Wrong-way risk in stock swaps : measuring counterparty credit risk and CVA

Uma forma interessante para uma companhia que pretende assumir uma posição comprada em suas próprias ações ou lançar futuramente um programa de recompra de ações, mas sem precisar dispor de caixa ou ter que contratar um empréstimo, ou então se protegendo de uma eventual alta no preço das ações, é através da contratação de um swap de ações. Neste swap, a companhia fica ativa na variação de sua própria ação enquanto paga uma taxa de juros pré ou pós-fixada. Contudo, este tipo de swap apresenta risco wrong-way, ou seja, existe uma dependência positiva entre a ação subjacente do swap e a probabilidade de default da companhia, o que precisa ser considerado por um banco ao precificar este tipo de swap. Neste trabalho propomos um modelo para incorporar a dependência entre probabilidades de default e a exposição à contraparte no cálculo do CVA para este tipo de swap. Utilizamos um processo de Cox para modelar o instante de ocorrência de default, dado que a intensidade estocástica de default segue um modelo do tipo CIR, e assumindo que o fator aleatório presente na ação subjacente e que o fator aleatório presente na intensidade de default são dados conjuntamente por uma distribuição normal padrão bivariada. Analisamos o impacto no CVA da incorporação do riscowrong-way para este tipo de swap com diferentes contrapartes, e para diferentes prazos de vencimento e níveis de correlação.

We're Chained: an analysis of systemic risk in finance

This dissertation presents two papers on how to deal with simple systemic risk measures to assess portfolio risk characteristics. The first paper deals with the Granger-causation of systemic risk indicators based in correlation matrices in stock returns. Special focus is devoted to the Eigenvalue Entropy as some previous literature indicated strong re- sults, but not considering different macroeconomic scenarios; the Index Cohesion Force and the Absorption Ratio are also considered. Considering the S&P500, there is not ev- idence of Granger-causation from Eigenvalue Entropies and the Index Cohesion Force. The Absorption Ratio Granger-caused both the S&P500 and the VIX index, being the only simple measure that passed this test. The second paper develops this measure to capture the regimes underlying the American stock market. New indicators are built using filtering and random matrix theory. The returns of the S&P500 is modelled as a mixture of normal distributions. The activation of each normal distribution is governed by a Markov chain with the transition probabilities being a function of the indicators. The model shows that using a Herfindahl-Hirschman Index of the normalized eigenval- ues exhibits best fit to the returns from 1998-2013.

Monetary policy, default risk and the exchange rate

In a country with high probability of default, higher interest rates may render the currency less attractive if sovereign default is costly. This paper develops that intuition in a simple model and estimates the effect of changes in interest rates on the exchange rate in Brazil using data from the dates surrounding the monetary policy committee meetings and the methodology of identification through heteroskedasticity. Indeed, we find that unexpected increases in interest rates tend to lead the Brazilian currency to depreciate. It follows that granting more independence to a central bank that focus solely on inflation is not always a free-lunch.

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.

A model of competition and interbank network formation

This work aims to understand the interaction between competition and network formation in the banking market. Combining Matutes and Padilla (1994) and Matutes and Vives (2000), we build a model of imperfect bank competition for deposits in which an interbank relationship network is a key strategic decision: it affects banks’ profit and risk position. The competition level exerts influence in the banking network structure since it affects the network outcomes. As result, we have that different competition levels imply different network topologies. Specifically, greater competition imply denser networks. Finally, when we allow for the possibility of collusion, the denser network can come out in the least competitive environment.

Transfer function-noise modeling and spatial interpolation to evaluate the risk of extreme (shallow) water-table levels in the Brazilian Cerrados

Coordenação de Aperfeiçoamento de Pessoal de Nível Superior (CAPES)

Semiparametric modeling of the spatial distribution of occupational accident risk in the casual labor market, Piracicaba, southeast Brazil

The objective of this study was to estimate the spatial distribution of work accident risk in the informal work market in the urban zone of an industrialized city in southeast Brazil and to examine concomitant effects of age, gender, and type of occupation after controlling for spatial risk variation. The basic methodology adopted was that of a population-based case-control study with particular interest focused on the spatial location of work. Cases were all casual workers in the city suffering work accidents during a one-year period; controls were selected from the source population of casual laborers by systematic random sampling of urban homes. The spatial distribution of work accidents was estimated via a semiparametric generalized additive model with a nonparametric bidimensional spline of the geographical coordinates of cases and controls as the nonlinear spatial component, and including age, gender, and occupation as linear predictive variables in the parametric component. We analyzed 1,918 cases and 2,245 controls between 1/11/2003 and 31/10/2004 in Piracicaba, Brazil. Areas of significantly high and low accident risk were identified in relation to mean risk in the study region (p < 0.01). Work accident risk for informal workers varied significantly in the study area. Significant age, gender, and occupational group effects on accident risk were identified after correcting for this spatial variation. A good understanding of high-risk groups and high-risk regions underpins the formulation of hypotheses concerning accident causality and the development of effective public accident prevention policies.

