Parametric portfolio policies: An application for a global tactical asset allocation model

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

Fixed-mobile integration

Often, fixed-line incumbents also own the largest mobile network. We consider the effect of this joint ownership on market outcomes. Our model predicts that while fixed-to-mobile call prices to the integrated mobile network are more efficient than under separation, those to rival mobile networks are distorted upwards, amplifying any incumbency advantage. As concerns potential remedies, a uniform off-net pricing constraint leads to higher welfare than functional separation and even allows to maintain some of the efficiency gains.

What hides behind the fixed-term contracts wage gap?

In Portugal, about 20% of full-time workers are employed under a fixed-term contract. Using a rich longitudinal matched employer-employee dataset for Portugal, with more than 20 million observations and covering the 2002-2012 period, we confirm the common idea that fixed-term contracts are not desirable when compared to permanent ones, by estimating a conditional wage gap of -1.7 log points. Then, we evaluate the sources of that wage penalty by combining a three way high-dimensional fixed effects model with the decomposition of Gelbach (2014), in which the three dimensions considered are the worker’s unobserved ability, the firm’s compensation wage policy and the job title effect. It is shown that the average worker with a fixed-term contract is less productive than his/her permanent counterparts, explaining -3.92 log points of the FTC wage penalty. Additionally, the sorting of workers into lower-paid job titles is also responsible for -0.59 log points of the wage gap. Surprisingly, we found that the allocation of workers among firms mitigates the existing wage penalty (in 4.23 log points), as fixed-term workers are concentrated into firms with a more generous compensation policy. Finally, following Figueiredo et al. (2014), we further control for the worker-firm match characteristics and reach the conclusion that fixed-term employment relationships have an overrepresentation of low quality worker-firm matches, explaining 0.65 log points of the FTC wage penalty.

Credit default swap (CDS) prediction model & trading strategy

This project focuses on the study of different explanatory models for the behavior of CDS security, such as Fixed-Effect Model, GLS Random-Effect Model, Pooled OLS and Quantile Regression Model. After determining the best fitness model, trading strategies with long and short positions in CDS have been developed. Due to some specifications of CDS, I conclude that the quantile regression is the most efficient model to estimate the data. The P&L and Sharpe Ratio of the strategy are analyzed using a backtesting analogy, where I conclude that, mainly for non-financial companies, the model allows traders to take advantage of and profit from arbitrages.

Search-for-yield in Portuguese fixed-income mutual funds and monetary policy

This paper studies the effects of monetary policy on mutual fund risk taking using a sample of Portuguese fixed-income mutual funds in the 2000-2012 period. Firstly I estimate time-varying measures of risk exposure (betas) for the individual funds, for the benchmark portfolio, as well as for a representative equally-weighted portfolio, through 24-month rolling regressions of a two-factor model with two systematic risk factors: interest rate risk (TERM) and default risk (DEF). Next, in the second phase, using the estimated betas, I try to understand what portion of the risk exposure is in excess of the benchmark (active risk) and how it relates to monetary policy proxies (one-month rate, Taylor residual, real rate and first principal component of a cross-section of government yields and rates). Using this methodology, I provide empirical evidence that Portuguese fixed-income mutual funds respond to accommodative monetary policy by significantly increasing exposure, in excess of their benchmarks, to default risk rate and slightly to interest risk rate as well. I also find that the increase in funds’ risk exposure to gain a boost in return (search-for-yield) is more pronounced following the 2007-2009 global financial crisis, indicating that the current historic low interest rates may incentivize excessive risk taking. My results suggest that monetary policy affects the risk appetite of non-bank financial intermediaries.

