Internship report: A guide to structured products – Reverse convertible on S&P500

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

Structured products in the current low interest rate environment

Directed Research Internship

Model risk in the pricing of exotic options

The growth experimented in recent years in both the variety and volume of structured products implies that banks and other financial institutions have become increasingly exposed to model risk. In this article we focus on the model risk associated with the local volatility (LV) model and with the Variance Gamma (VG) model. The results show that the LV model performs better than the VG model in terms of its ability to match the market prices of European options. Nevertheless, both models are subject to significant pricing errors when compared with the stochastic volatility framework.

The credit ratings game

The collapse of so many AAA-rated structured finance products in 2007-2008has brought renewed attention to the causes of ratings failures and the conflicts of interestin the Credit Ratings Industry. We provide a model of competition among Credit RatingsAgencies (CRAs) in which there are three possible sources of conflicts: 1) the CRA conflictof interest of understating credit risk to attract more business; 2) the ability of issuersto purchase only the most favorable ratings; and 3) the trusting nature of some investorclienteles who may take ratings at face value. We show that when combined, these give riseto three fundamental equilibrium distortions. First, competition among CRAs can reducemarket efficiency, as competition facilitates ratings shopping by issuers. Second, CRAs aremore prone to inflate ratings in boom times, when there are more trusting investors, andwhen the risks of failure which could damage CRA reputation are lower. Third, the industrypractice of tranching of structured products distorts market efficiency as its role is to deceivetrusting investors. We argue that regulatory intervention requiring: i) upfront paymentsfor rating services (before CRAs propose a rating to the issuer), ii) mandatory disclosure ofany rating produced by CRAs, and iii) oversight of ratings methodology can substantiallymitigate ratings inflation and promote efficiency.

Multi-objective assembly job shop scheduling using genetic algorithm and tabu search

Assembly job shop scheduling problem (AJSP) is one of the most complicated combinatorial optimization problem that involves simultaneously scheduling the processing and assembly operations of complex structured products. The problem becomes even more complicated if a combination of two or more optimization criteria is considered. This thesis addresses an assembly job shop scheduling problem with multiple objectives. The objectives considered are to simultaneously minimizing makespan and total tardiness. In this thesis, two approaches viz., weighted approach and Pareto approach are used for solving the problem. However, it is quite difficult to achieve an optimal solution to this problem with traditional optimization approaches owing to the high computational complexity. Two metaheuristic techniques namely, genetic algorithm and tabu search are investigated in this thesis for solving the multiobjective assembly job shop scheduling problems. Three algorithms based on the two metaheuristic techniques for weighted approach and Pareto approach are proposed for the multi-objective assembly job shop scheduling problem (MOAJSP). A new pairing mechanism is developed for crossover operation in genetic algorithm which leads to improved solutions and faster convergence. The performances of the proposed algorithms are evaluated through a set of test problems and the results are reported. The results reveal that the proposed algorithms based on weighted approach are feasible and effective for solving MOAJSP instances according to the weight assigned to each objective criterion and the proposed algorithms based on Pareto approach are capable of producing a number of good Pareto optimal scheduling plans for MOAJSP instances.

Estudo sobre a valorização de produtos estruturados no mercado brasileiro entre 2006 e 2011

Produtos estruturados é uma combinação de ativos que inclui uma renda fixa e um ou mais derivativos embutidos. No Brasil, como ainda não existe uma regulamentação específica como nos Estados Unidos e Europa, a comercialização destes produtos é feita, principalmente, via Fundos de Investimentos Estruturados. O objetivo deste trabalho é avaliar se existe uma sobrevalorização na emissão de Fundos de Investimentos Estruturados. Para isso, calculou-se a diferença entre o preço de emissão e o preço teórico. Este preço teórico foi calculado sintetizando uma carteira composta de um componente renda fixa e os derivativos embutidos, valorizando-se os dois componentes com base na mesma metodologia abordada em publicações nacionais e internacionais. Foram analisados 40 fundos de Investimentos Fechados com emissão entre 2006 e 2011, observando-se que há indícios de uma diferença de preços, conclusão similar aos demais trabalhos que analisaram o tema. Esta diferença de preços encontrada pode ser explicada pelos custos de desenvolvimento dos produtos, pelos custos de hedge das operações e pelo fato dos pequenos investidores não terem acesso a este mercado diretamente. Adicionalmente, analisou-se a existência de uma relação de longo prazo entre as variáveis volatilidade e a diferença de preços encontrada. Através do Teste de Cointegração foi observado que existe uma tendência de longo prazo entre as variáveis. A Decomposição das Variâncias demonstra que as variações de margem são explicadas pelas variações na volatilidade e, por fim, o Teste da Causalidade de Granger indica que as variações da margem precedem as variações da volatilidade estimada. Com este resultado, espera-se contribuir para aumentar a transparência do mercado ao ilustrar a sofisticação das estruturas e, também, contribuir para o debate nas discussões sobre a nova regulamentação dos produtos estruturados que o Banco Central está em via de definir.

