CONSTRAINED OPTIMIZATION WITH RESPECT TO STOCHASTIC DOMINANCE: APPLICATION TO PORTFOLIO INSURANCE

We are concerned with a classic portfolio optimization problem where the admissible strategies must dominate a floor process on every intermediate date (American guarantee). We transform the problem into a martingale, whose aim is to dominate an obstacle, or equivalently its Snell envelope. The optimization is performed with respect to the concave stochastic ordering on the terminal value, so that we do not impose any explicit specification of the agent's utility function. A key tool is the representation of the supermartingale obstacle in terms of a running supremum process. This is illustrated within the paper by an explicit example based on the geometric Brownian motion.     

The Effect of Mortgage Payment Reduction on Default: Evidence from the Home Affordable Refinance Program

This article evaluates the effect of payment reduction on mortgage default within the context of the Home Affordable Refinance Program. We find that mortgage default is sensitive to payment reduction using univariate, duration and hazard modeling approaches. A relative risk Cox model of default with time‐varying covariates estimates that a 10% reduction in mortgage payment is associated with about a 10–11% reduction in monthly default hazard for loans. This finding is robust to the inclusion of empirically important mortgage risk drivers (such as current loan‐to‐value and FICO score) as well as controlling for selection effects based on observables.     

Refinance and Mortgage Default: A Regression Discontinuity Analysis of HARP’s Impact on Default Rates

This paper examines the impact of refinancing on mortgage defaults based on an empirical investigation of the Home Affordable Refinance Program (HARP). We study a unique dataset from Freddie Mac which includes loans funded right before and after the HARP eligibility cutoff date, an exogenous event. Using a Fuzzy Regression Discontinuity Design method, we show that receiving a HARP refinance decreases the expected monthly default rate by about 48–62 percent using different bandwidth specifications.     

Comparative study of cognitive styles in Egypt,Greece, Hong Kong and the UK

Cognitive style has been described as consistent individual differences in the organising and processing of information. It is has been argued that it is an important factor in managerial learning and cognition. A number of authors have suggested that groups from different national cultures are likely to exhibit style differences and that this has important implications for management training and development. In the present study, which employed closely matched samples of business and management undergraduates from Egypt, Greece and the UK, there were no statistically significant differences in style. However, in post‐graduate samples from Egypt, Hong Kong and the UK that were less closely matched, statistically significant differences were observed. Comparison of these data with those from other studies suggests that amongst under‐graduates from a variety of national cultures there do not appear to be significant differences in style. Among post‐graduates and managers the picture that emerges was more equivocal and the extent to which any observed differences are artefacts of sampling and method remains unclear. The implications of the findings for style theory and management education, training and development are discussed.     

Recent Evidence on the Oil Price Shocks on Gulf Cooperation Council Stock Markets

The recent plunge in the price of oil affected many countries, especially major oil producers and exporters, such as the Gulf Cooperation Council (GCC), which accounts for half of the global oil reserves. This paper examines the impact of oil price changes on GCC stock markets, including Bahrain, Kuwait, Oman, Qatar, Kingdom of Saudi Arabia, and United Arab Emirates over a 10-year period, 2005–2015. We examine the direction of influence and influence absorption through Granger causality and impulse response function. The results are important for portfolio management at the international level, and provide insights for government and regulatory authorities in times of oil price change. Additionally, the evidence suggests the need for more economic diversification at the country level in the GCC region to mitigate high volatility in the event of oil shocks.     

How Gender Differences in Entitlement and Apprehension Manifest Themselves in Negotiation

Group Decision and Negotiation - The gender difference in the propensity to initiate negotiation has been theorized to be mediated by three constructs: recognition of opportunities, entitlement,...     

Optimal make–take fees for market making regulation

We address the mechanism design problem of an exchange setting suitable make– take fees to attract liquidity on its platform. Using a principal–agent approach, we provide the optimal compensation scheme of a market maker in quasi‐explicit form. This contract depends essentially on the market maker inventory trajectory and on the volatility of the asset. We also provide the optimal quotes that should be displayed by the market maker. The simplicity of our formulas allows us to analyze in details the effects of optimal contracting with an exchange, compared to a situation without contract. We show in particular that it improves liquidity and reduces trading costs for investors. We extend our study to an oligopoly of symmetric exchanges and we study the impact of such common agency policy on the system.     

An iterative method for the computation of the correlation matrix implied by a recursive path model

Quality & Quantity - In Path Analysis, especially in social sciences studies, many researchers usually assume that errors in the model are uncorrelated with all exogenous variables as well as...     

Inequality of opportunity in earnings and assets in Egypt

ABSTRACT

By most available measures, the level of inequality in the MENA region, including Egypt, is considered relatively low. This regularity applies to both inequality of outcomes as well as inequality of opportunity. This paper challenges this view. It argues specifically that circumstances beyond the control of individuals account for a larger share of inequality of opportunity when asset distribution is considered rather than the distribution of earnings, essentially because earnings are subject to measurement errors and idiosyncratic shocks. The paper tests this proposition by estimating the extent to which factors related to the circumstances a person is born into contribute to inequality of opportunity in earnings as well as asset ownership. The results show that circumstances account 26–32% of inequality of asset distribution, compared with only 8–10% of inequality of opportunity in earnings. The analysis further shows that the area of birth and fathers education level are the two most important circumstance factors contributing to inequality of opportunity, for both assets and earnings.