A Binomial Basis for the Cox, Ingersoll and Ross Model of the Term Structure of Interest Rates

The technical demands of the Cox, Ingersoll and Ross (1985a and 1985b) papers are such that they can only be mastered by those who have a good understanding of some deep mathematics and statistical concepts, including the techniques of continuous time stochastic calculus and the measure theory upon which it is based, the Kuhn-Tucker theory surrounding non-linear optimisation techniques as well as variational methods founded on solutions of non-linear differential equations. Hence, our purpose here is to formalise both investor preferences and the supply side which underscores the Cox, Ingersoll and Ross (1985b) 'square root' model of the term structure of interest rates in terms of some simple binomial filtration processes, thereby avoiding most of the intricate technical detail contained in the original papers. These procedures not only allow for a more focused evaluation of the model's underlying strengths and weaknesses but also provide a framework for assessing some of the strategies which the model makes available for hedging exposure against adverse interest rate movements.     

Comparative Analysis of Ownership Transformation and Performance Relationship among Major and Regional Banks in Australia

This article attempts to clarify existing doubts with respect to the performance of private and privatised banks versus public banks; that is, it is an attempt to clarify the ownership–performance relationship. The analysis takes explicit account of the privatisation transformation, including its intermediary stage, and the status of the economy. The ownership–performance model is estimated using cross‐sectional time‐series data and is used to test the influence of ownership changes on performance. Alternative performance measures are considered. The empirical findings show that ownership transformation in the case of regional banks has resulted in improved performance, whilst the benefits in the case of major banks were not significant, even though these banks have become more competitive.     

Stochastic Depreciation and Optimal Consumption-Investment Decisions

Capital accumulation is viewed as the net outcome of accumulation and wasting. Accumulation is modelled by a Gaussian process whilst wasting is generated by a continuous time and continuous state-space pseudo-Poisson process. These assumptions imply that an economic agent's preferences, consumption, capital accumulation and wastage are governed by a form of Hamilton-Jacobi-Bellman equation containing an infinite number of terms. We demonstrate the optimisation procedures applicable to consumption and the expected wastage of capital and in the process show that isoelastic preferences are consistent with the model.     

The Effect of Labor's Bargaining Power on Wealth Inequality in the UK,USA, And France

This paper analyses the determinants of wealth inequality, measured as the share of wealth owned by the top 1 percent wealthiest individuals. We find that labor's bargaining power is a significant and important determinant of top wealth shares. Using a semi-structural vector autoregression (SVAR) model for the period 1970–2019, we estimate that shocks to labor's bargaining power explain 32 percent, 8 percent and 32 percent of the variation around the long-term trend in wealth inequality in the UK, USA and France, respectively.     

Performance of Australia's Ethical Funds

Australia's three major public ethical investment funds achieved mixed financial success in the seven years to 30 June 1998, though on average the funds underperformed relative to the market. For the four‐year and five‐year holding periods to 30 June 1995 and 1996 respectively, the average holding‐period returns for the three funds were less than the risk‐free rate. This is strong evidence of investors incurring a financial discount for investing ethically and, with respect to the ethical investor's utility function, it is evidence of the marginal utility increasing as the ethical attributes of assets increase.