A utilização dos fundos de investimento imobiliários como veículos na gestão de ativos das empresas

No Brasil, historicamente, as companhias sempre detiveram ativos imobiliários (sede social, plantas fabris, galpões, etc.), influenciadas pela instabilidade macroeconômica, o que acarretava a dificuldade em estimar o preço do dinheiro. Com o controle inflacionário, foi possível expandir formas de financiamento de longo prazo, permitindo que as empresas passassem a realizar a alocação de recursos financeiros com mais eficiência, direcionando-os para as suas atividades principais. Assim, a discussão sobre a propriedade imobiliária pelas empresas é recente. E, há menos tempo ainda é que foram elaboradas novas alternativas, como os fundos de investimento imobiliário que tornaram-se mais representativos nos últimos três anos. Este trabalho visa analisar sobre as razões que permitem aos fundos de investimento imobiliário serem propostos como uma opção para as empresas realizarem a gestão de seus ativos imobiliários, quando estas buscarem não imobilizar recursos, mas sim, a locação do imóvel. Para alcançar este objetivo, o trabalho fará uma abordagem qualitativa, apresentando as características operacionais e tributárias dos fundos imobiliários e dois estudos de casos de empresas que promoveram a desmobilização de ativos por meio de fundos imobiliários. O primeiro caso é a venda de um centro de distribuição do Magazine Luiza, uma das maiores redes varejistas no Brasil, para o fundo Kinea Renda Imobiliária. O segundo exemplo é o processo de desmobilização do Banco do Brasil e o desenvolvimento do fundo BB Progressivo II. Será verificado que os objetivos das empresas foram alcançados nos dois casos e que, de fato, os fundos imobiliários podem ser considerados como uma alternativa. Entretanto, não é possível a conclusão de que ele produza os melhores resultados e que exista alguma atividade empresarial que tenha maior propensão a sua utilização. A pesquisa aborda os fundos de investimento imobiliário com o foco no locatário e possibilita que sejam aprimorados estudos quantitativos, identificando reações do mercado brasileiro ao aumento na quantidade de operações, e outras pesquisas qualitativas que envolvam novas estruturas de financiamento.

Avaliação do efeito da combinação de pectina, gelatina e alginato de sódio sobre as características de gel de fruta estruturada a partir de "mix" de polpa de cajá e mamão, por meio da metodologia de superfície de resposta

Este trabalho teve por objetivo estabelecer procedimento tecnológico para produção de fruta estruturada a partir de "mix" de polpa de cajá e mamão, procurando unir as propriedades sensoriais de cada uma das frutas e potencializar as características funcionais do produto final. Avaliou-se o efeito da combinação de pectina, gelatina e alginato de sódio, via metodologia de superfície de resposta, nas características do gel de fruta. As polpas de mamão e cajá e os estruturados obtidos foram caracterizados com relação aos compostos funcionais, avaliando-se o teor de taninos e carotenóides totais, além das análises de composição centesimal, pH, acidez titulável, sólidos solúveis, açúcares, atividade de água, carboidratos e valor energético total. Os resultados obtidos através do planejamento experimental indicam que para o estruturado misto de cajá e mamão, somente o aumento da concentração de gelatina afeta a firmeza do produto final. Os estruturados de frutas desenvolvidos apresentaram boa aceitação sensorial para todos os atributos avaliados. Com relação à intenção de compra, 70% dos provadores responderam que provavelmente ou certamente, comprariam o estruturado misto de cajá e mamão se o encontrassem à venda.

Análisis, dignóstico y propuesta para fomentar el destino turístico Bolivia enfocado al turismo emisivo de la ciudad de Cuenca, con la ruta que efrece LAN hacia La Paz y Santa Cruz 2015-2016

El presente trabajo de investigación tiene como objetivo conocer la oferta y demanda del mercado turístico emisivo hacia Bolivia desde la ciudad de Cuenca, con la finalidad de fomentar el turismo hacia nuevos destinos, enfocado principalmente en las ciudades de: La Paz y Santa Cruz de la Sierra, con la ruta que ofrece la aerolínea LAN hacia estos destinos. Para el desarrollo de la tesis se investigó el comportamiento de los pasajeros que deciden comprar los boletos en las oficinas de LAN, y las particularidades de las agencias de viajes que tienen convenio con la mencionada aerolínea, con la finalidad de determinar si existe un potencial mercado emisivo en la ciudad de Cuenca que esté dispuesto a visitar Bolivia; los resultados que se obtuvieron en este análisis definenprincipalmente la oferta y la demanda actual; adicionalmente se obtuvo la información necesaria de las agencias de viajes para informar y capacitar a los agentes de viajes, sobre los diferentes atractivos turísticos y sitios de interés con los que cuenta Bolivia; en base de toda ésta información, se propone la creación de diferentes paquetes con alternativas de turismo para los pasajeros en la ciudad de Cuenca. El aporte que se suministra con el desarrollo de ésta investigación, principalmente a las agencias de viajes y promotores turísticos es el de demostrar que se pueden ofertar lugares nuevos, que aún no han sido explotados en el mercado emisivo de la ciudad de Cuenca, para que no se limiten únicamente a competir por los productos de siempre previamente estructurados y saturados.

