25,755 research outputs found
Elimination of systemic risk in financial networks by means of a systemic risk transaction tax
Financial markets are exposed to systemic risk (SR), the risk that a major
fraction of the system ceases to function, and collapses. It has recently
become possible to quantify SR in terms of underlying financial networks where
nodes represent financial institutions, and links capture the size and maturity
of assets (loans), liabilities, and other obligations, such as derivatives. We
demonstrate that it is possible to quantify the share of SR that individual
liabilities within a financial network contribute to the overall SR. We use
empirical data of nationwide interbank liabilities to show that the marginal
contribution to overall SR of liabilities for a given size varies by a factor
of a thousand. We propose a tax on individual transactions that is proportional
to their marginal contribution to overall SR. If a transaction does not
increase SR it is tax-free. With an agent-based model (CRISIS macro-financial
model) we demonstrate that the proposed "Systemic Risk Tax" (SRT) leads to a
self-organised restructuring of financial networks that are practically free of
SR. The SRT can be seen as an insurance for the public against costs arising
from cascading failure. ABM predictions are shown to be in remarkable agreement
with the empirical data and can be used to understand the relation of credit
risk and SR.Comment: 18 pages, 7 figure
Competition between exchanges : Euronext versus Xetra
Exchanges in Europe are in a process of consolidation. After the failure of the proposed merger between Deutsche Börse and Euronext, these two groups are likely to become the nuclei for further mergers and co-operation with currently independent exchanges. A decision for one of the groups entails a decision for the respective trading platform. Against that background we evaluate the attractiveness of the two dominant continental European trading systems. Though both are anonymous electronic limit order books, there are important differences in the trading protocols. We use a matched-sample approach to compare execution costs in Euronext Paris and Xetra. We find that both quoted and effective spreads are lower in Xetra. When decomposing the spread we find no systematic differences in the adverse selection component. Realized spreads, on the other hand, are significantly higher in Euronext. Neither differences in the number of liquidity provision agreements nor differences in the minimum tick size or in the degree of domestic competition for order flow explain the different spread levels. We thus conclude that Xetra is the more efficient trading system. JEL Classification: G10, G1
Testing for Economies of Scope in European Railways: An Efficiency Analysis
In this paper, we conduct a pan-European effciency analysis to investigate the performance of European railways with a particular focus on economies of vertical integration. We test the hypothesis that integrated railways realize economies of scope and, thus, produce railway services with a higher level of effciency. To determine whether joint or separate production is more effcient, we apply a Data Envelopment Analysis super-effciency bootstrapping model which relates the ef- ficiency for integrated production to a reference set consisting of separated firms which use a dierent production technology. We find that for a majority of European railways economies of scope exist.Efficiency, Vertical Integraton, Railway Industry
Regulating two-sided markets: an empirical investigation
We study the effect of government encouraged or mandated interchange fee ceilings on consumer and merchant adoption and usage of payment cards in an economy where card acceptance is far from complete. We believe that we are the first to use bank-level data to study the impact of interchange fee regulation. We find that consumer and merchant welfare improved because of increased consumer and merchant adoption leading to greater usage of payment cards. We also find that bank revenues increased when interchange fees were reduced although these results are critically dependent on merchant acceptance being far from complete at the beginning and during the implementation of interchange fee ceilings. In addition, there is most likely a threshold interchange fee below which social welfare decreases although our data currently does not allow us to quantify it. JEL Classification: L11, G21, D53consumer payment choice, merchant payment adoption, network competition
European exchange trading funds trading with locally weighted support vector regression
In this paper, two different Locally Weighted Support Vector Regression (wSVR) algorithms are generated and applied to the task of forecasting and trading five European Exchange Traded Funds. The trading application covers the recent European Monetary Union debt crisis. The performance of the proposed models is benchmarked against traditional Support Vector Regression (SVR) models. The Radial Basis Function, the Wavelet and the Mahalanobis kernel are explored and tested as SVR kernels. Finally, a novel statistical SVR input selection procedure is introduced based on a principal component analysis and the Hansen, Lunde, and Nason (2011) model confidence test. The results demonstrate the superiority of the wSVR models over the traditional SVRs and of the v-SVR over the Δ-SVR algorithms. We note that the performance of all models varies and considerably deteriorates in the peak of the debt crisis. In terms of the kernels, our results do not confirm the belief that the Radial Basis Function is the optimum choice for financial series
Crowdsourcing the Robin Hood effect in cities
Socioeconomic inequalities in cities are embedded in space and result in
neighborhood effects, whose harmful consequences have proved very hard to
counterbalance efficiently by planning policies alone. Considering
redistribution of money flows as a first step toward improved spatial equity,
we study a bottom-up approach that would rely on a slight evolution of shopping
mobility practices. Building on a database of anonymized credit card
transactions in Madrid and Barcelona, we quantify the mobility effort required
to reach a reference situation where commercial income is evenly shared among
neighborhoods. The redirections of shopping trips preserve key properties of
human mobility, including travel distances. Surprisingly, for both cities only
a small fraction () of trips need to be altered to reach equity
situations, improving even other sustainability indicators. The method could be
implemented in mobile applications that would assist individuals in reshaping
their shopping practices, to promote the spatial redistribution of
opportunities in the city.Comment: 9 pages, 4 figures + Appendi
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