A FEM-based model to study the behaviour of corroded RC beams shear repaired by NSM CFRP rods technique

This paper presents the main features of finite element FE numerical model developed using the computer code FEMIX to predict the near-surface mounted NSM carbon-fiber-reinforced polymer CFRP rods shear repair contribution to corroded reinforced concrete RC beams. In the RC beams shear repaired with NSM technique, the Carbon Fibre Reinforced Polymer (CFRP) rods are placed inside pre-cut grooves onto the concrete cover of the RC beam’s lateral faces and are bonded to the concrete with high epoxy adhesive. Experimental and 3D numerical modelling results are presented in this paper in terms of load-deflection curves, and failure modes for 4 short corroded beams: two corroded beams (A1CL3-B and A1CL3-SB) and two control beams (A1T-B and A1T-SB), the beams noted with B were let repaired in bending only with NSM CFRP rods while the ones noted with SB were repaired in both bending and shear with NSM technique. The corrosion of the tensile steel bars and its effect on the shear capacity of the RC beams was discussed. Results showed that the FE model was able to capture the main aspects of the experimental load-deflection curves of the RC beams, moreover it has presented the experimental failure modes and FE numerical modelling crack patterns and both gave similar results for non-shear repaired beams which failed in diagonal tension mode of failure and for shear-repaired beams which failed due to large flexural crack at the middle of the beams along with the concrete crushing, three dimensional crack patterns were produced for shear-repaired beams in order to investigate the splitting cracks occurred at the middle of the beams and near the support.

A FEM-based model to study the behaviour of corroded RC beams shear repaired by NSM CFRP rods technique

This paper presents the main features of finite element FE numerical model developed using the computer code FEMIX to predict the near-surface mounted NSM carbon-fiber-reinforced polymer CFRP rods shear repair contribution to corroded reinforced concrete RC beams. In the RC beams shear repaired with NSM technique, the Carbon Fibre Reinforced Polymer (CFRP) rods are placed inside pre-cut grooves onto the concrete cover of the RC beam’s lateral faces and are bonded to the concrete with high epoxy adhesive. Experimental and 3D numerical modelling results are presented in this paper in terms of load-deflection curves, failure modes and slip information of the tensile steel bars for 4 short corroded beams: two corroded beams (A1CL3-B and A1CL3-SB) and two control beams (A1T-B and A1T-SB), the beams noted with B were let repaired in bending only with NSM CFRP rods while the ones noted with SB were repaired in both bending and shear with NSM technique. The corrosion of the tensile steel bars and its effect on the shear capacity of the RC beams was discussed. Results showed that the FE model was able to capture the main aspects of the experimental load-deflection curves of the RC beams, moreover it has presented the experimental failure modes and FE numerical modelling crack patterns and both gave similar results for non-shear repaired beams which failed in diagonal tension mode of failure and for shear-repaired beams which failed due to large flexural crack at the middle of the beams along with the concrete crushing, three dimensional crack patterns were produced for shear-repaired beams in order to investigate the splitting cracks occurred at the middle of the beams and near the support.

A New Model Of Trend Inflation

This paper introduces a new model of trend (or underlying) inflation. In contrast to many earlier approaches, which allow for trend inflation to evolve according to a random walk, ours is a bounded model which ensures that trend inflation is constrained to lie in an interval. The bounds of this interval can either be fixed or estimated from the data. Our model also allows for a time-varying degree of persistence in the transitory component of inflation. The bounds placed on trend inflation mean that standard econometric methods for estimating linear Gaussian state space models cannot be used and we develop a posterior simulation algorithm for estimating the bounded trend inflation model. In an empirical exercise with CPI inflation we find the model to work well, yielding more sensible measures of trend inflation and forecasting better than popular alternatives such as the unobserved components stochastic volatility model.

The role of fixed delays in neuronal rate models

Fixed delays in neuronal interactions arise through synaptic and dendritic processing. Previous work has shown that such delays, which play an important role in shaping the dynamics of networks of large numbers of spiking neurons with continuous synaptic kinetics, can be taken into account with a rate model through the addition of an explicit, fixed delay. Here we extend this work to account for arbitrary symmetric patterns of synaptic connectivity and generic nonlinear transfer functions. Specifically, we conduct a weakly nonlinear analysis of the dynamical states arising via primary instabilities of the stationary uniform state. In this way we determine analytically how the nature and stability of these states depend on the choice of transfer function and connectivity. While this dependence is, in general, nontrivial, we make use of the smallness of the ratio in the delay in neuronal interactions to the effective time constant of integration to arrive at two general observations of physiological relevance. These are: 1 - fast oscillations are always supercritical for realistic transfer functions. 2 - Traveling waves are preferred over standing waves given plausible patterns of local connectivity.

