We investigate the characteristic of implied volatility in CDS market and its relationship with stock market within European area. The comprehensive analysis show that stock market weakly leads CDS market on daily changes but for implied volatility, the stock market leads CDS market, and VECM analysis show that only the stock market contribute to price discovery. For sub-investment grade entities, the interactivities between implied volatility of CDS market and implied volatility of stock market are stronger especially during the recent credit crunch period.
{"title":"Characteristic of Implied Volatility of CDSwaptions in ITraxx Market and its Relationship to Stock Market","authors":"R. Bhar, David B. Colwell, Peipei Wang","doi":"10.2139/ssrn.1402984","DOIUrl":"https://doi.org/10.2139/ssrn.1402984","url":null,"abstract":"We investigate the characteristic of implied volatility in CDS market and its relationship with stock market within European area. The comprehensive analysis show that stock market weakly leads CDS market on daily changes but for implied volatility, the stock market leads CDS market, and VECM analysis show that only the stock market contribute to price discovery. For sub-investment grade entities, the interactivities between implied volatility of CDS market and implied volatility of stock market are stronger especially during the recent credit crunch period.","PeriodicalId":47599,"journal":{"name":"European Journal of Finance","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2009-05-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82963457","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This succinct (20-page) review of the national Valuation Profession touches upon its history, present public mandate in the context of other types of economic measurements, and also describes the organization of its current administrative institutions (such as SRPOs), application of the national valuation standards and the related legislative framework. The review also contains a summary of the major points of the 2007 Valuation reform and the assessment of its effectiveness where a conclusion is reached that the positive results of this reform have been short-lived, if not illusory, and that, despite this recent reform, monumental transformations are required within the profession as never before (including the change of its basic methodology and the perception of its social functions) to make its survival feasible and publicly justifiable in the new economic environment.
{"title":"Review of the Russian Professional Valuation (Анализ российской профессиональной оценки: ее история, институты и состояние методологических дебатов) (Russian)","authors":"Andrey Igorevich Artemenkov","doi":"10.2139/ssrn.1501785","DOIUrl":"https://doi.org/10.2139/ssrn.1501785","url":null,"abstract":"This succinct (20-page) review of the national Valuation Profession touches upon its history, present public mandate in the context of other types of economic measurements, and also describes the organization of its current administrative institutions (such as SRPOs), application of the national valuation standards and the related legislative framework. The review also contains a summary of the major points of the 2007 Valuation reform and the assessment of its effectiveness where a conclusion is reached that the positive results of this reform have been short-lived, if not illusory, and that, despite this recent reform, monumental transformations are required within the profession as never before (including the change of its basic methodology and the perception of its social functions) to make its survival feasible and publicly justifiable in the new economic environment.","PeriodicalId":47599,"journal":{"name":"European Journal of Finance","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2009-05-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88056758","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This chapter models long-term electricity forward prices with variables that influence the price of electricity. Long-term modelling requires consideration of expected changes in the demand and supply structure. The model combines high-resolution information on fuel costs from financial markets and low-resolution information on the demand/supply structure of the electricity market. We model the latter using consumption and supply capacity and the former with forward prices of fuels, emission allowances and imported electricity. The model is estimated using data from the Nordic electricity market and global long-term forward prices of energy. Owing to a lack of data on consumption and supply capacity, the estimated results provide only the broad influence of these variables on forward prices. Though extrapolation of the prices observed in Nord Pool may suffer from the influence of short-term variables, such as precipitation and temperature, the model yields robust forecasts of the prices of contracts that are not exchange traded.
