An empirical analysis of bank interest rate swaps

Considering the characteristics of banks that do and do not report interest rate swaps, the long-term interest rate exposure of a bank and the likelihood and extent of swap market participation are found to be positively related. Key to the finding is the inclusion of variables related to the provision of swap market intermediary services, which significantly explain both the likelihood of swap market participation and the notional value of outstanding swaps. The results suggest that the likelihood and extent of swap market participation by low-capitalized banks is less than for other banks.     

MOTIVATING RECYCLING: A MARGINAL COST ANALYSIS

Areas considering alternative house-to-house recycling programs as a means of diverting material from landfills can determine the most efficient choice by comparing programs' marginal costs with diversion's marginal benefits. This paper describes a controlled field experiment that observed individual household recycling habits over a six-month period. The experiment monitored the quantity of material that households recycled under increasingly more convenient (and increasingly more costly) programs. The analysis here uses a Tobit model to determine how the quantity of material diverted varies as a function of convenience factors and demographic characteristics. The analysis compares the value of the expected marginal increase in diversion to the marginal cost of increasing recycling convenience to determine the efficient level of convenience for an area's recycling program.     

Business Ethics: The Bottom Line

Teaching Business Ethics -     

Towards a complete real-time electricity market design

The general design for the real-time electricity market presented in this paper optimizes and prices both real and reactive power simultaneously in an AC setting, where all assets—generation, load and transmission—are allowed to bid and are financially settled at the locational price times energy consumed or produced. The result is that transmission lines are compensated for both capacity and admittance, providing incentives for efficient operation of transmission-related assets such as FACTS devices, if price-taking behavior is assumed. Losses are incorporated into the design and become an operating cost for transmission. The market design is shown to be revenue neutral and, under some assumptions, nonconfiscatory.      

Bayesian MCMC Mapping of Quantitative Trait Loci in a Half-sib Design: a Graphical Model Perspective

Graphical models provide a powerful and flexible approach to the analysis of complex problems in genetics. While task-specific software may be extremely efficient for any particular analysis, it is often difficult to adapt to new computational challenges. By viewing these genetic applications in a more general framework, many problems can be handled by essentially the same software. This is advantageous in an area where fast methodological development is essential. Once a method has been fully developed and tested, problem-specific software may then be required. The aim of this paper is to illustrate the potential use of a graphical model approach to genetic analyses by taking a very simple and well-understood problem by way of example.     

IntraLATA long-distance demand: carrier choice, usage demand and price elasticities

Competition in the long-distance market in the US continues to intensify; the 1996 Telecommunications Act has led to increased competition in long-distance telephony especially as the Regional Bell Operating Companies have begun to gain entry to long-haul, long-distance markets. In order to better understand the implications of having increased service offerings, models of how customers choose between carriers (and the impact of this choice on subsequent usage) will be useful. We develop the first publicly available models that simultaneously estimate choice and usage for intraLATA long-distance in the US. Utilizing a generalized Tobit model, the price responsiveness of usage and carrier choice are estimated. The results are generally consistent with expectations both in terms of theory and of practical experience in the industry.     

Ambient Taxes Under m-Dimensional Choice Sets, Heterogeneous Expectations, and Risk-Aversion

We consider the design of ambient taxes forrisk-neutral and risk-averse polluters whenpolluters and the regulatory agency haveasymmetric information about environmentalrelationships and probabilities associatedwith random events. Unlike prior work, we showthat under these conditions, optimal ambienttaxes must be firm-specific, and accompaniedby additional incentives to influencepolluters' choices of abatement techniques.     

Wealth and Risk Effects of Adopting Deposit Insurance in Canada: Evidence of Risk Shifting by Banks and Trust Companies

This paper confirms that adopting explicit deposit insurance expanded risk-shifting incentives for Canadian Banks and Trust Companies. By transferring responsibility for monitoring non-systematic risk to the Canadian Deposit Insurance Corporation (CDIC), deposit insurance eliminated the compensation previously paid to large-block stockholder monitors. This transfer fueled a redistribution of insured-institution stock from poorly diversified large-block shareholders to diversified investors. Also, subsequent changes in market volatility support the hypothesis that CDIC insurance and the absorption of catastrophic risk it provided reduced systematic risk in the stock market as a whole even as it increased non-systematic risk in the banking and trust-company sector.     

Some Cracks in the Empire of Chance (Flaws in the Foundations of Reliability)

Making quantified statements about the uncertainty associated with the lifelength of an item is one of the most fundamental tasks of reliability assessment. Most practitioners routinely do this using one of the several available statistical techniques. The purpose of this paper is two-fold. The first is to give the user an overview of the key tenets of two of the most commonly used parametric approaches. The second is to point out that these commonly used approaches involve strategies that are either ad hoc, or are in violation of some of the underlying tenets. A method that is devoid of logical flaws can be proposed, but this method is difficult to implement. The user must therefore resign to using that technique against which the fewest objections can be hurled.     

Scaling up support for children in HIV-affected families by involving early childhood development workers: community views from KwaZulu-Natal,South Africa

The United Nations Programme on HIV/AIDS estimates that South Africa has 1.2 million orphans as a result of AIDS. This study investigated the views of communities in KwaZulu-Natal on the potential use of early childhood development (ECD) practitioners for helping children in vulnerable households. It reports on in-depth interviews and focus group discussions with community members and service providers in six different areas of KwaZulu-Natal. Despite the increase in the numbers of deaths, people in affected areas have yet to accept that HIV is the cause. Stigma, denial, myths and witchcraft beliefs were evident, particularly in the rural areas. There was general agreement by the respondents that ECD practitioners with additional training specific to HIV/AIDS could assist families if cost difficulties were overcome. As community members with basic training in childcare they could enhance community responses by linking with community health workers and other service providers to assist children and households in need.