Can future systemic financial risks be quantified?: ergodic vs nonergodic stochastic processes

Different axioms underlie efficient market theory and Keynes's liquidity preference theory. Efficient market theory assumes the ergodic axiom. Consequently, today's decision makers can calculate with actuarial precision the future value of all possible outcomes resulting from today's decisions. Since in an efficient market world decision makers "know" their intertemporal budget constraints, decision makers never default on a loan, i.e., systemic defaults, insolvencies, and bankruptcies are impossible. Keynes liquidity preference theory rejects the ergodic axiom. The future is ontologically uncertain. Accordingly systemic defaults and insolvencies can occur but can never be predicted in advance.

Public-private partnership investments in dry ports – Russian logistics markets and risks

The investments have always been considered as an essential backbone and so-called ‘locomotive’ for the competitive economies. However, in various countries, the state has been put under tight budget constraints for the investments in capital intensive projects. In response to this situation, the cooperation between public and private sector has grown based on public-private mechanism. The promotion of favorable arrangement for collaboration between public and private sectors for the provision of policies, services, and infrastructure in Russia can help to address the problems of dry ports development that neither municipalities nor the private sector can solve alone. Especially, the stimulation of public-private collaboration is significant under the exposure to externalities that affect the magnitude of the risks during all phases of project realization. In these circumstances, the risk in the projects also is becoming increasingly a part of joint research and risk management practice, which is viewed as a key approach, aiming to take active actions on existing global and specific factors of uncertainties. Meanwhile, a relatively little progress has been made on the inclusion of the resilience aspects into the planning process of a dry ports construction that would instruct the capacity planner, on how to mitigate the occurrence of disruptions that may lead to million dollars of losses due to the deviation of the future cash flows from the expected financial flows on the project. The current experience shows that the existing methodological base is developed fragmentary within separate steps of supply chain risk management (SCRM) processes: risk identification, risk evaluation, risk mitigation, risk monitoring and control phases. The lack of the systematic approach hinders the solution of the problem of risk management processes of dry port implementation. Therefore, management of various risks during the investments phases of dry port projects still presents a considerable challenge from the practical and theoretical points of view. In this regard, the given research became a logical continuation of fundamental research, existing in the financial models and theories (e.g., capital asset pricing model and real option theory), as well as provided a complementation for the portfolio theory. The goal of the current study is in the design of methods and models for the facilitation of dry port implementation through the mechanism of public-private partnership on the national market that implies the necessity to mitigate, first and foremost, the shortage of the investments and consequences of risks. The problem of the research was formulated on the ground of the identified contradictions. They rose as a continuation of the trade-off between the opportunities that the investors can gain from the development of terminal business in Russia (i.e. dry port implementation) and risks. As a rule, the higher the investment risk, the greater should be their expected return. However, investors have a different tolerance for the risks. That is why it would be advisable to find an optimum investment. In the given study, the optimum relates to the search for the efficient portfolio, which can provide satisfaction to the investor, depending on its degree of risk aversion. There are many theories and methods in finance, concerning investment choices. Nevertheless, the appropriateness and effectiveness of particular methods should be considered with the allowance of the specifics of the investment projects. For example, the investments in dry ports imply not only the lump sum of financial inflows, but also the long-term payback periods. As a result, capital intensity and longevity of their construction determine the necessity from investors to ensure the return on investment (profitability), along with the rapid return on investment (liquidity), without precluding the fact that the stochastic nature of the project environment is hardly described by the formula-based approach. The current theoretical base for the economic appraisals of the dry port projects more often perceives net present value (NPV) as a technique superior to other decision-making criteria. For example, the portfolio theory, which considers different risk preference of an investor and structures of utility, defines net present value as a better criterion of project appraisal than discounted payback period (DPP). Meanwhile, in business practice, the DPP is more popular. Knowing that the NPV is based on the assumptions of certainty of project life, it cannot be an accurate appraisal approach alone to determine whether or not the project should be accepted for the approval in the environment that is not without of uncertainties. In order to reflect the period or the project’s useful life that is exposed to risks due to changes in political, operational, and financial factors, the second capital budgeting criterion – discounted payback period is profoundly important, particularly for the Russian environment. Those statements represent contradictions that exist in the theory and practice of the applied science. Therefore, it would be desirable to relax the assumptions of portfolio theory and regard DPP as not fewer relevant appraisal approach for the assessment of the investment and risk measure. At the same time, the rationality of the use of both project performance criteria depends on the methods and models, with the help of which these appraisal approaches are calculated in feasibility studies. The deterministic methods cannot ensure the required precision of the results, while the stochastic models guarantee the sufficient level of the accuracy and reliability of the obtained results, providing that the risks are properly identified, evaluated, and mitigated. Otherwise, the project performance indicators may not be confirmed during the phase of project realization. For instance, the economic and political instability can result in the undoing of hard-earned gains, leading to the need for the attraction of the additional finances for the project. The sources of the alternative investments, as well as supportive mitigation strategies, can be studied during the initial phases of project development. During this period, the effectiveness of the investments undertakings can also be improved by the inclusion of the various investors, e.g. Russian Railways’ enterprises and other private companies in the dry port projects. However, the evaluation of the effectiveness of the participation of different investors in the project lack the methods and models that would permit doing the particular feasibility study, foreseeing the quantitative characteristics of risks and their mitigation strategies, which can meet the tolerance of the investors to the risks. For this reason, the research proposes a combination of Monte Carlo method, discounted cash flow technique, the theory of real options, and portfolio theory via a system dynamics simulation approach. The use of this methodology allows for comprehensive risk management process of dry port development to cover all aspects of risk identification, risk evaluation, risk mitigation, risk monitoring, and control phases. A designed system dynamics model can be recommended for the decision-makers on the dry port projects that are financed via a public-private partnership. It permits investors to make a decision appraisal based on random variables of net present value and discounted payback period, depending on different risks factors, e.g. revenue risks, land acquisition risks, traffic volume risks, construction hazards, and political risks. In this case, the statistical mean is used for the explication of the expected value of the DPP and NPV; the standard deviation is proposed as a characteristic of risks, while the elasticity coefficient is applied for rating of risks. Additionally, the risk of failure of project investments and guaranteed recoupment of capital investment can be considered with the help of the model. On the whole, the application of these modern methods of simulation creates preconditions for the controlling of the process of dry port development, i.e. making managerial changes and identifying the most stable parameters that contribute to the optimal alternative scenarios of the project realization in the uncertain environment. System dynamics model allows analyzing the interactions in the most complex mechanism of risk management process of the dry ports development and making proposals for the improvement of the effectiveness of the investments via an estimation of different risk management strategies. For the comparison and ranking of these alternatives in their order of preference to the investor, the proposed indicators of the efficiency of the investments, concerning the NPV, DPP, and coefficient of variation, can be used. Thus, rational investors, who averse to taking increased risks unless they are compensated by the commensurate increase in the expected utility of a risky prospect of dry port development, can be guided by the deduced marginal utility of investments. It is computed on the ground of the results from the system dynamics model. In conclusion, the outlined theoretical and practical implications for the management of risks, which are the key characteristics of public-private partnerships, can help analysts and planning managers in budget decision-making, substantially alleviating the effect from various risks and avoiding unnecessary cost overruns in dry port projects.