{"title":"Modelling the Structure of Long-Term Electricity Forward Prices at Nord Pool","authors":"M. Povh, Robert Golob, Stein-Erik Fleten","doi":"10.2139/ssrn.927172","DOIUrl":"https://doi.org/10.2139/ssrn.927172","url":null,"abstract":"This chapter models long-term electricity forward prices with variables that influence the price of electricity. Long-term modelling requires consideration of expected changes in the demand and supply structure. The model combines high-resolution information on fuel costs from financial markets and low-resolution information on the demand/supply structure of the electricity market. We model the latter using consumption and supply capacity and the former with forward prices of fuels, emission allowances and imported electricity. The model is estimated using data from the Nordic electricity market and global long-term forward prices of energy. Owing to a lack of data on consumption and supply capacity, the estimated results provide only the broad influence of these variables on forward prices. Though extrapolation of the prices observed in Nord Pool may suffer from the influence of short-term variables, such as precipitation and temperature, the model yields robust forecasts of the prices of contracts that are not exchange traded.","PeriodicalId":47599,"journal":{"name":"European Journal of Finance","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2009-05-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84162273","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper assesses the sophistication of pension funds’ investment policies using data on 748 Dutch pension funds during the 1999–2006 period. We develop three indicators of sophistication: gross rounding of investment choices, investments in alternative sophisticated asset classes and ‘home bias’. We find that pension funds’ strategic portfolio choices are often based on coarse and possibly less sophisticated approaches. Most pension funds, particularly the medium-sized and smaller ones, round strategic asset allocations to the nearest multiple of 5%, similar to age heaping in demographic and historical studies. Second, many pension funds invest little or nothing in alternative asset classes besides equities and bonds, resulting in limited asset diversification. Third, medium-sized and smaller pension funds favor regional investments and as such not fully employ the opportunities of international diversification. Finally, we show that pension funds using less sophisticated asset allocation rules tend to opt for investment strategies with a lower risk-return profile.
{"title":"Pension Fund Sophistication and Investment Policy","authors":"J. D. Dreu, J. Bikker","doi":"10.2139/ssrn.1460174","DOIUrl":"https://doi.org/10.2139/ssrn.1460174","url":null,"abstract":"This paper assesses the sophistication of pension funds’ investment policies using data on 748 Dutch pension funds during the 1999–2006 period. We develop three indicators of sophistication: gross rounding of investment choices, investments in alternative sophisticated asset classes and ‘home bias’. We find that pension funds’ strategic portfolio choices are often based on coarse and possibly less sophisticated approaches. Most pension funds, particularly the medium-sized and smaller ones, round strategic asset allocations to the nearest multiple of 5%, similar to age heaping in demographic and historical studies. Second, many pension funds invest little or nothing in alternative asset classes besides equities and bonds, resulting in limited asset diversification. Third, medium-sized and smaller pension funds favor regional investments and as such not fully employ the opportunities of international diversification. Finally, we show that pension funds using less sophisticated asset allocation rules tend to opt for investment strategies with a lower risk-return profile.","PeriodicalId":47599,"journal":{"name":"European Journal of Finance","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2009-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73655381","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In the wake of the ongoing global financial crisis, recently the European Commission has published a proposal for a European Parliament and Council Regulation on Credit Rating Agencies. With this proposal the European Union aims at addressing calls for more regulation of the (global) financial markets and overall improvements in the rating process of Credit Rating Agencies. According to some analysts, such as the Financial Stability Forum, poor credit assessments of complex structured credit products by Credit rating Agencies contributed to both the build up and the unfolding of the financial crisis. The authors offer a first critical comparative examination of the proposed Regulation against the background of the current regime under the non-binding IOSCO Code of Conduct for Credit Rating Agencies. In doing so, answers are sought to the question, whether and to what extent the introduction of the envisaged regulatory framework will result in a more effective and efficient oversight over the activities of Credit Rating Agencies in the European Union. A certain degree of scepticism may be called for, as the proposed Regulation falls short of addressing some important shortcomings of the present regulatory framework, while the value added of the proposed regulatory framework may not necessarily outweigh its risks.
{"title":"Regulating Credit Rating Agencies in the European Union: A Critical First Assessment of the European Commission Proposal","authors":"F. Amtenbrink, J. de Haan","doi":"10.2139/ssrn.1394332","DOIUrl":"https://doi.org/10.2139/ssrn.1394332","url":null,"abstract":"In the wake of the ongoing global financial crisis, recently the European Commission has published a proposal for a European Parliament and Council Regulation on Credit Rating Agencies. With this proposal the European Union aims at addressing calls for more regulation of the (global) financial markets and overall improvements in the rating process of Credit Rating Agencies. According to some analysts, such as the Financial Stability Forum, poor credit assessments of complex structured credit products by Credit rating Agencies contributed to both the build up and the unfolding of the financial crisis. The authors offer a first critical comparative examination of the proposed Regulation against the background of the current regime under the non-binding IOSCO Code of Conduct for Credit Rating Agencies. In doing so, answers are sought to the question, whether and to what extent the introduction of the envisaged regulatory framework will result in a more effective and efficient oversight over the activities of Credit Rating Agencies in the European Union. A certain degree of scepticism may be called for, as the proposed Regulation falls short of addressing some important shortcomings of the present regulatory framework, while the value added of the proposed regulatory framework may not necessarily outweigh its risks.","PeriodicalId":47599,"journal":{"name":"European Journal of Finance","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2009-04-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82390049","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The article gives a brief description of current problems of corporate law and corporate governance practices in Ukraine. Paradoxically, among countries with emerging markets Ukraine managed to have one of the most attractive stock markets for foreign investors, at the same time being the country with the worst protected minority shareholders. The situation in Ukraine in many ways is very similar to that in Russia, but still there are some essential differences. In mid 90-s Ukraine “missed the train” of adoption of Joint-stock company law with substantial protection of shareholders before controlling shareholders took full control over the political system. In September 2008 after almost a decade of blocking any efforts of improving corporate laws the Ukrainian Parliament adopted the Law “On Joint Stock Companies“. The Law is of contradictory nature, it introduces many corporate governance mechanisms of crucial importance, but still preserves some old shortcomings, gaps and misconceptions. The article contains the analysis of the progress achieved and mistakes made in a new law through the point of view of implementation of basic principles of corporate governance development.
