An analysis of spending behaviour under liquidity constraints with an application to financial hedging

Imperial Users onl

Re-figuring Federalism: Nation and State in Health Reform's Next Round

Reviews the evolution of national healthcare reform movements and the relationship between the federal and state governments, with international comparisons. Outlines differences to be resolved over Medicaid and other programs under a reformed system

Privatization and regulation of transport infrastructure in the 1990s - successes...and bugs to fix for the next millennium

Governments should increasingly be able to rely on the private sector for help supporting (and financing) the transport sector - especially infrastructure support services for which there is heavy demand - but first they must improve their regulatory tools and sort out the institutional mess surrounding the regulatory process. Some countries have put together creative restructuring models and financing designs that tap potential in the private sector. Roads will continue to need significant public funding, but there are innovative ways (including shadow tools) to attract private financing for road maintenance and investment. Partnerships between public and private sectors have remained largely untapped at ports and airports. To attract more private capital to the sector, regulators must know the cost of capital, know how to be fair to captive shippers, and have a better handle on demand - so they have more credibility when conflicts arise. Governments have overemphasized making deals and have generally underestimated the difficulty of taking on their new job as regulators. They are increasingly switching to contract-based regulation, to firm up the commitments of all parties involved, but are not adequately emphasizing contract design that anticipates problems and addresses unpredictable situations. This increases the risk of arbitrary regulatory rulings, which increases regulatory and political risks, which raises the expected rate of return required by potential investors. And all that makes future projects costlier or more difficult, adding to the effects of the 1998-99 financial crisis. As a result of increased risk, the two groups most interested in the sector are: 1) Large, strong operators in the sector - typically in tandem with local construction companies - that feel confident they can take on regulators in case of conflict. 2) Risk-takers carving a niche for themselves. Either way, taxpayers and transport users are exposed to government, regulator, or operator failures that result in contract re-negotiations (the norm, rather than the exception, in transport infrastructure projects). Gains from privatization might not reach consumers, simply because governments are ignoring the importance of ensuring fair distribution of long-run gains through the early creation of independent and accountable regulatory institutions that work closely with effective competition agencies.Banks&Banking Reform,Public Sector Economics&Finance,Municipal Financial Management,Decentralization,Environmental Economics&Policies,Banks&Banking Reform,Municipal Financial Management,Environmental Economics&Policies,Public Sector Economics&Finance,Health Economics&Finance

Tendering Universal Service Obligations in Liberalized Network Industries

In the past decades, several countries have introduced reverse auctions for allocating universal service or public mission subsidies in various industries. Examples include urban transport, air transport and telecommunications. Recently, such mechanisms have also been envisioned in liberalized postal markets. Issuing an invitation to tender for obligations in otherwise liberalized markets significantly differs from auctioning off a monopolistic provision of services or goods (competition for the market), as is e.g. the case with spectrum auctions in the telecommunications sector. We discuss the rationale for introducing such a regulatory regime as well as conceptual and practical issues concerning its implementation. It turns out that designing an efficient tender for universal service subsidies in liberalized markets is considerably more difficult than tendering e.g. a monopoly franchise. A first reason is that the cost assessment is more complex in the former case as future competitive market outcomes have to be anticipated; in the case with franchise bidding, at least the number of competitors is given by the tender itself. Hence, revenue effects caused by competitors are easier to calculate. Second, the threat of a winner’s moral hazard requires more detailed ex ante regulations. These raise the social cost of universal service provision. Compared to direct designation of universal services with ex post compensation, tendering causes a series of fundamental concerns and trade-offs that make the application of auctions less attractive than in other sectors.Procurement, Tendering, Reverse Auctions, Universal Service Obligation, Liberalization, Network Industries

The History of the Quantitative Methods in Finance Conference Series. 1992-2007

This report charts the history of the Quantitative Methods in Finance (QMF) conference from its beginning in 1993 to the 15th conference in 2007. It lists alphabetically the 1037 speakers who presented at all 15 conferences and the titles of their papers.

Worst-Case Valuation of Equity-Linked Products Using Risk-Minimizing Strategies

The global market for life insurance products has been stable over the years. However, equity-linked products which form about �fifteen percent of the total life insurance market has experienced a decline in premiums written. The impact of model risk when hedging these investment guarantees has been found to be significant�. We propose a framework to determine the worst case value of an equity-linked product through partial hedging using quantile and conditional value-at-risk measures. The model integrates both the mortality and the financial risk associated with these products to estimate the value as well as the hedging strategy. We rely on robust optimization techniques for the worst case hedging strategy. To demonstrate the versatility of the framework, we present numerical examples of point-to-point equity-indexed annuities in multinomial lattice dynamics

Pricing and hedging of VIX derivatives in modified stochastic models

After Cboe launched the VIX and its corresponding derivatives, investors have maintained a high level of interest in this unique index. Unlike indices that focus on asset prices, the VIX can reflect investors' subjective expectations of the market by incorporating varying volatility into the calculation. However, in the past literature, the prices of the VIX derivatives have often been just obtained from models with fixed parameters or considered only the long-term volatility of the asset price Also, we find sparse discussions on the compatibility of the VIX valuation process with modifications of time series stochastic models, such as the regime switching and the subordinator method. At last, we note little literature specifically mentions hedging VIX derivatives and the relevant strategy-obtaining process. To address these issues, we explore the pricing and hedging of VIX derivatives in this thesis, using the VIX European call option as an example. In the pricing process covered in Chapters 3-4, we incorporate the regime switching factor into the continuous 4/2 model and discretize the model based on Heston-Nandi's idea in combination with various modifications, to improve the model's capture of various volatility and changes in the market environment. After comparing the results obtained by the saddlepoint method, we find that those modifications significantly improved the quality of the model, increasing the accuracy of the pricing results and allowing the model to adapt to a more general market environment. In Chapter 5, we hedge the VIX options based on the GARCH framework using a local quadratic hedging approach. After taking advantage of the GARCH model, we optimize the method of obtaining option hedging strategies by reducing the weights of stochastic simulations and reducing the number of simulations required while enhancing the model accuracy