Discrete time Wishart term structure models

This paper reveals that the class of Affine Term Structure Models (ATSMs) introduced by Duffie and Kan (1996) is larger than previously considered in the literature. In the framework of risk factors following a Wishart autoregressive process, we define the Wishart Term Structure Model (WTSM) as an extension of a subclass of Quadratic Term Structure Models (QTSMs), derive simple parameter restrictions that ensure positive bond yields at all maturities, and observe that the usual constraint on affine processes requiring that the volatility matrix be diagonal up to a path independent linear invertible transformation can be considerably relaxed.     

Remittances and Financial Access: Is There Really a Link and for Whom? Evidence from Mexican Household Data

In policy discussions, it has frequently been claimed that migrants' remittances could function as a ‘catalyst’ for financial access among receiving households. This paper provides empirical evidence on this hypothesis from Mexico, a major receiver of remittances worldwide. Using the Mexican Family Life Survey panel (MxFLS) for 2002 and 2005, the results from the fixed effects logit model show that receiving remittances is strongly correlated with the ownership of savings accounts and to a limited degree with the availability of borrowing options. Effects are particularly important for microfinance institutions, and more important for rural households compared to urban households.     

BEHAVIORAL PORTFOLIO SELECTION: ASYMPTOTICS AND STABILITY ALONG A SEQUENCE OF MODELS

We consider a sequence of financial markets that converges weakly in a suitable sense and maximize a behavioral preference functional in each market. For expected concave utilities, it is well known that the maximal expected utilities and the corresponding final positions converge to the corresponding quantities in the limit model. We prove similar results for nonconcave utilities and distorted expectations as employed in behavioral finance, and we illustrate by a counterexample that these results require a stronger notion of convergence of the underlying models compared to the concave utility maximization. We use the results to analyze the stability of behavioral portfolio selection problems and to provide numerically tractable methods to solve such problems in complete continuous‐time models.     

On the distribution of government bond returns: evidence from the EMU

This paper assesses the statistical distribution of daily EMU bond returns for the period 1999–2012. The normality assumption is tested and clearly rejected for all European countries and maturities. Although skewness plays a minor role in this departure from normality, it is mainly due to the excess kurtosis of bond returns. Therefore, we test the Student’s t, skewed Student’s t, and stable distribution that exhibit this feature. The financial crisis leads to a structural break in the time series. We account for this and retest the alternative distributions. A value-at-risk application underlines the importance of our findings for investors. In sum, excess kurtosis in bond returns is essential for risk management, and the stable distribution captures this feature best.     

Economic Implications of Further Harmonisation of Electronic Communications Regulation in the EU

There are some aspects of the European RFEC and its implementation today that could benefit from increased harmonisation; there are others in which substantial accommodation to local, national or regional circumstances and preferences is desirable or required.     

Regulations for the Eighth International Congress of Actuaries

Abstract

The present paper proposes and investigates a procedure for numerical evaluation of the transition probabilities for a time-inhomogeneous Markov process when the intensities are known (estimated). The procedure is based on Taylor-expansion of the transition probabilities linked with the Chapman-Kolmogorov equations.