La crisi sub-prime i el crack de 1929: Comparació d'episodis d'eufòria financera

Treball de recerca realitzat per un alumne d'ensenyament secundari i guardonat amb un Premi CIRIT per fomentar l'esperit científic del Jovent l'any 2009. La present investigació té per objecte d’estudi la relació, atès el període de turbulències econòmiques que travessa el món globalitzat, entre els episodis d’eufòria financera i les crisi financeres i econòmiques, i la periodicitat amb les que aquestes es produeixen. Aquesta pretén confrontar-se des d’una aproximació històric-econòmica, mitjançant l’anàlisi i la comparació de dos successos -el crack borsari de 1929 i la crisi sub-prime- per tal de demostrar la existència de comuns denominadors, i, a la llum dels resultats, apreciar les conclusions que aporta la Història. Serà, doncs, aquesta periodicitat i les seves implicacions la qual s'ambicionarà contrastar amb la realitat mitjançant l'aplicació i l'anàlisi pràctica de dos episodis rellevants i paradigmàtics, amb el recolzament i l'autoritat del model comparatiu establerts per l'economista John Kenneth Galbraith al seu llibre ''Breve historia de la euforia financiera''.

Molecular detection and identification of zygomycetes species from paraffin-embedded tissues in a murine model of disseminated zygomycosis: a collaborative European Society of Clinical Microbiology and Infectious Diseases (ESCMID) Fungal Infection Study Group (EFISG) evaluation.

The present study was performed to assess the interlaboratory reproducibility of the molecular detection and identification of species of Zygomycetes from formalin-fixed paraffin-embedded kidney and brain tissues obtained from experimentally infected mice. Animals were infected with one of five species (Rhizopus oryzae, Rhizopus microsporus, Lichtheimia corymbifera, Rhizomucor pusillus, and Mucor circinelloides). Samples with 1, 10, or 30 slide cuts of the tissues were prepared from each paraffin block, the sample identities were blinded for analysis, and the samples were mailed to each of seven laboratories for the assessment of sensitivity. A protocol describing the extraction method and the PCR amplification procedure was provided. The internal transcribed spacer 1 (ITS1) region was amplified by PCR with the fungal universal primers ITS1 and ITS2 and sequenced. As negative results were obtained for 93% of the tissue specimens infected by M. circinelloides, the data for this species were excluded from the analysis. Positive PCR results were obtained for 93% (52/56), 89% (50/56), and 27% (15/56) of the samples with 30, 10, and 1 slide cuts, respectively. There were minor differences, depending on the organ tissue, fungal species, and laboratory. Correct species identification was possible for 100% (30 cuts), 98% (10 cuts), and 93% (1 cut) of the cases. With the protocol used in the present study, the interlaboratory reproducibility of ITS sequencing for the identification of major Zygomycetes species from formalin-fixed paraffin-embedded tissues can reach 100%, when enough material is available.

Calomys callosus: an alternative model to study fibrosis in Schistosomiasis mansoni: the pathology of the acute phase