The influence of sports events endorsement on children’s perceptions of healthy food products and brands

Field lab in marketing: Children consumer behaviour

Structured software development with the IPIDDDT method - A lean method for small agile organizations

A software development process is a predetermined sequence of steps to create a piece of software. A software development process is used, so that an implementing organization could gain significant benefits. The benefits for software development companies, that can be attributed to software process improvement efforts, are improved predictability in the development effort and improved quality software products. The implementation, maintenance, and management of a software process as well as the software process improvement efforts are expensive. Especially the implementation phase is expensive with a best case scenario of a slow return on investment. Software processes are rare in very small software development companies because of the cost of implementation and an improbable return on investment. This study presents a new method to enable benefits that are usually related to software process improvement to small companies with a low cost. The study presents reasons for the development of the method, a description of the method, and an implementation process for the method, as well as a theoretical case study of a method implementation. The study's focus is on describing the method. The theoretical use case is used to illustrate the theory of the method and the implementation process of the method. The study ends with a few conclusions on the method and on the method's implementation process. The main conclusion is that the method requires further study as well as implementation experiments to asses the value of the method.

Solution of aerospace problems using structured and unstructured strategies

Products developed at industries, institutes and research centers are expected to have high level of quality and performance, having a minimum waste, which require efficient and robust tools to numerically simulate stringent project conditions with great reliability. In this context, Computational Fluid Dynamics (CFD) plays an important role and the present work shows two numerical algorithms that are used in the CFD community to solve the Euler and Navier-Stokes equations applied to typical aerospace and aeronautical problems. Particularly, unstructured discretization of the spatial domain has gained special attention by the international community due to its ease in discretizing complex spatial domains. This work has the main objective of illustrating some advantages and disadvantages of numerical algorithms using structured and unstructured spatial discretization of the flow governing equations. Numerical methods include a finite volume formulation and the Euler and Navier-Stokes equations are applied to solve a transonic nozzle problem, a low supersonic airfoil problem and a hypersonic inlet problem. In a structured context, these problems are solved using MacCormack’s implicit algorithm with Steger and Warming’s flux vector splitting technique, while, in an unstructured context, Jameson and Mavriplis’ explicit algorithm is used. Convergence acceleration is obtained using a spatially variable time stepping procedure.

Distribution channel plan for wound care products: Case 3M Finland Ltd.

The aim of this master’s thesis was to make a qualitative marketing research and on the basis of this to develop a distribution plan for the case company Finnish 3M Ltd.’s wound care products. The literature review includes three important parts: distribution channel planning, the buying behavior of seniors, and special characteristics of health care products’ marketing. The empirical part of this thesis comprises two different parts. The first part is a marketing research, in which the buying behavior of wound care products is studied in Espoo. The research aim was to examine, in which distribution channels the wound care patients under home care would most preferably buy wound care products during the time period, when municipalities will not yet provide the products for free. The data was collected through semi-structured phone interviews and regular interviews, and was treated qualitatively and anonymously. The study revealed that the recommendations of nurses and doctors influenced most the buying behavior of wound care customers. In the second part of the thesis a distribution channel plan for wound care products was made for the case company 3M Finland Ltd. based on the results. 3M Finland Ltd. should focus on pharmacies, online-stores and municipal health centers as their main distributors.

Service product internationalisation : market selection for new service products in a multinational financial service firm

The significance and impact of services in the modern global economy has become greater and there has been more demand for decades in the academic community of international business for further research into better understanding internationalisation of services. Theories based on the internationalisation of manufacturing firms have been long questioned for their applicability to services. This study aims at contributing to understanding internationalisation of services by examining how market selection decisions are made for new service products within the existing markets of a multinational financial service provider. The study focused on the factors influencing market selection and the study was conducted as a case study on a multinational financial service firm and two of its new service products. Two directors responsible for the development and internationalisation of the case service products were interviewed in guided semi-structured interviews based on themes adopted from the literature review and the outcome theoretical framework. The main empirical findings of the study suggest that the most significant factors influencing the market selection for new service products within a multinational financial service firm’s existing markets are: commitment to the new service products by both the management and the rest of the product related organisation; capability and competence by the local country organisations to adopt new services; market potential which combines market size, market structure and competitive environment; product fit to the market requirements; and enabling partnerships. Based on the empirical findings, this study suggests a framework of factors influencing market selection for new service products, and proposes further research issues and methods to test and extend the findings of this research.