Optimizing suicide and trespass prevention on railways: a problem-solving model from the RESTRAIL project

Suicides and trespassing accidents result in more than 3800 fatalities in Europe, representing 88% of all fatalities occurring within the EU railway system. This paper presents a problem-solving model, which consists of a multistep approach structuring the analysis of a suicide or trespass-related problem on the railways. First, we present the method used to design, evaluate and improve the problem-solving model. Then we describe the model in detail: it comprises six steps with several subsequent actions, and each action is approached through a checklist of prompting questions and possible answers. At the end, we discuss the added value of this model for decision makers and its usability in the selection of optimal prevention measures.     

Accounting quality,information risk and the term structure of implied volatility around earnings announcements

We examine the association between accounting quality, which is used as a proxy for firm information risk, and the behavior of the term structure of implied option volatility around earnings announcements. By employing a large sample of US firms having options traded on their equity during 1996–2010, we find that lower (higher) accounting quality is significantly associated with stronger (weaker) changes in the steepness of the term structure of implied volatility curve around quarterly earnings announcements. This finding (which is robust to controls for business-stemming uncertainty regarding future firm performance) is consistent with a stronger differential of short vs. long-term uncertainty for higher information risk firms, indicating greater uncertainty on the future economic performance of poorer vs. stronger accounting quality firms. We also establish the trading implications of these findings by demonstrating a (profitable in-sample) self-financed option trading strategy that is based on the quality of the accounting information released on earnings announcement days.     

Determining the integrated volatility via limit order books with multiple records

The integrated volatility plays an important role in risk management and portfolio selection, the estimation methods regarding the quantity have been widely investigated, either under low-frequency data or high-frequency data, or a combination of both. In this paper, we propose a measure for the integrated volatility via limit order book data with possible presence of multiple records. The estimator is valid under mild conditions and it is easily implemented. The finite sample performance of the proposed estimator has been verified by simulation studies and we apply the method to some real high-frequency data-sets as well.     

ARBITRAGE‐FREE BILATERAL COUNTERPARTY RISK VALUATION UNDER COLLATERALIZATION AND APPLICATION TO CREDIT DEFAULT SWAPS

We develop an arbitrage‐free valuation framework for bilateral counterparty risk, where collateral is included with possible rehypothecation. We show that the adjustment is given by the sum of two option payoff terms, where each term depends on the netted exposure, i.e., the difference between the on‐default exposure and the predefault collateral account. We then specialize our analysis to credit default swaps (CDS) as underlying portfolios, and construct a numerical scheme to evaluate the adjustment under a doubly stochastic default framework. In particular, we show that for CDS contracts a perfect collateralization cannot be achieved, even under continuous collateralization, if the reference entity’s and counterparty’s default times are dependent. The impact of rehypothecation, collateral margining frequency, and default correlation‐induced contagion is illustrated with numerical examples.     

The Tunisia Wheat Market in the Context of World Price Volatility: A Stochastic Partial Equilibrium Approach

Food security is a key objective of agricultural and food policy in Tunisia. The 2007–2008 food crisis highlighted the negative impacts of price volatility on international markets both in terms of food insecurity and budget exposure. Tunisian food subsidy expenditures ranged from $180 million to $710 million in 2006–2010, so volatile world prices meant volatile subsidy costs. Moreover, cereal production in Tunisia still has much instability due to climate conditions, which also influences imports and, consequently, subsidy expenditures. This study applies a structural model to conduct stochastic analyses of trade and policy impacts on food security and budget expenditures in the Tunisian wheat market. The methodology disaggregates durum wheat and soft wheat markets and generates projections of import prices of durum wheat and soft wheat, using projections of world prices provided by the Food and Agricultural Policy Research Institute at University of Missouri (FAPRI-MU). The key innovation is the generated stochastic analyses of subsidy costs based on stochastic world price projections and stochastic domestic wheat yields based on historic yield variances. The analysis highlights the sensitivity of subsidy costs to world prices, volumes imported and domestic production, so that alternative policy tools can be considered.     