Investigating the environmental risks of transgenic crops

Legitimation of public policies that support the widespread plantings of transgenic crops presuppose, among other conditions, that (1) evidence supports that there are no unmanageable environmental risks and (2) there are no better ways to produce enough nourishing food that can dispense with the transgenics-oriented ways. This paper discusses: (a) the kinds of scientific inquiry that are needed to address (1) adequately, (b) the connections between investigations of (1) and (2), and (c) how these investigations are related with controversial social values.

Pricing of Liquidity Risks in London Stock Exchange

This thesis aims to investigate pricing of liquidity risks in London Stock Exchange. Liquidity Adjusted Capital Asset Pricing Model i.e. LCAPM developed by Acharya and Pedersen (2005) is being applied to test the influence of various liquidity risks on stock returns in London Stock Exchange. The Liquidity Adjusted Capital Asset Pricing model provides a unified framework for the testing of liquidity risks. All the common stocks listed and delisted for the period of 2000 to 2014 are included in the data sample. The study has incorporated three different measures of liquidity – Percent Quoted Spread, Amihud (2002) and Turnover. The reason behind the application of three different liquidity measures is the multi-dimensional nature of liquidity. Firm fixed effects panel regression is applied for the estimation of LCAPM. However, the results are robust according to Fama-Macbeth regressions. The results of the study indicates that liquidity risks in the form of (i) level of liquidity, (ii) commonality in liquidity (iii) flight to liquidity, (iv) depressed wealth effect and market return as well as aggregate liquidity risk are priced at London Stock Exchange. However, the results are sensitive to the choice of liquidity measures.

A case study of the Ottawa Valley whitewater rafting industry : standards and risks

This qualitative case study identifies and discusses the standards and risk management practices of the Ottawa Valley whitewater rafting industry and the impacts of the government enforced Special-purpose Vessels Regulations are discussed. Data collection occurred using a single case study design, which included interviews and document analysis. This study found that internal, industry, and actual standards are influenced through a variety of sources. These standards were found to affect the risk management practices of commercial whitewater rafting providers. In general, these standards promoted a high level of risk management within the Ottawa Valley rafting industry. The Special-purpose Vessels Regulations were found to be non-influential in raising the risk management standards of the Ottawa Valley whitewater rafting industry.

Environmental Risks : Should Banks Be Liable?

