Crises and growth: A re-evaluation

We address the question of whether growth and welfare can be higher in crisis prone economies. First, we show that there is a robust empirical link between per-capita GDP growth and negative skewness of credit growth across countries with active financial markets. That is, countries that have experienced occasional crises have grown on average faster than countries with smooth credit conditions. We then present a two-sector endogenous growth model in which financial crises can occur, and analyze the relationship between financial fragility and growth. The underlying credit market imperfections generateborrowing constraints, bottlenecks and low growth. We show that under certain conditions endogenous real exchange rate risk arises and firms find it optimal to take on credit risk in the form of currency mismatch. Along such a risky path average growth is higher, but self-fulfilling crises occur occasionally. Furthermore, we establish conditions under which the adoption of credit risk is welfare improving and brings the allocation nearer to the Pareto optimal level. The design of the model is motivated by several features of recent crises: credit risk in the form of foreign currency denominated debt; costly crises that generate firesales and widespread bankruptcies; and asymmetric sectorial responses, wherethe nontradables sector falls more than the tradables sector in the wake of crises.

Interbank comptetition with costly screening

We analyse credit market equilibrium when banks screen loan applicants. When banks have a convex cost function of screening, a pure strategy equilibrium exists where banks optimally set interest rates at the same level as their competitors. This result complements Broecker s (1990) analysis, where he demonstrates that no pure strategy equilibrium exists when banks have zero screening costs. In our set up we show that interest rate on loansare largely independent of marginal costs, a feature consistent with the extant empirical evidence. In equilibrium, banks make positive profits in our model in spite of the threat of entry by inactive banks. Moreover, an increase in the number of active banks increases credit risk and so does not improve credit market effciency: this point has important regulatory implications. Finally, we extend our analysis to the case where banks havediffering screening abilities.

The optimal dividend barrier in the Gamma-Omega model

In the traditional actuarial risk model, if the surplus is negative, the company is ruined and has to go out of business. In this paper we distinguish between ruin (negative surplus) and bankruptcy (going out of business), where the probability of bankruptcy is a function of the level of negative surplus. The idea for this notion of bankruptcy comes from the observation that in some industries, companies can continue doing business even though they are technically ruined. Assuming that dividends can only be paid with a certain probability at each point of time, we derive closed-form formulas for the expected discounted dividends until bankruptcy under a barrier strategy. Subsequently, the optimal barrier is determined, and several explicit identities for the optimal value are found. The surplus process of the company is modeled by a Wiener process (Brownian motion).

Cotton manufacturers as bankers: the textile trade and credit in spain, 1840-1913

[cat] La historiografia ha assenyalat que en el segle XIX el crèdit que els fabricants cotoners catalans oferien als seus clients era de caràcter informal i, per tant, impossible de ser transferit al sistema bancari. Això hauria tingut un efecte negatiu en la rendibilitat de les empreses cotoneres. A partir de l’anàlisi de diversos arxius empresarials, així com de fonts judicials i notarials, aquest treball confirma aquesta descripció dels fets però proposa una interpretació més optimista. Els fabricants feien de banquers dels seus clients perquè eren els millor situats per a exercir aquesta funció. Havien construït una bona estructura d’informació, gestionaven eficientment el risc creditici i obtenien beneficis d’aquesta activitat.

Cotton manufacturers as bankers: the textile trade and credit in spain, 1840-1913

[cat] La historiografia ha assenyalat que en el segle XIX el crèdit que els fabricants cotoners catalans oferien als seus clients era de caràcter informal i, per tant, impossible de ser transferit al sistema bancari. Això hauria tingut un efecte negatiu en la rendibilitat de les empreses cotoneres. A partir de l’anàlisi de diversos arxius empresarials, així com de fonts judicials i notarials, aquest treball confirma aquesta descripció dels fets però proposa una interpretació més optimista. Els fabricants feien de banquers dels seus clients perquè eren els millor situats per a exercir aquesta funció. Havien construït una bona estructura d’informació, gestionaven eficientment el risc creditici i obtenien beneficis d’aquesta activitat.

