MODELING SOVEREIGN RISKS: FROM A HYBRID MODEL TO THE GENERALIZED DENSITY APPROACH

Motivated by the European sovereign debt crisis, we propose a hybrid sovereign default model that combines an accessible part taking into account the evolution of the sovereign solvency and the impact of critical political events, and a totally inaccessible part for the idiosyncratic credit risk. We obtain closed‐form formulas for the probability that the default occurs at critical political dates in a Markovian setting. Moreover, we introduce a generalized density framework for the hybrid default time and deduce the compensator process of default. Finally, we apply the hybrid model and the generalized density to the valuation of sovereign bonds and explain the significant jumps in long‐term government bond yields during the sovereign crisis.     

Advertising to the masses: the effects of crowding on the attention to place-based advertising

Advertising situated in environments where people congregate or pass through on their way to somewhere else benefit from being placed in such high traffic areas. However, these strategically placed ads also suffer from conditions of human crowding that prevents them from being noticed and processed. We undertake a study of place-based advertising in a shopping mall using facial recognition software to determine the effect of human density on the attention directed to advertising. We find that as human density increases, attention to advertising decreases, but only to a point where it begins to increase again. Our research also finds that human density plays a moderating role on the motivation to process advertising.     

Generalized piecewise linear histograms

We extend the concept of piecewise linear histogram introduced recently by Beirlant, Berlinet and Györfi. The disadvantage of that histogram is that in many models it takes on negative values with probability close to 1. We show that for a wide set of models, the extended class of estimates contains a bona fide density with probability tending to 1 as the sample size n increases to infinity. The mean integrated absolute error in the extended class of estimators decreases with the same rate n^–2/5 as in the original narrower class.     

The relevance of currency risk in the EMU

We investigate how the elimination of intra-European exchange risk may affect international financial markets using a conditional version of the International CAPM. We estimate the EMU and non-EMU components of aggregate currency risk and document significant exposures to both. The premium for EMU risk is positive and associated with exposure to the French, Italian and Spanish currencies. The premium for non-EMU risk is consistently negative and accounts for most of the aggregate currency premiums. In the 1990s, exposures to EMU risk declined significantly while exposures to non-EMU risk increased. Hence the adoption of the Euro is unlikely to have a large impact on aggregate currency risk premiums.     

Statistical Decision Problems and Bayesian Nonparametric Methods

This paper considers parametric statistical decision problems conducted within a Bayesian nonparametric context. Our work was motivated by the realisation that typical parametric model selection procedures are essentially incoherent. We argue that one solution to this problem is to use a flexible enough model in the first place, a model that will not be checked no matter what data arrive. Ideally, one would use a nonparametric model to describe all the uncertainty about the density function generating the data. However, parametric models are the preferred choice for many statisticians, despite the incoherence involved in model checking, incoherence that is quite often ignored for pragmatic reasons. In this paper we show how coherent parametric inference can be carried out via decision theory and Bayesian nonparametrics. None of the ingredients discussed here are new, but our main point only becomes evident when one sees all priors—even parametric ones—as measures on sets of densities as opposed to measures on finite-dimensional parameter spaces.     

Locally minimum variance unbiased estimator in a discontinuous density function

The exact forms of the locally minimum variance unbiased estimators and their variances are given in the case of a discontinuous density function.     

The topography of metropolitan employment: Identifying centers of employment in a polycentric urban area

While it is well recognized that US metropolitan areas are polycentric, there is little consensus as to the appropriate method for identifying concentrations of employment within them. Existing methods suffer from strong assumptions about parametric form, misspecification, or reliance on local knowledge to calibrate model parameters. This paper introduces a new nonparametric method for identifying subcenters. Results indicate that this, more flexible, nonparametric approach yields greater accuracy with regard to both urban and suburban centers compared with other approaches. This approach should provide better data for the numerous topics that depend on the spatial accounting of employment within metropolitan areas.     

Regional, national, and spatially explicit scenarios of demographic and economic change based on SRES

We report here spatially explicit scenario interpretations for population and economic activity (GDP) for the time period 1990 to 2100 based on three scenarios (A2, B1, and B2) from the IPCC Special Report on Emissions Scenarios (SRES). At the highest degree of spatial detail, the scenario indicators are calculated at a 0.5 by 0.5 degree resolution. All three scenarios follow the qualitative scenario characteristics, as outlined in the original SRES scenarios. Two scenarios (B1 and B2) also follow (with minor adjustments due to scenario improvements) the original SRES quantifications at the level of 4 and 11 world regions respectively. The quantification of the original SRES A2 scenario has been revised to reflect recent changing perceptions on the demographic outlook of world population growth. In this revised “high population growth” scenario, A2r world population reaches some 12 billion by 2100 (as opposed to some 15 billion in the original SRES A2 scenario) and is characterized by a “delayed fertility transition” that is also mirrored in a delayed (economic) development catch-up, resulting in an initially stagnating and subsequently only very slow reduction in income disparities. The spatially explicit scenario interpretation proceeds via two steps. Through a combination of decomposition and optimization methods, world regional scenario results are first disaggregated to the level of 185 countries. In a subsequent second step, national results are further disaggregated to a grid cell level, taking urbanization and regional (rural–urban) income disparities explicitly into account. A distinguishing feature of the spatially explicit scenario results reported here is that both methodologies, as well as numerical assumptions underlying the “downscaling” exercise, are scenario-dependent, leading to distinctly different spatial patterns of population and economic activities across the three scenarios examined.     

Land conservation and tenure security in Kenya: Boserup's hypothesis revisited

Land conservation technologies used by farmers are known to play an important role in improving farm incomes and household welfare in the long run. For this reason substantial investments have been made in research to improve agricultural technologies in various parts of the world, from the development of new crop varieties to new practices of land management. This paper explores the impact of land rights among other factors on adoption of soil and water conservation practices. The study further tests for Boserup's hypothesis (correlation between population density, land conservation and property rights) using panel survey data collected from farming households. The key findings of the paper are that property right regimes and population density affect both the decision to conserve land as well as the type of conservation practices used by farmers. The results further suggest a positive correlation between land tenure security and population density, thus supporting Boserup's hypothesis. The findings call for pursuit of both short-term and long-term policy measures that offer incentives for land conservation through government initiatives and participation of local communities.     

城市广场规划控制指标

提出了城市广场规划控制指标体系 ,以期通过密度控制、用地控制、设施控制 ,使城市广场的规划设计、审批和管理有法可依、有章可循