Modeling Dependence Structure and Forecasting Portfolio Value-at-Risk with Dynamic Copulas

We study the asymmetric and dynamic dependence between financial assets and demonstrate, from the perspective of risk management, the economic significance of dynamic copula models. First, we construct stock and currency portfolios sorted on different characteristics (ex ante beta, coskewness, cokurtosis and order flows), and find substantial evidence of dynamic evolution between the high beta (respectively, coskewness, cokurtosis and order flow) portfolios and the low beta (coskewness, cokurtosis and order flow) portfolios. Second, using three different dependence measures, we show the presence of asymmetric dependence between these characteristic-sorted portfolios. Third, we use a dynamic copula framework based on Creal et al. (2013) and Patton (2012) to forecast the portfolio Value-at-Risk of long-short (high minus low) equity and FX portfolios. We use several widely used univariate and multivariate VaR models for the purpose of comparison. Backtesting our methodology, we find that the asymmetric dynamic copula models provide more accurate forecasts, in general, and, in particular, perform much better during the recent financial crises, indicating the economic significance of incorporating dynamic and asymmetric dependence in risk management.

Dynamic Relational Contracts under Complete Information

This paper considers a long-term relationship between two agents who both undertake a costly action or investment that together produces a joint benefit. Agents have an opportunity to expropriate some of the joint benefit for their own use. Two cases are considered: (i) where agents are risk neutral and are subject to limited liability constraints and (ii) where agents are risk averse, have quasi-linear preferences in consumption and actions but where limited liability constraints do not bind. The question asked is how to structure the investments and division of the surplus over time so as to avoid expropriation. In the risk-neutral case, there may be an initial phase in which one agent overinvests and the other underinvests. However, both actions and surplus converge monotonically to a stationary state in which there is no overinvestment and surplus is at its maximum subject to the constraints. In the risk-averse case, there is no overinvestment. For this case, we establish that dynamics may or may not be monotonic depending on whether or not it is possible to sustain a first-best allocation. If the first-best allocation is not sustainable, then there is a trade-off between risk sharing and surplus maximization. In general, surplus will not be at its constrained maximum even in the long run.

Modeling Dependence Structure and Forecasting Market Risk with Dynamic Asymmetric Copula

We investigate the dynamic and asymmetric dependence structure between equity portfolios from the US and UK. We demonstrate the statistical significance of dynamic asymmetric copula models in modelling and forecasting market risk. First, we construct “high-minus-low" equity portfolios sorted on beta, coskewness, and cokurtosis. We find substantial evidence of dynamic and asymmetric dependence between characteristic-sorted portfolios. Second, we consider a dynamic asymmetric copula model by combining the generalized hyperbolic skewed t copula with the generalized autoregressive score (GAS) model to capture both the multivariate non-normality and the dynamic and asymmetric dependence between equity portfolios. We demonstrate its usefulness by evaluating the forecasting performance of Value-at-Risk and Expected Shortfall for the high-minus-low portfolios. From back-testing, e find consistent and robust evidence that our dynamic asymmetric copula model provides the most accurate forecasts, indicating the importance of incorporating the dynamic and asymmetric dependence structure in risk management.

Estimation of dynamic latent variable models using simulated nonparametric moments

Abstract. Given a model that can be simulated, conditional moments at a trial parameter value can be calculated with high accuracy by applying kernel smoothing methods to a long simulation. With such conditional moments in hand, standard method of moments techniques can be used to estimate the parameter. Because conditional moments are calculated using kernel smoothing rather than simple averaging, it is not necessary that the model be simulable subject to the conditioning information that is used to define the moment conditions. For this reason, the proposed estimator is applicable to general dynamic latent variable models. It is shown that as the number of simulations diverges, the estimator is consistent and a higher-order expansion reveals the stochastic difference between the infeasible GMM estimator based on the same moment conditions and the simulated version. In particular, we show how to adjust standard errors to account for the simulations. Monte Carlo results show how the estimator may be applied to a range of dynamic latent variable (DLV) models, and that it performs well in comparison to several other estimators that have been proposed for DLV models.

Dynamic stackelberg game with risk-averse players: optimal risk-sharing under asymmetric information

The objective of this paper is to clarify the interactive nature of the leader-follower relationship when both players are endogenously risk-averse. The analysis is placed in the context of a dynamic closed-loop Stackelberg game with private information. The case of a risk-neutral leader, very often discussed in the literature, is only a borderline possibility in the present study. Each player in the game is characterized by a risk-averse type which is unknown to his opponent. The goal of the leader is to implement an optimal incentive compatible risk-sharing contract. The proposed approach provides a qualitative analysis of adaptive risk behavior profiles for asymmetrically informed players in the context of dynamic strategic interactions modelled as incentive Stackelberg games.