Secondary Cancer Risk for Stage I Seminoma Patients - a Comparison of Adjuvant Treatment Versus Surveillance

Background: Post-surgical management of stage I seminoma includes: surveillance with repeated CT-scans and treatment reserved for those who relapse, or adjuvant treatment with either immediate radiation therapy (RT) or carboplatin. The cancer specific survival is close to 100%. Cure without long-term sequelae of treatment is the aim. Our goal is to estimate the risk of radiation-induced secondary cancers (SC) death from for patients undergoing S, adjuvant RT or adjuvant carboplatin (AC).Materials and Methods: We measured organ doses from CT scans (3 phases each one) of a seminoma patient who was part of the active surveillance strategy and from a man undergoing adjuvant RT 20-Gy and a 30-Gy salvage RT treatment to the para-aortic area using helical Intensity Modulated RT (Tomotherapy®) with accurate delineation of organs at risk and a CTV to PTV expansion of 1 cm. Effective doses to organs in mSv were estimated according to the tissue-weighting factors recommendations of the International Commission on Radiological Protection 103 (Ann ICRP 2007). We estimated SC incidence and mortality for a 10,000 people population based on the excess absolute risk model from the Biological Effects of Ionizing Radiation (BEIR) VII (Health Risk of Exposure to Low Levels of Ionizing Radiation, NCR, The National Academies Press Washington, DC, 2006) assuming a seminoma diagnosis at age 30, a total life expectancy of 80 years.Results: The nominal risk for a fatal secondary cancers was calculated 1.5% for 15 abdominal CT scans, 14.8% for adjuvant RT (20 Gy paraaortic field) and 22.2% for salvage RT (30 Gy). The calculation assumed that the risk of relapse on surveillance and adjuvant AC was 15% and 4% respectively and that all patients were salvaged at relapse with RT. n CT abdomen/Pelvis = secondary cancer % RT Dose and % receiving treatment = secondary cancer % Total secondary cancer risk in % Active surveillance 15 = 1.5% 30 Gy in 15% of pts = 3.3% 4.8 Adjuvant carboplatin 7 = 0.7% 30 Gy in 4% of pts = 0.88% 1.58 Adjuvant radiotherapy 7 = 0.7% 20 Gy in 100% of pts = 14.8% 15.5Conclusions: These data suggest that: 1) Adjuvant radiotherapy is harmful and should not anymore be regarded as a standard option for seminoma stage I. 2) AC seems to be an option to reduce radiation induced cancers. Limitations: the study does not consider secondary cancers due to chemotherapy with AC (unknown). The use of BEIR VII for risk modeling with higher doses of RT needs to be validated.

Frailty and risk for heart failure in older adults: The health, aging, and body composition study.

OBJECTIVE: The aim of this study was to assess the association between frailty and risk for heart failure (HF) in older adults. BACKGROUND: Frailty is common in the elderly and is associated with adverse health outcomes. Impact of frailty on HF risk is not known. METHODS: We assessed the association between frailty, using the Health ABC Short Physical Performance Battery (HABC Battery) and the Gill index, and incident HF in 2825 participants aged 70 to 79 years. RESULTS: Mean age of participants was 74 ± 3 years; 48% were men and 59% were white. During a median follow up of 11.4 (7.1-11.7) years, 466 participants developed HF. Compared to non-frail participants, moderate (HR 1.36, 95% CI 1.08-1.71) and severe frailty (HR 1.88, 95% CI 1.02-3.47) by Gill index was associated with a higher risk for HF. HABC Battery score was linearly associated with HF risk after adjusting for the Health ABC HF Model (HR 1.24, 95% CI 1.13-1.36 per SD decrease in score) and remained significant when controlled for death as a competing risk (HR 1.30; 95% CI 1.00-1.55). Results were comparable across age, sex, and race, and in sub-groups based on diabetes mellitus or cardiovascular disease at baseline. Addition of HABC Battery scores to the Health ABC HF Risk Model improved discrimination (change in C-index, 0.014; 95% CI 0.018-0.010) and appropriately reclassified 13.4% (net-reclassification-improvement 0.073, 95% CI 0.021-0.125; P = .006) of participants (8.3% who developed HF and 5.1% who did not). CONCLUSIONS: Frailty is independently associated with risk of HF in older adults.