Mortality Risk in Insects

Understanding how and why insect numbers fluctuate through time and space has been a central theme in ecological research for more than a century. Life tables have been used to understand temporal and spatial patterns in insect numbers. In this study, we estimated cause-of-death probabilities for phytophagous insects using multiple decrement life tables and the irreplaceable mortality analytic technique. Multiple decrement life tables were created from 73 insect life tables published from 1954 to 2004. Irreplaceable mortality (the portion of mortality that cannot be replaced by another cause) from pathogens, predators, and parasitoids was 8.6 +/- 7.2, 7.8 +/- 4.9, and 6.2 +/- 1.6%, respectively. In contrast, the mean irreplaceable mortality from all non-natural enemy mortality factors (mortality from factors other than natural enemies) was 35.1 +/- 4.4%. Irreplaceable mortality from natural enemies was significantly lower compared with non-natural enemy factors. Our results may partially explain cases of unsuccessful efficacy in classical biological control, after successful establishment, by showing low irreplaceable mortality for natural enemies, including 5.2 +/- 1.6% for introduced natural enemies. We suggest that the environment (i.e., the degree of environmental stability) influences the magnitude of the irreplaceable mortality from natural enemies. Our results lead to several testable hypotheses and emphasize that it is not possible to estimate the effect of any mortality factor without considering its interaction with competing mortality factors, which has far-reaching consequences for population biology and applied ecology.

Evaluation of the elevated T-maze as an animal model of anxiety in the mouse

The elevated T-maze has been developed as an animal model of anxiety to generate both conditioned and unconditioned fears in the same rat. This study explores a version of the elevated T-maze fit for mice. Inhibitory (passive) avoidance-conditioned fear-is measured by recording the latency to leave the enclosed arm during three consecutive trials. One-way escape-unconditioned fear-is measured by recording the time to withdraw from open arms. The results showed that mice do not appear to acquire inhibitory avoidance in the standard T-maze, since their latencies to leave enclosed arm did not increase along trials. Nevertheless, the open arms seemed to be aversive for mice, because the latency to leave the enclosed arm after the first trial was lower in a T-maze with the three enclosed arms than in the standard elevated T-maze, In agreement, the exposure of mice to an elevated T-maze without shield, that reduces the perception of openness, increased significantly the latencies to leave the enclosed arm, However, the absence of the shield also increased the time taken to leave the open arms when compared to that recorded in standard T-maze. Systematic observation of behavioral items in the enclosed arm has shown that risk assessment behavior decreases along trials while freezing increases. In the open arms, freezing did not appear to influence the high latency to leave this compartment, since mice spend only about 8% of their time exhibiting this behavior, These results suggest that mice acquire inhibitory avoidance of the open arms by decreasing and increasing time in risk assessment and freezing, respectively, along three consecutive trials, However, one-way escape could not be characterized. Therefore, there are important differences between mice (present results) and rats (previously reported results) in the performance of behavioral tasks in the elevated T-maze. (C) 1999 Elsevier B.V.

Modelos de sobrevivência com fração de cura e erro de medida nas covariáveis

In this work, we study the survival cure rate model proposed by Yakovlev et al. (1993), based on a competing risks structure concurring to cause the event of interest, and the approach proposed by Chen et al. (1999), where covariates are introduced to model the risk amount. We focus the measurement error covariates topics, considering the use of corrected score method in order to obtain consistent estimators. A simulation study is done to evaluate the behavior of the estimators obtained by this method for finite samples. The simulation aims to identify not only the impact on the regression coefficients of the covariates measured with error (Mizoi et al. 2007) but also on the coefficients of covariates measured without error. We also verify the adequacy of the piecewise exponential distribution to the cure rate model with measurement error. At the end, model applications involving real data are made

The Conway-Maxwell-Poisson-generalized gamma regression model with long-term survivors

In this paper, we proposed a flexible cure rate survival model by assuming the number of competing causes of the event of interest following the Conway-Maxwell distribution and the time for the event to follow the generalized gamma distribution. This distribution can be used to model survival data when the hazard rate function is increasing, decreasing, bathtub and unimodal-shaped including some distributions commonly used in lifetime analysis as particular cases. Some appropriate matrices are derived in order to evaluate local influence on the estimates of the parameters by considering different perturbations, and some global influence measurements are also investigated. Finally, data set from the medical area is analysed.

