446 research outputs found

    Two-sided jumps risk model with proportional investment and random observation periods

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    In this paper, we consider a two-sided jumps risk model with proportional investments and random observation periods. The downward jumps represent the claim while the upward jumps represent the random returns. Suppose an insurance company invests all of their surplus in risk-free and risky investments in proportion. In real life, corporate boards regularly review their accounts rather than continuously monitoring them. Therefore, we assume that insurers regularly observe surplus levels to determine whether they will ruin and that the random observation periods are exponentially distributed. Our goal is to study the Gerber-Shiu function (i.e., the expected discounted penalty function) of the two-sided jumps risk model under random observation. First, we derive the integral differential equations (IDEs) satisfied by the Gerber-Shiu function. Due to the difficulty in obtaining explicit solutions for the IDEs, we utilize the sinc approximation method to obtain the approximate solution. Second, we analyze the error between the approximate and explicit solutions and find the upper bound of the error. Finally, we discuss examples of sensitivity analysis

    SEC Follow Up Exhibits Part A

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    SEC Follow Up Exhibits Part C

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    SEC Follow Up Exhibits Part D

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    Three Essays on the Law and Economics of Taxation and Finance

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    This dissertation empirically measures how the laws governing taxation and finance affect behavior and addresses how those laws should adapt to changing circumstances. The first chapter examines the effect of joint-taxation and “marriage bonuses” on marriage formation in the United States in the late 1940s and early 1950s. It uses a natural experiment to identify the effect and finds that tax incentives caused an increase in the marriage rate of up to 9%. The second chapter shows that idiosyncratic risk has spiked in every economic downturn since the 1920s and develops new models to explain this phenomenon. It then explores the implications of spikes in idiosyncratic risk for corporate and securities law. The third chapter compares the existing corporate tax to a hypothetical “cash flow tax” to determine how much of the corporate tax base is composed of the normal return to capital. It finds that the normal return to capital made up a relatively small percentage of the corporate tax base over the last 20 years. Because taxes on the normal return to capital are the most likely to be passed on to labor, this suggests that labor’s long-run share of the corporate tax burden is likely to be lower than typically thought.PHDEconomicsUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttps://deepblue.lib.umich.edu/bitstream/2027.42/143950/1/edfox_1.pd

    Real Estate Investment Trusts (REITs) Corporate Governance and Investment Decision-Making in the United Kingdom, South Africa and Nigeria

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    Adopting Real Estate Investment Trusts (REITs) has been relatively slow due to corporate governance issues and a limited understanding of investment decision-making processes. This study aims to enhance the performance of REITs by developing a Corporate Governance Scoring Framework and improving the investment decision-making process. A mixed-method research strategy was employed to gather data on investment decisionmaking processes and corporate governance in the UK, SA, and Nigeria from 2014-2019. Qualitative data was collected through semi-structured telephone interviews with key decision-makers in the three regimes and analysed using content and discourse analysis techniques. Quantitative data was obtained from the annual financial reports of listed REITs during the study period and analysed using OLS, fixed effects, and random effect models. The Integrated Corporate Governance Index (ICGI), a self-scoring framework, was used to measure the quality of corporate governance strength. The qualitative analysis identified four stages in the investment decision-making process: strategy, search, analysis and adjustment, and consultation or decision and review. The interviews revealed that the board, remuneration, and fee proxies were relevant factors across all three regimes, with audit and ownership also significant in the developing regimes of SA and Nigeria. The board's reputation, experience, and management role were highlighted as crucial during the decision-making process. Performance factors such as 'Operational Stability,' 'Tenant Quality,' 'Experience,' and metrics including 'Rental Income,' 'Dividend Payment,' and 'Yield' were identified. The quantitative analysis demonstrated that adherence to corporate governance codes was highest in the UK, followed by SA and Nigeria. Regression analysis results showed that a higher ICGI score improved return on assets (ROA) and return on equity (ROE) in the UK but not in SA and Nigeria. The index did not significantly impact firm value in the UK and pooled country analysis, but it led to better firm valuation in SA. In the Nigeria REIT regime, the ICGI harmed firm valuation. The study concluded that adherence to country-level corporate governance was more predictive of operational performance than firm valuation. In summary, this study contributes to the existing knowledge by providing insights into the investment decision-making processes of REITs and the importance of corporate governance in improving their performance. The developed Corporate Governance Scoring Framework offers a valuable tool for evaluating the quality of corporate governance in REITs, but further refinement is necessary to keep up with evolving policies

