is responsible for control and the new systems make it easier for Tax control, but actual physical on-scene control must be performed to detect irregularities.

Kundernas behov i butiksmiljöer : Skillnaderna mellan handlares och kunders uppfattning av kundernas behov i klädbutiker

Konkurrensen inom detaljhandeln blir allt hårdare, både från andra butiker men även från e-handeln, vilket sätter press på fysiska butiker att ha nöjda kunder som fortsätter handla i butiken. Ett tillvägagångssätt för att möta den hårdnande konkurrensen är att ha en butiksmiljö s.k. servicescape som är utformad efter kundernas behov, vilket dock förutsätter att handlarna vet vilka behov sina kunder har. Har handlarna en felaktig uppfattning om kundernas behov föreligger det ett gap som minskar chansen att kunderna blir nöjda och därmed butikens konkurrenskraft. En avgränsning gjordes till klädbutiker, då klädbutiker är bland de butikstyper som är mest konkurrensutsatt. Syftet med uppsatsen var att kartlägga hur kundernas behov överensstämmer eller skiljer sig från handlarnas uppfattning om deras behov. För att uppfylla syftet tillämpades en kvalitativ metod men med en statistisk bearbetning dvs. en kvantitativ bearbetning då resultatet redovisades med hjälp av frekvenser och värden på en skala. Datainsamlingsverktyget som användes var enkäter och utformades efter de tio faktorerna som sammanställdes i den teoretiska referensramen. Enkäterna delades ut till både kunder och handlare i Borlänges stadskärna och Faluns stadskärna. Resultatet av uppsatsen visade att det för faktorerna ljus (4,2), trängsel (4.5) (4.6), Ljud (4.7), toaletter (4.9), (4.10) finns en skillnad ett s.k. gap mellan handlarnas uppfattning om kundernas behov och vad kundernas behov egentligen är. Det framkom även att handlarna ansåg att kunderna har större behov av att faktorerna rent & städat (4.3), (4.4) in & utgångar (4.8) är tillfredsställande än vad kunderna egentligen har. Det framkom precis som behandlades i den teoretiska referensramen att kundernas behov tenderar att variera utifrån deras demografiska faktorer ålder och kön. Om handlarna har en låg, medel eller hög prisnivå påverkade även det hur viktigt det är för kunderna att faktorerna är tillfredsställande. Slutsatsen som författarna identifierade var att det föreligger ett gap mellan handlarnas uppfattning om kundernas behov och vad kunderna anser att deras behov är gällande flera av faktorerna. Detta är dock något som kunderna säger vilket inte behöver stämma överrens med hur de verkligen tycker. Det är dock svårt att urskilja något mönster gällande gapen utan det är nästan enbart tendenser man kan urskilja, vilket gör att varje faktor bör analyseras individuellt.

Hydropower Energy Simulation Using Mike 11 Model; A Case Study In South Germany's Small Run-Of-River Hydropower Plants

Renewable energy production is a basic supplement to stabilize rapidly increasing global energy demand and skyrocketing energy price as well as to balance the fluctuation of supply from non-renewable energy sources at electrical grid hubs. The European energy traders, government and private company energy providers and other stakeholders have been, since recently, a major beneficiary, customer and clients of Hydropower simulation solutions. The relationship between rainfall-runoff model outputs and energy productions of hydropower plants has not been clearly studied. In this research, association of rainfall, catchment characteristics, river network and runoff with energy production of a particular hydropower station is examined. The essence of this study is to justify the correspondence between runoff extracted from calibrated catchment and energy production of hydropower plant located at a catchment outlet; to employ a unique technique to convert runoff to energy based on statistical and graphical trend analysis of the two, and to provide environment for energy forecast. For rainfall-runoff model setup and calibration, MIKE 11 NAM model is applied, meanwhile MIKE 11 SO model is used to track, adopt and set a control strategy at hydropower location for runoff-energy correlation. The model is tested at two selected micro run-of-river hydropower plants located in South Germany. Two consecutive calibration is compromised to test the model; one for rainfall-runoff model and other for energy simulation. Calibration results and supporting verification plots of two case studies indicated that simulated discharge and energy production is comparable with the measured discharge and energy production respectively.

