Profitability patterns in the interest rate derivatives market

This study identifies profitability patterns and their determinants in the global interest rate derivatives market. Although this market is the world’s largest financial market in terms of nominal value, there has been basically no academic research on profitability owing to missing data. To address this problem, a new analytical method has been developed. Using this new method, the study shows that interest rate derivatives have been a substantial source of profitability that have netted a total average annual profit of more than USD 82 billion for banks since 2009. Furthermore, the study shows that counterparty type, market position (i.e. being one of the Top 5 banks), and trade currency are determinants of the profitability of a trade. For other features of a trade, such as duration or notional amount, no correlation with profitability is found. Finally, the impact of changes of the market structure on profitability driven by regulatory initiatives is discussed qualitatively.     

Eurobonds: politisch erwünscht, ökonomisch sinnvoll,juristisch machbar?

This research focuses on the question of to what extent Eurobonds are feasible and which problems may arise in the political, economic and juridical areas. The contribution shows possible forms of the arrangement and discusses a justification from the regulatory point of view. It also examines the extent to which Eurobonds have already become reality by the rescue aid of the European Union. The economic analysis demonstrates the interrelated benefits and problems, especially redistribution, misdirected incentives and misallocation of capital. Finally, establishing Eurobonds is the cornerstone of the political and normative question of which direction the Eurozone will or rather should move within the scope of the sovereign debt crisis.     

From Hot Cakes to Cold Feet: A Contingent Perspective on the Relationship between Market Uncertainty and Status Homophily in the Formation of Alliances

In this study, we reconsider the classical positive association between the level of market uncertainty and an organization's propensity to form ties with organizations of similar status. Although prior research argues that the greater the uncertainty, the higher the level of status homophily, we suggest that this relationship is contingent upon framing that affects positive or negative valence towards uncertainty. In an up market, organizations tend to frame uncertainty as upside risk, and thus will subsequently favour explorative uncertainty‐mitigation devices; whereas, in a down market, organizations primarily frame uncertainty as downward risk, and thus will rely on more conservative uncertainty‐mitigation mechanisms. We therefore predict that a greater number of status‐heterophilous ties will be formed in an up market than in a down market. We discuss the implications of our results for status theory and more broadly for research on strategic decision making under uncertainty.     

Viewpoint: Further results on measuring the well‐being of the poor using income and consumption

Abstract We evaluate the relative merits of income‐ and consumption‐based measures of well‐being. Our results provide evidence that consumption better captures well‐being for those with few resources. The bottom deciles of expenditures exceed those of income, suggesting under‐reporting of income. The under‐reporting rate for government transfers is high and rising. Overall non‐response is more severe in U.S. income data than in expenditure data. Furthermore, a consumption data set requires fewer observations than an income data set to obtain the same level of precision for typical estimates. Finally, very low consumption is more strongly related to other bad outcomes than very low income.     

Entwicklungen im Risikomanagement

PRAXIS | Magazin

Entwicklungen im Risikomanagement Konferenz-Review     

Poverty in South Africa: Statistical inference for decomposable poverty measures

The measurement of poverty involves two problems: identifying the poor and constructing an index to measure the intensity of poverty. The headcount ratio is one of the widely used indices for the measurement of poverty. This article considers some of the other decomposable (i.e. additively separable) poverty measures. The importance of this property (decomposability) and of subgroup consistency for a poverty measure is highlighted. Since most of these poverty measures are estimated on the basis of sample surveys, the statistical significance of the observed differences is tested using the distribution-free approach proposed by Kakwani (1993, Review of Economics and Statistics , 75: 632-40). The Income and Expenditure Survey conducted in 1995 by Statistics South Africa, then called Central Statistical Service, is used in the study.     

Entrepreneurship and Start-Ups in the Boston Region: Factors Differentiating High-Growth Ventures from Micro-Ventures

The use of entrepreneurship to stimulate economic growth in lagging regions of the world has grown over the last decade. The type of business needed for job creation is a new venture rather than a micro-business. The experience of a major program in the U.S., empowerment zones, has failed to produce many jobs, mostly because the program has stimulated micro-businesses rather than growth ventures. This paper analyzed the factors differentiating between the formation of high-growth ventures and micro businesses, and discussed how these factors may best influence the activities of organizations that either nurture ventures or create government policies for regional development. The data consisted of ninety business plans submitted to a business plan competition in Boston. The results showed that founders of high-growth ventures have work experience or advanced training in their technologies, and teams rather than individuals created the plans. The results suggest that a combination of exogenous and endogenous approaches may be needed to stimulate a lagging region's economic growth.     

Schumpeterian competition in heterogeneous oligopolies

The modeling of Schumpeterian competition as a process of innovation, imitation and selection was first presented by Nelson/Winter (1982) in a simulation study and further analyzed in a similar but general analytical formulation by Iwai (1984a, 1984b). Their results concerning the relations between the combination of the different forces of Schumpeterian competition and market structure respectively the distributions of profits are interesting, but restricted to competitive markets. Comparing rules of thumb and satisficing for the Ramp;D decisions the present study analyzes the process of Schumpeterian competition in a heterogeneous oligopoly. Firstly, the authors find for the Ramp;D-concentration relation results contrary to the traditional interpretation of Schumpeter. Secondly, Iwai’s (1984a, 1984b) qualitative results hold in this less restrictive modeling.