Will banning naked CDS impact bond prices?

We develop a tractable partial equilibrium model to analyze the impact on the bond market generated by a ban on naked credit default swaps (CDS). We demonstrate that such a ban will have a negligible impact on the borrowing costs if CDS speculators are risk averse and take positions which are small relatively to the amount of debt outstanding. We find that the ban only excludes from the market moderately pessimistic investors, and induces the most pessimistic to implement their strategy on the short side of the bond market. Despite the sovereign debtor benefits from the reduced yields on the issued bonds, he will suffer from a diminished borrowing capacity after the ban. Such findings suggest that regulators should consider other measures to reduce instability arising from excessive speculation in derivatives markets.     

Childhood and capability deprivation in Italy: a multidimensional and fuzzy set approach

In the last decades, starting with the United Nations Convention on the Rights of the Children in 1989, children’s quality of life have received a growing attention in scientific research, as well as in politics. This work aims to gain insights into Italian children’s living conditions and deprivation of capabilities using the Capability Approach, an alternative normative framework for the evaluation of human development, well-being and freedom by thinking in terms of human functionings and capabilities. From a methodological point of view we present an approach based on a fuzzy methodology applied to data from the EU-SILC 2009 ad-hoc module on children. The use of this methodology makes it possible to preserve the richness of the data available from the EU-SILC survey, that include both monetary and non monetary aspects of children deprivation. To get more insides into Italian children living conditions we also combine the fuzzy methodology with the capability approach at a disaggregated level of analysis by three social economic factors (single parent household, household educational level, macro-region of residence). Besides the well-known Italian North/South disparity of financial indicators—confirmed also for households with children—our findings suggest a new duality for Italian children quality of life, given by the multidimensional domains of deprivation internal or external to children’s households.     

Evaluating the impact of nonreciprocal trade preferences using gravity models

This article presents new evidence on the impact of Nonreciprocal Preferential Trade Policies (NRPTPs) granted by developed countries to exports from developing countries over the period 1995 to 2003. The analysis has been carried out by using three levels of data aggregation. It accounts for unobservable heterogeneity, endogeneity of the preferential treatment and potential selection bias. We find a positive and significant impact of NRPTPs when considering total exports and total agricultural exports. However, at 2-digit agricultural level the results are heterogeneous.     

Pricing vulnerable claims in a Lévy-driven model

We obtain an explicit expression for the price of a vulnerable claim written on a stock whose predefault dynamics follows a Lévy-driven SDE. The stock jumps to zero at default with a hazard rate given by a negative power of the stock price. We recover the characteristic function of the terminal log price as the solution of an infinite-dimensional system of complex-valued first-order ordinary differential equations. We provide an explicit eigenfunction expansion representation of the characteristic function in a suitably chosen Banach space and use it to price defaultable bonds and stock options. We present numerical results to demonstrate the accuracy and efficiency of the method.     

Firms' efficiency and global value chains: An empirical investigation on Italian industry

This paper investigates the effect of participation in global value chains (GVCs) on firms' efficiency and explores heterogeneity in this impact across different firms, according to GVC governance, positioning in the chain and time length of participation. Our analysis takes advantage of survey data providing information on involvement in GVCs for a large set of Italian industrial SMEs between 2008 and 2012. We employ Data Envelopment Analysis (DEA) to retrieve a measure of firms' technical efficiency (i.e., DEA efficiency scores) and estimate the impact of involvement in GVCs on firms' efficiency through propensity-score matching techniques and truncated regression. Our results show that participation in GVCs induces significant efficiency premia, especially for suppliers, with stronger effects in the case of relational modes of participation.     

Firm capital dynamics in centrally cleared markets

We develop a tractable continuous time model of multifirm capital dynamics in a centrally cleared market. Our framework jointly models the strategic interactions between business operations of firms and their trading activities. We show that the endogenous allocation of firm capital between trading and operations can be recovered as the unique fixed point of a system of quadratic equations. Our model predicts that (a) there exists a convex relationship between equilibrium margins and firm capital in the cross‐section, (b) market collateral demand is positively correlated with size concentration, and (c) size concentration is expected to increase over time. Using proprietary data on bilateral credit default swap exposures, we provide evidence that the convexity prediction is both economically and statistically significant and validate our model assumption that firms hedge excess risks.     

Measuring differences in economic standard of living between immigrant communities in Italy

Measuring differences in the economic standard of living of between natives and other ethnic groups can inform us about the relative disadvantages and inequalities within Italian society. Despite the importance of this question, the measurement of this gap is not an easy task because, when using the usual design-based approach to survey sampling inference, the available micro-data lack sufficient sample size for the majority of immigrant communities needed to obtain reliable estimates. In this paper, we show that small area estimation (SAE) techniques can be applied in a fruitful way to avoid this issue. In particular, we use an approach based on M-quantile regression for estimating the economic standard of living in each community in Italy. Our findings highlight economic disparities between natives and other ethnic groups and suggest the need to adopt specific policies that target the most vulnerable immigrant communities and are designed to improve their economic standard of living.     

Does Trade Credit Affect Technical Efficiency? Empirical Evidence from Italian Manufacturing SMEs

Using firm‐level data from the Italian manufacturing sector, we investigate the relationship between small and medium‐sized firms technical efficiency and trade credit. Our contribution is twofold: we provide evidence on an open empirical question, and disentangle the channels through which trade credit may influence firms' efficiency. According to our findings, based on the Simar and Wilson (2007) procedure, trade credit seems to positively affect firm efficiency by mitigating financial constraints. Indeed, trade credit enhances efficiency especially for firms that are more likely to be financially constrained (i.e., smaller and/or younger firms) and during the most recent financial crisis.