Um modelo de competição baseada em tempo nos mercados financeiros

O objetivo deste trabalho é modelar o comportamento estratégico dos indivíduos diante de um choque estocástico que desloca o preço de determinado ativo financeiro do seu equilíbrio inicial. Investiga-se o caminho do preço de mercado em direção ao novo equilíbrio, conduzido pelas sucessivas negociações dos agentes em busca de oportunidades de obter lucros imediatos. Os operadores, que por suposição possuem funções de utilidade avessas ao risco, devem escolher a quantidade ótima transacionada e quanto devem aguardar para executar as suas ordens, tendo em vista a diminuição da volatilidade do preço do ativo à medida que as transações se sucedem após o choque. Procura-se demonstrar que os operadores que aceitam incorrer em riscos mais elevados negociam com maior frequência e em volumes e velocidades maiores, usufruindo lucros esperados mais altos que os demais.

Preferences, common knowledge and speculative trade

We study the proposition that if it is common knowledge that en allocation of assets is ex-ante pareto efficient, there is no further trade generated by new information. The key to this result is that the information partitions and other characteristics of the agents must be common knowledge and that contracts, or asset markets, must be complete. It does not depend on learning, on 'lemons' problems, nor on agreement regarding beliefs and the interpretation of information. The only requirement on preferences is state-additivity; in particular, traders need not be risk-averse. We also prove the converse result that "no-trade results" imply that traders' preferences can be represented by state-additive utility functions. We analyze why examples of other widely studied preferences (e.g., Schmeidler (1989)) allow "speculative" trade.

Essays on finance and macroeconomy

I study the asset-pricing implications in an cnviromncnt with feedback traders and rational arbitrageurs. Feedback traders are defined as possible naive investors who buy after a raise in prices and sell after a drop in prices. I consider two types of feedback strategies: (1) short-term (SF), motivated by institutional rulcs as top-losscs and margin calls and (2) long-tcrm (LF), motivated by representativeness bias from non-sophisticated investors. Their presence in the market follows a stochastic regime swift process. Short lived assumption for the arbitrageurs prevents the correction of the misspricing generated by feedback strategies. The estimated modcl using US data suggests that the regime switching is able to capture the time varying autocorrclation of returns. The segregation of feedback types helps to identify the long term component that otherwise would not show up due to the large movements implied by the SF typc. The paper also has normativo implications for practioners since it providos a methodology to identify mispricings driven by feedback traders.

Construção de superfície de volatilidade para o mercado brasileiro de opções de dólar baseado no modelo de volatilidade estocástica de Heston

Nos últimos anos, o mercado brasileiro de opções apresentou um forte crescimento, principalmente com o aparecimento da figura dos High Frequency Traders (HFT) em busca de oportunidades de arbitragem, de modo que a escolha adequada do modelo de estimação de volatilidade pode tornar-se um diferencial competitivo entre esses participantes. Este trabalho apresenta as vantagens da adoção do modelo de volatilidade estocástica de Heston (1993) na construção de superfície de volatilidade para o mercado brasileiro de opções de dólar, bem como a facilidade e o ganho computacional da utilização da técnica da Transformada Rápida de Fourier na resolução das equações diferenciais do modelo. Além disso, a partir da calibração dos parâmetros do modelo com os dados de mercado, consegue-se trazer a propriedade de não-arbitragem para a superfície de volatilidade. Os resultados, portanto, são positivos e motivam estudos futuros sobre o tema.