城市经营者还是市场监管者？——市场波动下地方政府土地供给非对称行为研究

研究目的:分析市场监管激励对于地方政府土地供给决策的影响。研究方法:通过建立模型对市场监管激励的影响机制进行理论分析,并基于2004—2014年中国30个省的面板数据构建门限模型进行实证检验。研究结果:地方政府的土地供给决策同时受到经济绩效和市场监管双重激励的影响,在不同的市场波动下存在非对称性:在市场较平稳时,地方政府会通过减少土地供给、提升土地价格实现其经济绩效目标;而在市场波动较大时,地方政府则会兼顾"市场监管者"的职责,通过增加土地有效供应、维持土地价格实现其经济绩效目标。研究结论:市场监管激励在地方政府的土地供给决策机制中具有显著作用,可以通过加强政绩考核中市场监管的权重来规范地方政府的土地供给行为。     

Value at risk forecasting for volatility index

Forecasts of values at risk (VaRs) are made for volatility indices such as the VIX for the US S&P 500 index, the VKOSPI for the KOSPI (Korea Stock Price Index) and the OVX (oil volatility index) for crude oil funds, which is the first in the literature. In the forecasts, dominant features of the volatility indices are addressed: long memory, conditional heteroscedasticity, asymmetry and fat-tails. An out-of-sample comparison of the VaR forecasts is made in terms of violation probabilities, showing better performance of the proposed method than several competing methods which consider the features differently from ours. The proposed method is composed of heterogeneous autoregressive model for the mean, GARCH model for the volatility and skew-t distribution for the error.     

A Bayesian approach to excess volatility,short-term underreaction and long-term overreaction during financial crises

In this paper, we introduce a new Bayesian approach to explain some market anomalies during financial crises and subsequent recovery. We assume that the earnings shock of an asset follows a random walk model with and without drift to incorporate the impact of financial crises. We further assume the earning shock follows an exponential family distribution to accommodate symmetric as well as asymmetric information. By using this model setting, we develop some properties on the expected earnings shock and its volatility, and establish properties of investor behavior on the stock price and its volatility during financial crises and the subsequent recovery. Thereafter, we develop properties to explain excess volatility, short-term underreaction, long-term overreaction, and their magnitude effects during financial crises and the subsequent recovery. We also explain why behavioral finance theory could be used to explain many of the asset pricing anomalies, but traditional asset pricing models cannot achieve this aim.     

The euro exchange rate during the European sovereign debt crisis – Dancing to its own tune?

This paper studies the determinants of the euro exchange rate volatility during the European sovereign debt crisis, allowing a role for macroeconomic fundamentals, policy actions and the public debate by policy makers. It finds that the euro exchange rate mainly danced to its own tune, with a particularly low explanatory power for macroeconomic fundamentals. The findings of the paper also suggest that financial markets might have been less reactive to the public debate by policy makers than previously feared. Still, there are instances where exchange rate volatility increased in response to news, such as on days when several politicians from AAA-rated countries went public with negative statements, suggesting that communication by policy makers at times of crisis should be cautious about triggering undesirable financial market reactions.     

Implications of domestic price insulation for global food price behavior

Rapid changes in global food prices in recent years are widely viewed as a serious threat to global development. While various sources of price instability in agriculture have been identified, little attention appears to have been given to the importance of changes in trade policies that insulate domestic prices from world markets as a source of volatility in world prices. A contribution of this paper is to show that these interventions are dynamically more complex than simple proportional insulation. Insulation against an initial price increase in world prices increases the magnitude of that increase, while subsequent adjustments to the level of protection change the fundamental nature of price volatility. We find such policies are widespread and increase the volatility of world prices while not reducing the volatility of domestic prices because of the collective action problem involved in this form of policy intervention.