    Micro, Small and Medium Enterprise (MSME) Insolvency in Canada

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    Insolvency law is broadly recognized as an essential tool in well-functioning economies. A balance of mechanisms that allow for timely and effective liquidation, but also for a “fresh start” for individual entrepreneurs and the rehabilitation of viable businesses, tends to enhance creditor recoveries and lender confidence. This study examines the treatment of micro, small and medium enterprises (“MSME”) under the Canada Bankruptcy and Insolvency Act. It undertakes a qualitative examination of 200 business insolvencies in 2015, in order to try to understand the reasons for insolvency, types of debt, and outcomes of proceedings. The study reports on the results of a survey of 53 licenced insolvency trustees and 10 loan officers across Canada, in terms of their experience with respect to the barriers to small and medium enterprise insolvency. It suggests a series of legislative changes, including creating a streamlined approach to the insolvency of micro and small businesses (“MSE”), so that MSE can access formal proceedings; a deemed approval process where creditors have received meaningful notice and do not object to the proposal; increased authority for the insolvency professional, reducing the administrative burden and cost of multiple court appearances; and other measures to enhance access to insolvency system

    Agent-based Modeling And Market Microstructure

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    In most modern financial markets, traders express their preferences for assets by making orders. These orders are either executed if a counterparty is willing to match them or collected in a priority queue, called a limit order book. Such markets are said to adopt an order-driven trading mechanism. A key question in this domain is to model and analyze the strategic behavior of market participants, in response to different definitions of the trading mechanism (e.g., the priority queue changed from the continuous double auctions to the frequent call market). The objective is to design financial markets where pernicious behavior is minimized.The complex dynamics of market activities are typically studied via agent-based modeling (ABM) methods, enriched by Empirical Game-Theoretic Analysis (EGTA) to compute equilibria amongst market players and highlight the market behavior (also known as market microstructure) at equilibrium. This thesis contributes to this research area by evaluating the robustness of this approach and providing results to compare existing trading mechanisms and propose more advanced designs.In Chapter 4, we investigate the equilibrium strategy profiles, including their induced market performance, and their robustness to different simulation parameters. For two mainstream trading mechanisms, continuous double auctions (CDAs) and frequent call markets (FCMs), we find that EGTA is needed for solving the game as pure strategies are not a good approximation of the equilibrium. Moreover, EGTA gives generally sound and robust solutions regarding different market and model setups, with the notable exception of agents’ risk attitudes. We also consider heterogeneous EGTA, a more realistic generalization of EGTA whereby traders can modify their strategies during the simulation, and show that fixed strategies lead to sufficiently good analyses, especially taking the computation cost into consideration.After verifying the reliability of the ABM and EGTA methods, we follow this research methodology to study the impact of two widely adopted and potentially malicious trading strategies: spoofing and submission of iceberg orders. In Chapter 5, we study the effects of spoofing attacks on CDA and FCM markets. We let one spoofer (agent playing the spoofing strategy) play with other strategic agents and demonstrate that while spoofing may be profitable in both market models, it has less impact on FCMs than on CDAs. We also explore several FCM mechanism designs to help curb this type of market manipulation even further. In Chapter 6, we study the impact of iceberg orders on the price and order flow dynamics in financial markets. We find that the volume of submitted orders significantly affects the strategy choice of the other agents and the market performance. In general, when agents observe a large volume order, they tend to speculate instead of providing liquidity. In terms of market performance, both efficiency and liquidity will be harmed. We show that while playing the iceberg-order strategy can alleviate the problem caused by the high-volume orders, submitting a large enough order and attracting speculators is better than taking the risk of having fewer trades executed with iceberg orders.We conclude from Chapters 5 and 6 that FCMs have some exciting features when compared with CDAs and focus on the design of trading mechanisms in Chapter 7. We verify that CDAs constitute fertile soil for predatory behavior and toxic order flows and that FCMs address the latency arbitrage opportunities built in those markets. This chapter studies the extent to which adaptive rules to define the length of the clearing intervals — that might move in sync with the market fundamentals — affect the performance of frequent call markets. We show that matching orders in accordance with these rules can increase efficiency and selfish traders’ surplus in a variety of market conditions. In so doing, our work paves the way for a deeper understanding of the flexibility granted by adaptive call markets
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