Rating Cooperative and Commercial Bank Bonds: a comparative approach

Abstract ** :  The primary objective of this article is to find whether bonds issued by commercial and cooperative banks are rated similarly or not. We then compare the performance of two quantitative methods, namely seemingly unrelated regressions (SURE) and recursive partitioning algorithm (RPA), at explaining bond ratings based on the same set of quantitative indicators. Using the regression model, cooperative banks' credit risk is more sensitive to the quality and size of assets. For commercial banks, elements relative to debt more clearly stand out. In the RPA model, a subtree for the financial cooperatives is created which provides evidence of some differentiation in the rating process. Also, the RPA model outperforms the parametric method whether performance is measured by the percentage of correct classification or the size of the average rating prediction error.     

Calibration and hedging under jump diffusion

A jump diffusion model coupled with a local volatility function has been suggested by Andersen and Andreasen (2000). By generating a set of option prices assuming a jump diffusion with known parameters, we investigate two crucial challenges intrinsic to this type of model: calibration of parameters and hedging of jump risk. Even though the estimation problem is ill-posed, our results suggest that the model can be calibrated with sufficient accuracy. Two different strategies are explored for hedging jump risk: a semi-static approach and a dynamic technique. Simulation experiments indicate that each of these methods can sharply reduce risk exposure. JEL Classification G12 · G13     

government and the PSBR

The government has changed its view of how to gauge the size of the budget deficit. Nick Parsons and David Coleman, of Union Discount, argue that this change is an ill-omen for the control of public spending.     

Entry and exit in retailing: Incentives, barriers, displacement and replacement

In this study the determinants of entry and exit and the interrelationship between these market phenomena are investigated. We examine incentives, barriers, displacement and replacement for a panel data-set of 23 Dutch shoptypes for the 1981–1988 period. Results indicate that profit as a ratio of modal income, growth of consumer spending and growing unemployment are important incentives to enter and disincentives to exit. Requirements of floorspace and professional skills appear to reduce entry rates. We find evidence for entry and exit to interact but not to be simultaneously determined. The implication being that entry (exit) has a separate influence on exit (entry) next to market incentives and entry and exit barriers.     

mortgage interest tax relief reform

Mortgage interest tax relief is unjustified, say Professor Roy Wilkinson, of the Sheffield University School of Management, and Margaret Wilkinson. They argue that it should be phased out.     

Organizational energy: an empirical study in Indian R&D laboratories

Analyzing the way organizations function and the processes that operate within these organizations is an important managerial responsibility. We have adopted a people–oriented approach called organizational energy to develop a simple process for diagnosing the level of satisfaction of scientists working in R&D laboratories. Psychic energy as reflected in different work activities in an organization is manifested in energy generating and energy draining activities that can be reduced to an energy count. The present study assesses the use of mental energy by scientific personnel working in three national laboratories in India with the objective of increasing the energy count for improving organizational effectiveness. We hope that the results can be used as the basis for initiating action to improve the motivation and utilization of scientists in India, to support the overall goal of self–reliance in science and technology.     

'multiculturalism' or assimilation: still to decide

Can communities of emigrants be assimilated? David Coleman of Oxford University examines how the issues have been dealt with in the United Kingdom.     

On Sustained Growth Under Uncertainty

We analyze a stochastic one‐sector model of economic growth and investigate the conditions under which long‐run growth occurs almost surely. In contrast to the deterministic version of the model, the utility function plays a crucial role in determining the long‐run behavior of output.     

Free Riding in Noncooperative Entry Deterrence with Differentiated Products

We examine free riding and underinvestment in noncooperative entry deterrence in the Gilbert and Vives (1986) model with differentiated products. Our analysis proves that for products that are differentiated enough, when both entry allowing and entry deterring equilibria coexist, the symmetric entry deterring equilibrium may Pareto dominate the entry equilibrium. Hence, “coordination failure” underinvestment in entry prevention can occur. However, as claimed, the overinvestment result of Gilbert and Vives remains robust to moderate amounts of product differentiation. We also show that coordination failure underinvestment arises in a wide variety of entry deterrence models and does not rely on assumptions regarding strategic substitutability or complementarity of precommitments.