Nash equilibrium strategies in discrete-time finite-horizon dynamic games with risk-and effort-averse players

The objective of this paper is to re-examine the risk-and effort attitude in the context of strategic dynamic interactions stated as a discrete-time finite-horizon Nash game. The analysis is based on the assumption that players are endogenously risk-and effort-averse. Each player is characterized by distinct risk-and effort-aversion types that are unknown to his opponent. The goal of the game is the optimal risk-and effort-sharing between the players. It generally depends on the individual strategies adopted and, implicitly, on the the players' types or characteristics.

In vitro growth of human urinary tract smooth muscle cells on laminin and collagen type I-coated membranes under static and dynamic conditions.

This study investigates in vitro growth of human urinary tract smooth muscle cells under static conditions and mechanical stimulation. The cells were cultured on collagen type I- and laminin-coated silicon membranes. Using a Flexcell device for mechanical stimulation, a cyclic strain of 0-20% was applied in a strain-stress-time model (stretch, 104 min relaxation, 15 s), imitating physiological bladder filling and voiding. Cell proliferation and alpha-actin, calponin, and caldesmon phenotype marker expression were analyzed. Nonstretched cells showed significant better growth on laminin during the first 8 days, thereafter becoming comparable to cells grown on collagen type I. Cyclic strain significantly reduced cell growth on both surfaces; however, better growth was observed on laminin. Neither the type of surface nor mechanical stimulation influenced the expression pattern of phenotype markers; alpha-actin was predominantly expressed. Coating with the extracellular matrix protein laminin improved in vitro growth of human urinary tract smooth muscle cells.

Dynamic of population-dynamics in a medically important snail species Lymnaea (Radix) Luteola (Lamarck)

The life-cycle parameters of the snail Lymnaea (Radix) luteola and the factors influencing the same have been studied under laboratory conditions. Ins each month, from July 1990 to June 1991, a batch of 100 zero-day old individual were considered for studies. The snails of April batch survived for 19.42 days while those in December batch survived for 87.45 days. The May batch individual though survived for 65.67 days gained maximum shell size (15.84 mm in length) and body weight (419.87 mg). All individuals of April batch died prior to attainment of sexual maturity. In the remaining 11 batches the snails became sexually mature between 32 and 53 days. At this stage, they were with varying shell lengths, 9.3 mm to 13,11 mm in respect to batches. The reproduction period varied from 1-67 days. An individual laid, on an average, 0,25 (March batch) to 443.67 (May batch) eggs in its life-span. A batch of such snails would leave 24312, 22520, 720268, 80408, 76067, 418165, 214, 9202, 0, 0, 2459386 and 127894 individuals at the end of 352nd day. Since the environmental conditions were almost similar the 'dynamic' of population dynamics seems to be involved with the 'strain' of the snail individuals of the batches concerned.

Recerca versus docència en una experiència d'internalització dels estudis de Geografia a la Universitat de Girona: The faces of landscape, Catalonia and North Karelia = Research versus teaching in one experience of internationalization of the Geography degree studies in the University of Girona: The faces of landscape, Catalonia and North Karelia

Un dels reptes cabdals de la Universitat és enllaçar l’experiència de recerca amb la docència, així com promoure la internacionalització dels estudis, especialment a escala europea, tenint present que ambdues poden actuar com a catalitzadores de la millora de la qualitat docent. Una de les fórmules d’internacionalització és la realització d’assignatures compartides entre universitats de diferents països, fet que suposa l’oportunitat d’implementar noves metodologies docents. En aquesta comunicació es presenta una experiència en aquesta línia desenvolupada entre la Universitat de Girona i la Universitat de Joensuu (Finlàndia) en el marc dels estudis de Geografia amb la realització de l’assignatura 'The faces of landscape: Catalonia and North Karelia'. Aquesta es desenvolupa al llarg de dues setmanes intensives, una en cadascuna de les Universitats. L’objectiu és presentar i analitzar diferents significats del concepte paisatge aportant també metodologies d’estudi tant dels aspectes físics i ecològics com culturals que s’hi poden vincular i que són les que empren els grups de recerca dels professors responsables de l’assignatura. Aquesta part teòrica es completa amb una presentació de les característiques i dinàmiques pròpies dels paisatges finlandesos i catalans i una sortida de camp. Per a la part pràctica es constitueixen grups d’estudi multinacionals que treballen a escala local algun dels aspectes en els dos països, es comparen i es realitza una presentació i defensa davant del conjunt d’estudiants i professorat. La llengua vehicular de l’assignatura és l’anglès.

Dynamic calibration of our sense of time.

An accurate sense of time contributes to functions ranging from the perception and anticipation of sensory events to the production of coordinated movements. However, accumulating evidence demonstrates that time perception is subject to strong illusory distortion. In two experiments, we investigated whether the subjective speed of temporal perception is dependent on our visual environment. By presenting human observers with speed-altered movies of a crowded street scene, we modulated performance on subsequent production of "20s" elapsed intervals. Our results indicate that one's visual environment significantly contributes to calibrating our sense of time, independently of any modulation of arousal. This plasticity generates an assay for the integrity of our sense of time and its rehabilitation in clinical pathologies.

