The effects of credit default swaps on corporate investment

ABSTRACT

This paper examines how credit default swaps (CDS) affect the corporate investment of the referenced entities. We document a significant reduction in corporate investment after CDS trading, a result that is robust to alternative model specifications and a set of endogeneity tests. Our findings of the increased firm risk and cost of capital support the costly external capital channel. The cross-sectional variations in CDS effects demonstrate that both reduced monitoring and the empty creditor problem might be the underlying forces driving the costly external capital channel. Our additional analysis implies that CDS trading is associated with an enhancement in investment efficiency for firms that are prone to overinvestment.     

Impact of Decision Rules and Non-cooperative Behaviors on Minimum Consensus Cost in Group Decision Making

Group Decision and Negotiation - In group decision making, it is sensible to achive minimum consensus cost (MCC) because the consensus reaching process resources are often limited. In this...     

Settlement procedures and stock market efficiency

This study examines why most derivatives markets that settle on the day following expiration choose the opening rather than the closing price as the final settlement price (FSP), whereas most markets that settle on the expiration day select an average rather than a single price as the FSP. Four exogenous changes in the Taiwan Futures Exchange settlement procedures provide an experimental basis for studying the settlement procedures’ impact on underlying assets. Greatest market efficiency is observed when the FSP is determined by a single rather than an average price and hypothesize that manipulation is prevented at the expense of market quality.     

乡村振兴战略下农村产业融合、人力资本与农民增收*——以浙江省为例

［目的］乡村振兴战略是贯彻新发展理念，建设现代化经济强国的重大战略之一。农村产业兴旺，农民生活富裕是乡村振兴战略的重要目标。农村一、二、三产业融合发展是实现乡村产业振兴，农民增收的重要途径。农村人力资本状况关系到农村产业融合的人才建设，关系到农民增收的实现。文章力图探究乡村振兴战略下农村产业融合、人力资本与农民增收间的相互作用关系，以期为乡村振兴战略的实现提供政策建议。［方法］以浙江省为例进行实证分析，通过建立PVAR模型，采用格兰杰因果关系及面板数据模型进行检验。［结果］农村产业融合及人力资本构成农民增收的格兰杰因果关系，两者都对农民增收产生显著影响，且人力资本影响效应更大。农民增收及人力资本对农村产业融合没有起到相应的促进作用。［结论］在实证分析的基础上，从加大人力资本投入、培育农村产业融合复合型人才及加强宣传引导工作等方面提出相应的政策建议促进农村产业融合。     

融资渠道与中国区域技术创新

运用2011-2016年中国内地31个省份面板数据，通过固定效应模型检验不同融资渠道对全国以及东中西部地区技术创新的影响。结果表明：①债权融资在整体上对技术创新影响不显著，分地区看，其在东部地区发挥了促进作用，而在中西部地区则起到抑制作用；②从整体及中西部地区看，股权融资对技术创新的影响不显著，且抑制了东部地区技术创新；③对股市板块进行细分后，整体上股权融资中只有创业板股权融资显著促进了技术创新水平提升，主板和中小板的作用均不显著。     

Variance swaps valuation under non-affine GARCH models and their diffusion limits

In this article, we investigate the pricing and convergence of general non-affine non-Gaussian GARCH-based discretely sampled variance swaps. Explicit solutions for fair strike prices under two different sampling schemes are derived using the extended Girsanov principle as the pricing kernel candidate. Following standard assumptions on time-varying GARCH parameters, we show that these quantities converge respectively to fair strikes of discretely and continuously sampled variance swaps that are constructed based on the weak diffusion limit of the underlying GARCH model. An empirical study which relies on a joint estimation using both historical returns and VIX data indicates that an asymmetric heavier tailed distribution is more appropriate for modelling the GARCH innovations. Finally, we provide several numerical exercises to support our theoretical convergence results in which we further investigate the effect of the quadratic variation approximation for the realized variance, as well as the impact of discrete versus continuous-time modelling of asset returns.     

EXPLAINING THE DECLINE OF THE U.S. SAVING RATE: THE ROLE OF HEALTH EXPENDITURE

The U.S. saving rate declined by 8% between 1980 and 2009. We document that the decline can be explained by rising health expenditures. Using exogenous variation in medical expenses generated by Food and Drug Administration drug approvals, we document that a 1 percentage point increase in health expenditure generated a decline in saving rate of 0.9 percentage points. We then estimate a model of household decisions to evaluate the mechanisms behind the decline. We find that the rise in health expenses and drop in saving rate are driven by progress in health technology, reduction in copayment rates, and improvements in income processes.     

Foreign direct investment subsidy in a dynamic stochastic general equilibrium model with heterogeneous firms

This study analyzes the macroeconomic impacts of subsidies to attract multinational corporations when firms are determining whether to enter or how to serve foreign markets. We show that a small FDI subsidy scheme induces consumption gains and delivers short‐term welfare improvement for the FDI host country if firms differ in productivity. However, the subsidy generates a new problem and results in the wealth reallocation effect, leading to welfare deterioration for the host country in the long run. Moreover, we find that a subsidy program induces a welfare improvement for the host country if it is offered to all domestic producers instead of foreign producers only in the host country.     

Losers and prospectors in the short-term options market

Intraday data for weekly options are investigated for behavioral biases implied in prospect theory (PT) and cumulative prospect theory (CPT). The results generally support both theories, with losers (winners) observed to be relatively risk-seeking (averse). On aggregate, losers (winners) overprice (underprice) their contracts and overweight (underweight) the probability of winning. Additionally, the volatility smirk observed in equity options is dampened by PT/CPT biases. The price distortions are time sensitive, especially for losing traders. Losers hold out by transacting later in the day and closer to expiration than their baseline counterparts. This betting-time effect is absent among winners.