This paper studies the impact of banks' liability for environmental damages caused by their borrowers. Laws or court decisions that declare banks liable for environmental damages have two objectives : (1) finding someone to pay for the damages and (2) exerting a pressure on a firm's stakeholders to incite them to invest in environmental risk prevention. We study the effect that such legal decisions can have on financing relationships and especially on the incentives to reduce environmental risk in an environment where banks cannot commit to refinance the firm in all circumstances. Following an environmental accident, liable banks more readily agree to refinance the firm. We then show that bank liability effectively makes refinancing more attractive to banks, therefore improving the firm's risk-sharing possibilities. Consequently, the firm's incentives to invest in environmental risk reduction are weakened compared to the (bank) no-liability case. We also show that, when banks are liable, the firm invests at the full-commitment optimal level of risk reduction investment. If there are some externalities such that some damages cannot be accounted for, the socially efficient level of investment is greater than the privately optimal one. in that case, making banks non-liable can be socially desirable.

Towards a Methodology for Assessing the Legal Risks Associated with Cyberjustice

Présentation du professeur Karim Benyekhlef, lors du Congrès annuel de l'Institut canadien de l'administration de la justice (ICAJ) intitulé « Règlement des conflits : la justice n'appartient-elle qu'aux tribunaux ? ». Le panel auquel il participait : « La cyber justice - Les tribunaux virtuels ». Disponible en français et en anglais (avec commentaires).

Warning Patients’ Relatives of Genetic Risks: Policy Approaches

As an increasing number of genetic tests for specific early- and late-onset disorders move from research to the clinical setting, health care professionals are faced with new challenges or, alternatively, with novel twists on age-old ethical dilemmas. A finding that an individual carries a deleterious mutation can indicate that his or her relatives are at an increased risk of being affected by the same genetic disorder.

‘Modeling and Analysis of Competing Risks Data’

there has been much research on analyzing various forms of competing risks data. Nevertheless, there are several occasions in survival studies, where the existing models and methodologies are inadequate for the analysis competing risks data. ldentifiabilty problem and various types of and censoring induce more complications in the analysis of competing risks data than in classical survival analysis. Parametric models are not adequate for the analysis of competing risks data since the assumptions about the underlying lifetime distributions may not hold well. Motivated by this, in the present study. we develop some new inference procedures, which are completely distribution free for the analysis of competing risks data.

Health & Health Risks.

El uso de ejemplos para demostrar un entendimiento de los conceptos y procesos en geografía física y humana es un requisito básico para un exitoso examen en AS y A2. Esta serie ofrece estudios de casos actualizados y seleccionados, para que así puedas contestar a los ejercicios del libro. El libro consta de ocho partes: patrones globales de la salud y riesgos para la salud, enfermedades infecciosas, enfermedades no infecciosas, los impactos de las enfermedades, salud y la economía global, controles de salud del Reino Unido, la prestación de atención médica y consejos de exámenes.

Understanding safety and production risks in rail engineering planning and protection

Much of the published human factors work on risk is to do with safety and within this is concerned with prediction and analysis of human error and with human reliability assessment. Less has been published on human factors contributions to understanding and managing project, business, engineering and other forms of risk and still less jointly assessing risk to do with broad issues of ‘safety’ and broad issues of ‘production’ or ‘performance’. This paper contains a general commentary on human factors and assessment of risk of various kinds, in the context of the aims of ergonomics and concerns about being too risk averse. The paper then describes a specific project, in rail engineering, where the notion of a human factors case has been employed to analyse engineering functions and related human factors issues. A human factors issues register for potential system disturbances has been developed, prior to a human factors risk assessment, which jointly covers safety and production (engineering delivery) concerns. The paper concludes with a commentary on the potential relevance of a resilience engineering perspective to understanding rail engineering systems risk. Design, planning and management of complex systems will increasingly have to address the issue of making trade-offs between safety and production, and ergonomics should be central to this. The paper addresses the relevant issues and does so in an under-published domain – rail systems engineering work.

Establishing a community of practice of researchers, practitioners, policy-makers and communities to sustainably manage environmental health risks in Ecuador

The Sustainably Managing Environmental Health Risk in Ecuador project was launched in 2004 as a partnership linking a large Canadian university with leading Cuban and Mexican institutes to strengthen the capacities of four Ecuadorian universities for leading community-based learning and research in areas as diverse as pesticide poisoning, dengue control, water and sanitation, and disaster preparedness. By 2009, train-the-trainer project initiation involved 27 participatory action research Master’s theses in 15 communities where 1200 community learners participated in the implementation of associated interventions. This led to establishment of innovative Ecuadorian-led master’s and doctoral programs, and a Population Health Observatory on Collective Health, Environment and Society for the Andean region based at the Universidad Andina Simon Bolivar. Building on this network, numerous initiatives were begun, such as an internationally funded research project to strengthen dengue control in the coastal community of Machala, and establishment of a local community eco-health centre focusing on determinants of health near Cuenca. Alliances of academic and non-academic partners from the South and North provide a promising orientation for learning together about ways of addressing negative trends of development. Assessing the impacts and sustainability of such processes, however, requires longer term monitoring of results and related challenges.