Encoding dysfunctions in a dynamic-static paradigm for visuospatial working memory in first-episode psychosis patients: a 2-year follow-up study.

Aim: To investigate static and dynamic visuospatial working memory (VSWM) processes in first-episode psychosis (FEP) patients and explore the validity of such measures as specific trait markers of schizophrenia. Methods: Twenty FEP patients and 20 age-, sex-, laterality- and education-matched controls carried out a dynamic and static VSWM paradigm. At 2-year follow up 13 patients met Diagnostic and Statistical Manual (of Mental Health Disorders) - Fourth Edition (DSM-IV) criteria for schizophrenia, 1 for bipolar disorder, 1 for brief psychotic episode and 5 for schizotypal personality disorder. Results: Compared with controls, the 20 FEP patients showed severe impairment in the dynamic VSWM condition but much less impairment in the static condition. No specific bias in stimulus selection was detected in the two tasks. Two-year follow-up evaluations suggested poorer baseline scores on the dynamic task clearly differentiated the 13 FEP patients who developed schizophrenia from the seven who did not. Conclusions: Results suggest deficits in VSWM in FEP patients. Specific exploratory analyses further suggest that deficit in monitoring-manipulation VSWM processes, especially involved in our dynamic VSWM task, can be a reliable marker of schizophrenia.

How multiple repetitions influence the processing of self-, famous and unknown names and faces: an ERP study.

Because we live in an extremely complex social environment, people require the ability to memorize hundreds or thousands of social stimuli. The aim of this study was to investigate the effect of multiple repetitions on the processing of names and faces varying in terms of pre-experimental familiarity. We measured both behavioral and electrophysiological responses to self-, famous and unknown names and faces in three phases of the experiment (in every phase, each type of stimuli was repeated a pre-determined number of times). We found that the negative brain potential in posterior scalp sites observed approximately 170 ms after the stimulus onset (N170) was insensitive to pre-experimental familiarity but showed slight enhancement with each repetition. The negative wave in the inferior-temporal regions observed at approximately 250 ms (N250) was affected by both pre-experimental (famous>unknown) and intra-experimental familiarity (the more repetitions, the larger N250). In addition, N170 and N250 for names were larger in the left inferior-temporal region, whereas right-hemispheric or bilateral patterns of activity for faces were observed. The subsequent presentations of famous and unknown names and faces were also associated with higher amplitudes of the positive waveform in the central-parietal sites analyzed in the 320-900 ms time-window (P300). In contrast, P300 remained unchanged after the subsequent presentations of self-name and self-face. Moreover, the P300 for unknown faces grew more quickly than for unknown names. The latter suggests that the process of learning faces is more effective than learning names, possibly because faces carry more semantic information.

Signaling in Dynamic Contests: Some Impossibility Results

General signaling results in dynamic Tullock contests have been missing for long. The reason is the tractability of the problems. In this paper, an uninformed contestant with valuation vx competes against an informed opponent with valuation, either high vh or low vl. We show that; (i) When the hierarchy of valuations is vh ≥ vx ≥ vl, there is no pooling. Sandbagging is too costly for the high type. (ii) When the order of valuations is vx ≥ vh ≥ vl, there is no separation if vh and vl are close. Sandbagging is cheap due to the proximity of valuations. However, if vh and vx are close, there is no pooling. First period cost of pooling is high. (iii) For valuations satisfying vh ≥ vl ≥ vx, there is no separation if vh and vl are close. Bluffing in the first period is cheap for the low valuation type. Conversely, if vx and vl are close there is no pooling. Bluffing in the first stage is too costly. JEL: C72, C73, D44, D82. KEYWORDS: Signaling, Dynamic Contests, Non-existence, Sandbag Pooling, Bluff Pooling, Separating

Obedience-disobedience dynamic and the role of responsibility

Obedience has been thoroughly studied in social psychology, both in its positive and negative aspects. Nevertheless, in these empirical studies disobedience has been considered to be the opposite of obedience and indeed its negation. Instead, some recent studies suggest that if obedience to authority is important in ensuring the continuity of social and group life, disobedience is crucial, under some circumstances, in stopping the authority relationship from degenerating into an authoritarian relationship. In this perspective, disobedience may be conceived of as a protest undermining the legitimacy of authority, or else it can represent an instrument of the community for controlling the legitimacy of the authority's demands, becoming a factor safeguarding against authoritarianism. The aim of the present study was to empirically verify the dynamics existing between disobedience and obedience. The results show that people who attach importance to both obedience and disobedience in the relationship between the individual and society recognize the importance of democratic values and consider themselves responsible for the defence of human rights. Instead, people who only recognize the value of obedience and consider disobedience as a threat to the status quo are more authoritarian, individualistic people.