Government debt and fiscal execution efficiency

Governments have used deficit policies in recent years, yet many still face fiscal debt problems. Thus, this research uses Range Directional Measure Dynamic Directional Distance Function model with negative data to explore the financial efficiency of local governments in Taiwan from 2011 to 2018. This article has three major contributions: (1) The research uses RDM Dynamic DDF model with negative data to solve the problem of negative values on input and output data and uses dynamic models to make up for the deficiencies of past research. (2) Due to the differences in regions, local governments have different fiscal budgets. Therefore, this article uses the Wilcoxon Test to explore the efficiency differences of local governments in different regions. (3) This article analyzes the impact of central subsidies and government deficits (debts) of local governments on fiscal efficiency, and discusses the efficiency of government fiscal execution. The results are as follows. (1) Seven counties and cities with the best efficiency, and seven local governments with poor efficiency. (2) The fiscal performances of outlying islands and eastern local governments are better than those of western local governments. (3) Kaohsiung City has the highest accumulated debt and Tainan City exhibits poor financial performance.     

Integration of network data envelopment analysis and decision-making trial and evaluation laboratory for the performance evaluation of the financial holding companies in Taiwan

Data envelopment analysis (DEA) has been constantly used to measure the technical efficiency of decision-making units (DMUs). However, the major problem of traditional DEA methods is that they do not consider the possible intermediate effects. Recently, many papers have applied network DEA models to evaluate the efficiency scores. However, the linking activity of DMUs is still hard to be recognized. Hence, we employ DEMATEL to obtain the linking activity of DMUs. Our empirical research shows that the proposed method can soundly deal with the purpose of identifying the relationship between variables and derive the reasonable result in network DEA.     

The global minimum variance hedge

Review of Derivatives Research - We explore futures hedging based on the global minimum variance strategy. As evidenced by using eleven of the world’s major stock market indexes and their...     

Arbitrage opportunities,liquidity provision,and trader types in an index option market

This study examines the impact of arbitrage in put–call futures parity (PCFP) violations on option market liquidity and explores the liquidity provision process by trader type during periods of arbitrage exploitation. Using a unique data set comprising the complete history of transactions, we find that PCFP violations contain toxic arbitrage opportunities. Hence, more frequent toxic arbitrage opportunities can cause liquidity to deteriorate because arbitrageurs create adverse selection costs and order imbalances in the option market. In addition, when the law of one price breaks down, market makers dominate by providing liquidity compared with individual, domestic, and foreign institutional traders.     

Mean-variance hedging in the presence of estimation risk

Review of Derivatives Research - The mean-variance hedging (MVH) with a significant risk-aversion coefficient is approximately equal to the minimum-variance (MV) hedge. However, how large the...     

Relevance of the disposition effect on the options market: New evidence

A moneyness‐based propensity to sell (MPS) measure, at the aggregate level, determines the propensity of option holders to exercise their winning relative to losing positions. Using data on individual stock and S&P 500 Index options, we find that the MPS measure has significant predictive power over the cross section of delta‐hedged option returns. We test the disposition effect in the options market based on a long–short strategy that exploits price distortions induced by the disposition bias. More pronounced evidence of the disposition bias is found for individual at‐the‐money call options than put options where the significance of abnormal returns remains robust across different subsamples even after we control for the portfolio option greeks and market‐based risk factors. The profitability of the long–short strategy is related to limit‐to‐arbitrage proxies suggesting that behavioral explanations help explain the positive relation between the MPS measure and delta‐hedged option returns.     

Putting Responsible Finance to Work for Citi Microfinance

This paper develops an ethical framework for responsible finance and then applies it to Citigroup (Citi), a major financial actor in the microfinance sector, to see whether it meets with such obligations. The framework consists of two categories of responsibility. The first category is the special social responsibility of financial institutions; and the second is the fundamental principles of ethical behavior in financial services. From Citigroup’s microfinance model, scope of business, and multiple roles in the market, the company seems to be fulfilling its responsibility in inclusive finance. However, judged in term of the principles of integrity, objectivity, fairness, professionalism, and diligence, it falls short of its ethical responsibility. In view of this shortcoming, Citigroup should recall its obligation to avoid conflicts of interest, to provide responsible advice, to protect clients from over-indebtedness, and most importantly, to act with integrity.     

Central bank haircut policy

We present a model of central bank collateralized lending to study the optimal choice of the haircut policy. We show that a lending facility provides a bundle of two types of insurance: insurance against liquidity risk as well as insurance against downside risk of the collateral. Setting a haircut therefore involves balancing the trade-off between relaxing the liquidity constraints of agents on one hand, and increasing potential inflation risk and distorting the portfolio choices of agents on the other. We argue that the optimal haircut is higher when the central bank is unable to lend exclusively to agents who actually need liquidity. Finally, for a temporary surprise drop in the haircut, the central bank can be more aggressive than when setting a permanent level of the haircut.     

Allocation model for theme park advertising budget

This paper treats advertising budgeting, which is a challenging issue for academicians and practitioners. A problem-solving tool, namely Project Advancement (PA), is employed to identify the characteristics of the budget allocation issue the advertising manager faces with. In line with the characteristics (i.e., fundamental objective (FO), the length of value-based time limit of advertising campaigns, and advancement strategy of advertising campaigns), an efficient allocation model for achieving the FO is then constructed. A case of theme park advertising budgeting throughout this paper provides insights into this approach and yields illustrations to the allocation model. Analytic Hierarchy Process (AHP) method is employed for estimate of objective coefficients of the allocation model. Managerial implications are identified with regard to using the new approach.