Optimal dividend strategies for a compound Poisson risk process under transaction costs and power utility

We characterize the value function of maximizing the total discounted utility of dividend payments for a compound Poisson insurance risk model when strictly positive transaction costs are included, leading to an impulse control problem. We illustrate that well known simple strategies can be optimal in the case of exponential claim amounts. Finally we develop a numerical procedure to deal with general claim amount distributions.

Properties of a risk measure derived from ruin theory

This paper studies a risk measure inherited from ruin theory and investigates some of its properties. Specifically, we consider a value-at-risk (VaR)-type risk measure defined as the smallest initial capital needed to ensure that the ultimate ruin probability is less than a given level. This VaR-type risk measure turns out to be equivalent to the VaR of the maximal deficit of the ruin process in infinite time. A related Tail-VaR-type risk measure is also discussed.

Market Index Biases and Minimum Risk Indices

Markets, in the real world, are not efficient zero-sum games where hypotheses of the CAPM are fulfilled. Then, it is easy to conclude the market portfolio is not located on Markowitz"s efficient frontier, and passive investments (and indexing) are not optimal but biased. In this paper, we define and analyze biases suffered by passive investors: the sample, construction, efficiency and active biases and tracking error are presented. We propose Minimum Risk Indices (MRI) as an alternative to deal with to market index biases, and to provide investors with portfolios closer to the efficient frontier, that is, more optimal investment possibilities. MRI (using a Parametric Value-at-Risk Minimization approach) are calculated for three stock markets achieving interesting results. Our indices are less risky and more profitable than current Market Indices in the Argentinean and Spanish markets, facing that way the Efficient Market Hypothesis. Two innovations must be outlined: an error dimension has been included in the backtesting and the Sharpe"s Ratio has been used to select the"best" MRI

Risk and global change : developing scientific methods for advocacy and awareness raising