Twenty Calomys callosus, Rengger, 1830 (Rodentia-Cricetidae) were studied in the early stage of the acute schistosomal mansoni infection (42nd day). The same number of Swiss Webster mice were used as a comparative standard. Liver and intestinal sections, fixed in formalin-Millonig and embedded in paraffin, were stained with hematoxilin and eosin, PAS-Alcian Blue, pH = 1.0 and 2.5, Lennert's Giemsa, Picrosirius plus polarization microscopy, Periodic acid methanamine silver, Gomori's silver reticulin and resorcin-fuchsin. Immunohistological study (indirect immunofluorescence and peroxidase labeled extravidin-biotin methods) was done with antibodies specific to pro-collagen III, fibronectin, elastin, condroitin-sulfate, tenascin, alpha smooth muscle actin, vimentin and desmin. The hepatic granulomas were small, reaching only 27 of the volume of the hepatic Swiss Webster granuloma. They were composed mainly by large immature macrophages, often filled by schistosomal pigment, characterizing an exsudative-macrophage granuloma type. The granulomas were situated in the parenchyma and in the portal space. They were often intravascular, poor of extracellular matrix components, except fibronectin and presented, sometimes alpha smooth muscle actin and vimentin positive cells. The C. callosus intestinal granulomas were similar to Swiss Webster, showing predominance of macrophages. Therefore, the C. callosus acquire very well the Schistosoma mansoni infection, without developing strong hepatic acute granulomatous reaction, suggesting lack of histopathological signs of hypersensitivity.

Dynamic price competition with fixed capacities

Many revenue management (RM) industries are characterized by (a) fixed capacities in theshort term (e.g., hotel rooms, seats on an airline flight), (b) homogeneous products (e.g., twoairline flights between the same cities at similar times), and (c) customer purchasing decisionslargely influenced by price. Competition in these industries is also very high even with just twoor three direct competitors in a market. However, RM competition is not well understood andpractically all known implementations of RM software and most published models of RM donot explicitly model competition. For this reason, there has been considerable recent interestand research activity to understand RM competition. In this paper we study price competitionfor an oligopoly in a dynamic setting, where each of the sellers has a fixed number of unitsavailable for sale over a fixed number of periods. Demand is stochastic, and depending on howit evolves, sellers may change their prices at any time. This reflects the fact that firms constantly,and almost costlessly, change their prices (alternately, allocations at a price in quantity-basedRM), reacting either to updates in their estimates of market demand, competitor prices, orinventory levels. We first prove existence of a unique subgame-perfect equilibrium for a duopoly.In equilibrium, in each state sellers engage in Bertrand competition, so that the seller withthe lowest reservation value ends up selling a unit at a price that is equal to the equilibriumreservation value of the competitor. This structure hence extends the marginal-value conceptof bid-price control, used in many RM implementations, to a competitive model. In addition,we show that the seller with the lowest capacity sells all its units first. Furthermore, we extendthe results transparently to n firms and perform a number of numerical comparative staticsexploiting the uniqueness of the subgame-perfect equilibrium.

Fixed-term contracts and the duration distribution of unemployment

In the mid-1980s, many European countries introduced fixed-term contracts.Since then their labor markets have become more dynamic. This paper studiesthe implications of such reforms for the duration distribution ofunemployment, with particular emphasis on the changes in the durationdependence. I estimate a parametric duration model using cross-sectionaldata drawn from the Spanish Labor Force Survey from 1980 to 1994 to analyzethe chances of leaving unemployment before and after the introduction offixed-term contracts. I find that duration dependence has increased sincesuch reform. Semi-parametric estimation of the model also shows that forlong spells, the probability of leaving unemployment has decreased sincesuch reform.

On the performance of small-area estimators: Fixed vs. random area parameters

Most methods for small-area estimation are based on composite estimators derived from design- or model-based methods. A composite estimator is a linear combination of a direct and an indirect estimator with weights that usually depend on unknown parameters which need to be estimated. Although model-based small-area estimators are usually based on random-effects models, the assumption of fixed effects is at face value more appropriate.Model-based estimators are justified by the assumption of random (interchangeable) area effects; in practice, however, areas are not interchangeable. In the present paper we empirically assess the quality of several small-area estimators in the setting in which the area effects are treated as fixed. We consider two settings: one that draws samples from a theoretical population, and another that draws samples from an empirical population of a labor force register maintained by the National Institute of Social Security (NISS) of Catalonia. We distinguish two types of composite estimators: a) those that use weights that involve area specific estimates of bias and variance; and, b) those that use weights that involve a common variance and a common squared bias estimate for all the areas. We assess their precision and discuss alternatives to optimizing composite estimation in applications.