{"title":"Corporate Governance Under Ukraine’s New Joint Stock Company Law","authors":"Anatoliy P. Yefymenko","doi":"10.2139/ssrn.1387360","DOIUrl":"https://doi.org/10.2139/ssrn.1387360","url":null,"abstract":"The article gives a brief description of current problems of corporate law and corporate governance practices in Ukraine. Paradoxically, among countries with emerging markets Ukraine managed to have one of the most attractive stock markets for foreign investors, at the same time being the country with the worst protected minority shareholders. The situation in Ukraine in many ways is very similar to that in Russia, but still there are some essential differences. In mid 90-s Ukraine “missed the train” of adoption of Joint-stock company law with substantial protection of shareholders before controlling shareholders took full control over the political system. In September 2008 after almost a decade of blocking any efforts of improving corporate laws the Ukrainian Parliament adopted the Law “On Joint Stock Companies“. The Law is of contradictory nature, it introduces many corporate governance mechanisms of crucial importance, but still preserves some old shortcomings, gaps and misconceptions. The article contains the analysis of the progress achieved and mistakes made in a new law through the point of view of implementation of basic principles of corporate governance development.","PeriodicalId":47599,"journal":{"name":"European Journal of Finance","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2009-04-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74763339","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper provides an updated state of art in the literature on carbon permits as inputs and financial assets. Analyses refer to the operation of the European market for allowances in the Pilot Phase. Results are particular intriguing as they posit the bases for future assessments.
{"title":"Carbon Allowances as Inputs or Financial Assets: Lesson Learned from the Pilot Phase of the EU-ETS","authors":"M. Bonacina, Simone Cozialpi","doi":"10.2139/ssrn.1392177","DOIUrl":"https://doi.org/10.2139/ssrn.1392177","url":null,"abstract":"This paper provides an updated state of art in the literature on carbon permits as inputs and financial assets. Analyses refer to the operation of the European market for allowances in the Pilot Phase. Results are particular intriguing as they posit the bases for future assessments.","PeriodicalId":47599,"journal":{"name":"European Journal of Finance","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2009-04-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87208366","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper uses a large survey of directors to investigate variation in directors' dual roles as advisors and monitors of management. I examine whether the advisory role encourages information exchange between the CEO and the board, as suggested by Adams and Ferreira (2007). I also examine factors related to directors' perceptions of their roles. Amongst others the data suggests that a) directors vary in their perceptions of their roles and directors' roles affect their perceptions of information exchange, b) directors who agree more that they primarily monitor management perceive that they participate less in boardroom discussion than directors who agree that the CEO often asks them for advice, c) directors with a stronger personal relationship with management perceive their advisory role to be more important, and d) directors on boards with more decision-making power perceive their monitoring role to be less important relative to their advisory role. The results are robust to using Heckman selection techniques to address nonresponse bias. Overall, the data suggests that monitoring alone may not be sufficient for good governance.