Les catastrophes sont souvent perçues comme des événements rapides et aléatoires. Si les déclencheurs peuvent être soudains, les catastrophes, elles, sont le résultat d'une accumulation des conséquences d'actions et de décisions inappropriées ainsi que du changement global. Pour modifier cette perception du risque, des outils de sensibilisation sont nécessaires. Des méthodes quantitatives ont été développées et ont permis d'identifier la distribution et les facteurs sous- jacents du risque.¦Le risque de catastrophes résulte de l'intersection entre aléas, exposition et vulnérabilité. La fréquence et l'intensité des aléas peuvent être influencées par le changement climatique ou le déclin des écosystèmes, la croissance démographique augmente l'exposition, alors que l'évolution du niveau de développement affecte la vulnérabilité. Chacune de ses composantes pouvant changer, le risque est dynamique et doit être réévalué périodiquement par les gouvernements, les assurances ou les agences de développement. Au niveau global, ces analyses sont souvent effectuées à l'aide de base de données sur les pertes enregistrées. Nos résultats montrent que celles-ci sont susceptibles d'être biaisées notamment par l'amélioration de l'accès à l'information. Elles ne sont pas exhaustives et ne donnent pas d'information sur l'exposition, l'intensité ou la vulnérabilité. Une nouvelle approche, indépendante des pertes reportées, est donc nécessaire.¦Les recherches présentées ici ont été mandatées par les Nations Unies et par des agences oeuvrant dans le développement et l'environnement (PNUD, l'UNISDR, la GTZ, le PNUE ou l'UICN). Ces organismes avaient besoin d'une évaluation quantitative sur les facteurs sous-jacents du risque, afin de sensibiliser les décideurs et pour la priorisation des projets de réduction des risques de désastres.¦La méthode est basée sur les systèmes d'information géographique, la télédétection, les bases de données et l'analyse statistique. Une importante quantité de données (1,7 Tb) et plusieurs milliers d'heures de calculs ont été nécessaires. Un modèle de risque global a été élaboré pour révéler la distribution des aléas, de l'exposition et des risques, ainsi que pour l'identification des facteurs de risque sous- jacent de plusieurs aléas (inondations, cyclones tropicaux, séismes et glissements de terrain). Deux indexes de risque multiples ont été générés pour comparer les pays. Les résultats incluent une évaluation du rôle de l'intensité de l'aléa, de l'exposition, de la pauvreté, de la gouvernance dans la configuration et les tendances du risque. Il apparaît que les facteurs de vulnérabilité changent en fonction du type d'aléa, et contrairement à l'exposition, leur poids décroît quand l'intensité augmente.¦Au niveau local, la méthode a été testée pour mettre en évidence l'influence du changement climatique et du déclin des écosystèmes sur l'aléa. Dans le nord du Pakistan, la déforestation induit une augmentation de la susceptibilité des glissements de terrain. Les recherches menées au Pérou (à base d'imagerie satellitaire et de collecte de données au sol) révèlent un retrait glaciaire rapide et donnent une évaluation du volume de glace restante ainsi que des scénarios sur l'évolution possible.¦Ces résultats ont été présentés à des publics différents, notamment en face de 160 gouvernements. Les résultats et les données générées sont accessibles en ligne (http://preview.grid.unep.ch). La méthode est flexible et facilement transposable à des échelles et problématiques différentes, offrant de bonnes perspectives pour l'adaptation à d'autres domaines de recherche.¦La caractérisation du risque au niveau global et l'identification du rôle des écosystèmes dans le risque de catastrophe est en plein développement. Ces recherches ont révélés de nombreux défis, certains ont été résolus, d'autres sont restés des limitations. Cependant, il apparaît clairement que le niveau de développement configure line grande partie des risques de catastrophes. La dynamique du risque est gouvernée principalement par le changement global.¦Disasters are often perceived as fast and random events. If the triggers may be sudden, disasters are the result of an accumulation of actions, consequences from inappropriate decisions and from global change. To modify this perception of risk, advocacy tools are needed. Quantitative methods have been developed to identify the distribution and the underlying factors of risk.¦Disaster risk is resulting from the intersection of hazards, exposure and vulnerability. The frequency and intensity of hazards can be influenced by climate change or by the decline of ecosystems. Population growth increases the exposure, while changes in the level of development affect the vulnerability. Given that each of its components may change, the risk is dynamic and should be reviewed periodically by governments, insurance companies or development agencies. At the global level, these analyses are often performed using databases on reported losses. Our results show that these are likely to be biased in particular by improvements in access to information. International losses databases are not exhaustive and do not give information on exposure, the intensity or vulnerability. A new approach, independent of reported losses, is necessary.¦The researches presented here have been mandated by the United Nations and agencies working in the development and the environment (UNDP, UNISDR, GTZ, UNEP and IUCN). These organizations needed a quantitative assessment of the underlying factors of risk, to raise awareness amongst policymakers and to prioritize disaster risk reduction projects.¦The method is based on geographic information systems, remote sensing, databases and statistical analysis. It required a large amount of data (1.7 Tb of data on both the physical environment and socio-economic parameters) and several thousand hours of processing were necessary. A comprehensive risk model was developed to reveal the distribution of hazards, exposure and risk, and to identify underlying risk factors. These were performed for several hazards (e.g. floods, tropical cyclones, earthquakes and landslides). Two different multiple risk indexes were generated to compare countries. The results include an evaluation of the role of the intensity of the hazard, exposure, poverty, governance in the pattern and trends of risk. It appears that the vulnerability factors change depending on the type of hazard, and contrary to the exposure, their weight decreases as the intensity increases.¦Locally, the method was tested to highlight the influence of climate change and the ecosystems decline on the hazard. In northern Pakistan, deforestation exacerbates the susceptibility of landslides. Researches in Peru (based on satellite imagery and ground data collection) revealed a rapid glacier retreat and give an assessment of the remaining ice volume as well as scenarios of possible evolution.¦These results were presented to different audiences, including in front of 160 governments. The results and data generated are made available online through an open source SDI (http://preview.grid.unep.ch). The method is flexible and easily transferable to different scales and issues, with good prospects for adaptation to other research areas. The risk characterization at a global level and identifying the role of ecosystems in disaster risk is booming. These researches have revealed many challenges, some were resolved, while others remained limitations. However, it is clear that the level of development, and more over, unsustainable development, configures a large part of disaster risk and that the dynamics of risk is primarily governed by global change.