Distorções no leilão de fechamento de ações da BMF&BOVESPA

O preço de fechamento de uma ação é a referência mais importante de seu valor. Dada sua ampla utilização em diversos contratos e em problemas de assimetria de informação, corretores, traders e gestores de fundos têm incentivos a interferir em sua formação. Este estudo analisa o registro intradiário de todas as transações de ações na BMF&BOVESPA entre 03 de abril de 2006 e 31 de março 2011, e econtra no fechamento um volume atípicamente alto, acompanhado de retornos muito voláteis que são em grande parte revertidos no dia seguinte. Adicionalmente, mostra-se que a magnitude destes fenômenos estão em linha com os incentivos para a distorção.

Educação e lutas sociais na colonização dirigida: o Alto Turi maranhense: 1962-1984

Proposta de compreensao da relação entre educaçao e lutas sociais no contexto histórico da Colonização Dirigida. O trabalho de campo realizou-se na região do Alto Turi, na pré-Amazônia maranhense, onde se desenvolve o Projeto de Colonização do Alto Turi(PCAT), executado pela Companhia de Colonização do Nordeste (COLONE), empresa mista, subsidiária da Superintendência de Desenvolvimento do Nordeste (SUDENE). A questão fundamental do estudo é como os colonos se educam e se transformam, de produtores passivos e dependentes de relações assistencialistas e paterna por mudanças no PCAT. A análise do processo educativo, da reflexão e da ação desenvolvida pelos colonos, passa pela compreensão do processo histórico do Alto Turi Maranhense, isto é: do movimento migratório nordestino a partir da década de 50; da resposta a esse movimento dada pela SUDENE com a criação, em 1962, do projeto de colonização da região; da continuação do processo migratório introduzindo novos personagens (fazendeiros e comerciantes); da criação, em 1972, da COLONE, substituindo a SUDENE na execução do PCAT; da análise dos trabalhos de organização de comunidades, educação, extensão rural e cooperativismo oferecidos pela SUDENE e, posteriormente, pela COLONE à população nucleada. Esta linha de trabalho ainda implica, metodologicamente, em analisar a estrutura de classes da região, verificando o papel político e o peso social do grupo formado pelos colonos, assim como compreender as contradições que dinamizam a luta de classes na região, percebendo esse movimento no interior do processo social mais amplo, regional e nacional.

Impacto das negociações algorítmicas de alta frequência no mercado futuro de dólar

Este trabalho apresenta um estudo do impacto das negociações algorítmicas no processo de descoberta de preços no mercado de câmbio. Foram utilizados dados de negociação de alta frequência para contratos futuros de reais por dólar (DOL), negociados na Bolsa de Valores de São Paulo no período de janeiro a junho de 2013. No intuito de verificar se as estratégias algorítmicas de negociação são mais dependentes do que as negociações não algorítmicas, foi examinada a frequência em que algoritmos negociam entre si e comparou-se a um modelo benchmark que produz probabilidades teóricas para diferentes tipos de negociadores. Os resultados obtidos para as negociações minuto a minuto apresentam evidências de que as ações e estratégias de negociadores algorítmicos parecem ser menos diversas e mais dependentes do que aquelas realizadas por negociadores não algorítmicos. E para modelar a interação entre a autocorrelação serial dos retornos e negociações algorítmicas, foi estimado um vetor autorregressivo de alta frequência (VAR) em sua forma reduzida. As estimações mostram que as atividades dos algoritmos de negociação causam um aumento na autocorrelação dos retornos, indicando que eles podem contribuir para o aumento da volatilidade.

Pair trading in Bovespa with a quantitative approach: cointegration, Ornstein-Uhlenbeck equation and Kelly criterion.

Pair trading is an old and well-known technique among traders. In this paper, we discuss an important element not commonly debated in Brazil: the cointegration between pairs, which would guarantee the spread stability. We run the Dickey-Fuller test to check cointegration, and then compare the results with non-cointegrated pairs. We found that the Sharpe ratio of cointegrated pairs is greater than the non-cointegrated. We also use the Ornstein-Uhlenbeck equation in order to calculate the half-life of the pairs. Again, this improves their performance. Last, we use the leverage suggested by Kelly Formula, once again improving the results.