Combined Pool/Bilateral Short-Term Hydrothermal Scheduling Model for Day-Ahead Energy Markets

This paper proposes a combined pool/bilateral short term hydrothermal scheduling model (PDC) for the context of the day-ahead energy markets. Some innovative aspects are introduced in the model, such as: i) the hydraulic generation is optimized through the opportunity cost function proposed; ii) there is no decoupling between physical and commercial dispatches, as is the case today in Brazil; iii) interrelationships between pool and bilateral markets are represented through a single optimization problem; iv) risk exposures related to future deficits are intrinsically mitigated; v) the model calculates spot prices in an hourly basis and the results show a coherent correlation between hydrological conditions and calculated prices. The proposed PDC model is solved by a primal-dual interior point method and is evaluated by simulations involving a test system. The results are focused on sensitivity analyses involving the parameters of the model, in such a way to emphasize its main modeling aspects. The results show that the proposed PDC provides a conceptual means for short term price formation for hydrothermal systems.

Geographic and Educational Factors and Risk of the First Peritonitis Episode in Brazilian Peritoneal Dialysis Study (BRAZPD) Patients

Background and objectives Peritonitis remains as the most frequent cause of peritoneal dialysis (PD) failure, impairing patient's outcome. No large multicenter study has addressed socioeconomic, educational, and geographic issues as peritonitis risk factors in countries with a large geographic area and diverse socioeconomic conditions, such as Brazil.Design, setting, participants, & measurements Incident PD patients recruited from 114 dialysis centers and reporting to BRAZPD, a multicenter observational study, from December 2004 through October 2007 were included. Clinical, dialysis-related, demographic, and socioeconomic variables were analyzed. Patients were followed up until their first peritonitis. Cox proportional model was used to determine independent factors associated with peritonitis.Results In a cumulative follow-up of 2032 patients during 22.026 patient-months, 474 (23.3%) presented a first peritonitis episode. In contrast to earlier findings, PD modality, previous hemodialysis, diabetes, gender, age, and family income were not risk predictors. Factors independently associated with increased hazard risk were lower educational level, non-white race, region where patients live, shorter distance from dialysis center, and lower number of patients per center.Conclusions Educational level and geographic factors as well as race and center size are associated with risk for the first peritonitis, independent of socioeconomic status, PD modality, and comorbidities. Clin J Am Soc Nephrol 6: 1944-1951, 2011. doi: 10.2215/CJN.11431210

Quality of life and its association with cardiovascular risk factors in a community health care program population

OBJECTIVE: To evaluate quality of life in a population that attended a specific community event on health care education, and to investigate the association of their quality of life with the presence of cardiovascular risk factors INTRODUCTION: Interest in health-related quality of life is growing worldwide as a consequence of increasing rates of chronic disease. However, little is known about the association between quality of life and cardiovascular risk factors. METHODS: This study included 332 individuals. Demographics, blood pressure, body mass index, and casual glycemia were evaluated. The brief version of the World Health Organization Quality of Life questionnaire on quality of life was given to them. The medians of the scores obtained for the physical, psychological, emotional, and environmental domains were used as cutoffs to define higher and lower scores. A multinomial logistic regression model was used to define the parameters associated with lower scores. RESULTS: Diabetes mellitus, dyslipidemia, and obesity were associated with lower scores in the physical domain. Dyslipidemia was also associeted with lower scores in the psychological domain. Male gender and regular physical activity had protective effects on quality of life. Aging was inversely associated with decreased quality of life in the environmental domain. CONCLUSION: The presence of cardiovascular risk factors is related to a decreased quality of life. Conversely, male gender and regular physical activity had protective effects on quality of life. These findings suggest that exercising should be further promoted by health-related public programs, with a special focus on women.

Group B streptococci colonization in pregnant women: risk factors and evaluation of the vaginal flora

Fundação de Amparo à Pesquisa do Estado de São Paulo (FAPESP)