Monitoring bank performance in the presence of risk

This paper proposes a managerial control tool that integrates risk in efficiency scores. Building on existing efficiency specifications, our proposal reflects the real banking technology and accurately models the relationship between desirable and undesirable outputs. Specifically, the undesirable output is defined as non-performing loans to capture credit risk, and is linked only to the relevant dimension of the output set. We empirically illustrate how our efficiency measure functions for managerial control purposes. The application considers a unique dataset of Costa Rican banks during 1998-2012. Efficiency scores? implications are mostly discussed at bank-level, and their interpretations are enhanced by using accounting ratios. We also show the usefulness of our tool for corporate governance by examining performance changes around executive turnover. Results confirm that appointing CEOs from outside the bank significantly improves performance, thus suggesting the potential benefits of new organisational practices.

Determinants of credit default swap spread: evidence from european credit derivatives market

Tämän tutkielman tavoitteena on selvittää, mitkä tekijät vaikuttavat yrityksen ja valtion velkakirjojen väliseen tuottoeroon. Strukturaalisten luottoriskin hinnoittelumallien mukaan luottoriskiin vaikuttavia tekijöitä ovat yrityksen velkaantumisaste, volatiliteetti ja riskitön korkokanta. Tavoitteena on erityisesti tutkia, kuinka hyvin nämä teoreettiset tekijät selittävät tuottoeroja ja onko olemassa muita tärkeitä selittäviä tekijöitä. Luottoriskinvaihtosopimusten noteerauksia käytetään tuottoerojen määrittämiseen. Selittävät tekijät koostuvat sekä yrityskohtaisista että markkinalaajuisista muuttujista. Luottoriskinvaihtosopimusten ja yrityskohtaisten muuttujien data on kerätty yhteensä 50 yritykselle Euroalueen maista. Aineisto koostuu kuukausittaisista havainnoista aikaväliltä 01.01.2003-31.12.2006. Empiiriset tulokset osoittavat, että strukturaalisten mallien mukaiset tekijät selittävät vain pienen osan tuottoeron muutoksista yli ajan. Toisaalta nämä teoreettiset tekijät selittävät huomattavasti paremmin tuottoeron vaihtelua yli poikkileikkauksen. Muut kuin teoreettiset tekijät pystyvät selittämään suuren osan tuottoeron vaihtelusta. Erityisen tärkeäksi tuottoeron selittäväksi tekijäksi osoittautui yleinen riskipreemio velkakirjamarkkinoilla. Tulokset osoittavat, että luottoriskin hinnoittelumalleja on kehitettävä edelleenniin, että ne ottaisivat huomioon yrityskohtaisten tekijöiden lisäksi myös markkinalaajuisia tekijöitä.