{"title":"Asking Directors About Their Dual Roles","authors":"Renée B. Adams","doi":"10.2139/ssrn.1362339","DOIUrl":"https://doi.org/10.2139/ssrn.1362339","url":null,"abstract":"This paper uses a large survey of directors to investigate variation in directors' dual roles as advisors and monitors of management. I examine whether the advisory role encourages information exchange between the CEO and the board, as suggested by Adams and Ferreira (2007). I also examine factors related to directors' perceptions of their roles. Amongst others the data suggests that a) directors vary in their perceptions of their roles and directors' roles affect their perceptions of information exchange, b) directors who agree more that they primarily monitor management perceive that they participate less in boardroom discussion than directors who agree that the CEO often asks them for advice, c) directors with a stronger personal relationship with management perceive their advisory role to be more important, and d) directors on boards with more decision-making power perceive their monitoring role to be less important relative to their advisory role. The results are robust to using Heckman selection techniques to address nonresponse bias. Overall, the data suggests that monitoring alone may not be sufficient for good governance.","PeriodicalId":47599,"journal":{"name":"European Journal of Finance","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2009-03-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79628154","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Isabel Argimón, Marta Botella, Clara I. Gonzalez, Raquel Vegas Sánchez
In this paper we analyse the role that Social Security wealth and incentives play in the transition to retirement in Spain. We use the labour records and other relevant information contained in a newly released database [Muestra Continua de Vidas Laborales (2006)] to construct incentive measures stemming from the Social Security provisions in relation to retiring at old age and investigate the role played by such incentives and by other socio-economic variables on the retirement hazard. We compute the effects of the reform that took place in 2002, which made the requirements to access a pension stricter in general. We carry out a dynamic reduced-form analysis of the retirement decision using a duration model. Our results show that both the pension wealth and substitution effects have a significant role on retirement decisions, but that the latter has less relevance since the reform introduced in 2002.
{"title":"Retirement Behaviour and Retirement Incentives in Spain","authors":"Isabel Argimón, Marta Botella, Clara I. Gonzalez, Raquel Vegas Sánchez","doi":"10.2139/ssrn.1464628","DOIUrl":"https://doi.org/10.2139/ssrn.1464628","url":null,"abstract":"In this paper we analyse the role that Social Security wealth and incentives play in the transition to retirement in Spain. We use the labour records and other relevant information contained in a newly released database [Muestra Continua de Vidas Laborales (2006)] to construct incentive measures stemming from the Social Security provisions in relation to retiring at old age and investigate the role played by such incentives and by other socio-economic variables on the retirement hazard. We compute the effects of the reform that took place in 2002, which made the requirements to access a pension stricter in general. We carry out a dynamic reduced-form analysis of the retirement decision using a duration model. Our results show that both the pension wealth and substitution effects have a significant role on retirement decisions, but that the latter has less relevance since the reform introduced in 2002.","PeriodicalId":47599,"journal":{"name":"European Journal of Finance","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2009-03-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88823461","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We consider a double moral hazard model with three agents: the entrepreneur, the LBO fund and the bank. The entrepreneur and the LBO fund have to exert efforts in order to improve the productivity of their project; efforts are not observable. We show that the bank's payments decrease with the outcome of the project. When the project is not very risky, the entrepreneur and the LBO fund exert first best efforts and they get equal shares of the project's outcome. When it is highly risky, debt gives high powered incentives to the two agents to provide efforts but it still not sufficient to induce them to provide the first best efforts. However, these efforts are more efficient than those that could be provided if the entrepreneur asks the LBO fund for advice and money. Moreover, when the entrepreneur asks for advice from a consultant and for money from a bank, they get equal shares whether the project is very risky or not. When the project is lowly risky, the identity of the advisor (consultant/ LBO fund) is irrelevant. When it is highly risky, the optimal efforts depend on their impact on the performance of the project.
{"title":"Leveraged Buy Out and Tax Saving Advantage: A Double-Sided Moral Hazard Model","authors":"O. Yousfi","doi":"10.2139/ssrn.1361469","DOIUrl":"https://doi.org/10.2139/ssrn.1361469","url":null,"abstract":"We consider a double moral hazard model with three agents: the entrepreneur, the LBO fund and the bank. The entrepreneur and the LBO fund have to exert efforts in order to improve the productivity of their project; efforts are not observable. We show that the bank's payments decrease with the outcome of the project. When the project is not very risky, the entrepreneur and the LBO fund exert first best efforts and they get equal shares of the project's outcome. When it is highly risky, debt gives high powered incentives to the two agents to provide efforts but it still not sufficient to induce them to provide the first best efforts. However, these efforts are more efficient than those that could be provided if the entrepreneur asks the LBO fund for advice and money. Moreover, when the entrepreneur asks for advice from a consultant and for money from a bank, they get equal shares whether the project is very risky or not. When the project is lowly risky, the identity of the advisor (consultant/ LBO fund) is irrelevant. When it is highly risky, the optimal efforts depend on their impact on the performance of the project.","PeriodicalId":47599,"journal":{"name":"European Journal of Finance","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2009-03-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82628579","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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