Efficiency of EU Merger Control in the 1990-2008 Period

The main goal of this paper is to provide an analysis of key regulatory changes in the European merger control and to evaluate their real impact on the efficiency of merger regulation. Our main contribution is an empirical analysis of a unique representative sample of 161 horizontal mergers covering the final regulatory assessments during the period from 1990 to 2008. We use stock market data to identify those cases where there are discrepancies between the Commission and market evaluation of the merger. The PROBIT model is then used to further investigate the sources of these discrepancies. Our results suggest that the Commission’s decisions are not purely explained by the motive of protecting consumer welfare and that other political and institutional factors do play a role in setting policy. We did not find evidence that the Commission protects competitors at the expense of consumers and foreign firms. Moreover, we conclude that the regulatory reform introduced in 2004 has significantly enhanced efficiency of the European merger control. To the authors’ best knowledge, this paper is the first study using stock market data to evaluate an impact of the recent EU merger control.merger control, European Union, political economy, regulatory reform, PROBIT model

Main Flaws of The Collateralized Debt Obligation‘s: Valuation Before And During The 2008/2009 Global Turmoil

As a result of the 2008 financial crisis, the world credit markets stalled significantly and raised the doubts of market participants and policymakers about the proper and fair valuation of financial derivatives and structured products such as collateralized debt obligations (CDOs). The aim of the paper is to contribute to the understanding of CDOs and shed light on CDO valuation based on data before and during the current financial upheaval. We present the One Factor Model based on a Gaussian Copula and test five hypothesizes. Based on the results we discovered four main deficiencies of the CDO market. For our modelling we used data of the CDX NA IG 5Y V3 index from 20 September 2007 until 27 February 2009 and its quotes we appropriately transform into CDO quotes. Based on the results we discovered four main deficiencies of the CDO market: i) an insufficient analysis of underlying assets by both investors and rating agencies; ii) the valuation model was usually based only on expected cash-flows when neglecting other factors such mark-to-market losses or correlation risk; iii) mispriced correlation; and finally iv) the mark-to-market valuation obligation for financial institutions should be reviewed. Based on the mentioned recommendations we conclude that the CDO market has a chance to be regenerated. However, the future CDO market would then be more conscious, driven by smarter motives rather than by poor understanding of risks involved in CDOs.collateralized debt obligations, Gaussian Copula, valuation, securitization

Operational Risk Management and Implications for Bank’s Economic Capital – a Case Study

In this paper we review the actual operational data of an anonymous Central European Bank, using two approaches described in the literature: the loss distribution approach and the extreme value theory (“EVT”). Within the EVT analysis, two estimation methods were applied; the standard maximum likelihood estimation method and the probability weighted method (“PWM”). Our results proved a heavy-tailed pattern of operational risk data consistent with the results documented by other researchers in this field. Additionally, our research demonstrates that the PWM is quite consistent even when the data is limited since our results provide reasonable and consistent capital estimates. From a policy perspective, it should be noted that banks from emerging markets such as Central Europe are exposed to these operational risk events and that successful estimates of the likely distribution of these risk events can be derived from more mature markets.operational risk, economic capital, Basel II, extreme value theory, probability weighted method

Regulation of Bank Capital and Behavior of Banks: Assessing the US and the EU-15 Region Banks in the 2000-2005 Period

In recent years, regulators have increased their focus on the capital adequacy of banking institutions to enhance their stability, hence the stability of the whole financial system. The purpose of this paper is to assess and compare how American and European banks adjust their level of capital and portfolio risk under capital regulation, whether and how they react to constraints placed by the regulators. In order to do this, we estimate a modified version of the simultaneous equations model developed by Shrieves and Dahl. This model analyzes adjustments in capital and risk at banks when they approach the minimum regulatory capital level. The results indicate that regulatory requirements have the desired effect on bank behavior. Both American and European banks that are close to minimum requirements simultaneously increase their capital. In addition, the US banks decrease their portfolio risk taking.banking regulation, Basel Capital Accord, capital adequacy, banks, simultaneous equations model

The Prediction of Corporate Bankruptcy and Czech Economy’s Financial Stability through Logit Analysis

This article presents a financial scoring model estimated on Czech corporate accounting data. Seven financial indicators capable of explaining business failure at a 1-year prediction horizon are identified. Using the model estimated in this way, an aggregate indicator of the creditworthiness of the Czech corporate sector (named as JT index) is then constructed and its evolution over time is shown. This indicator aids the estimation of the risks of this sector going forward and broadens the existing analytical set-up used by the Czech National Bank for its financial stability analyses. The results suggest that the creditworthiness of the Czech corporate sector steadily improved between 2004 and 2006, but slightly deteriorated in 2007 what could be explained through global market turbulences.bankruptcy prediction, financial stability, logit analysis, corporate sector risk, JT index

An alternative perspective on projectivity of modules

Similar to the idea of relative projectivity, we introduce the notion of relative subprojectivity, which is an alternative way to measure the projectivity of a module. Given modules $M$ and $N$, $M$ is said to be {\em $N$-subprojective} if for every epimorphism $g:B \rightarrow N$ and homomorphism $f:M \rightarrow N$, then there exists a homomorphism $h:M \rightarrow B$ such that $gh=f$. For a module $M$, the {\em subprojectivity domain of $M$} is defined to be the collection of all modules $N$ such that $M$ is $N$-subprojective. A module is projective if and only if its subprojectivity domain consists of all modules. Opposite to this idea, a module $M$ is said to be {\em subprojectively poor}, or {\em $sp$-poor} if its subprojectivity domain is as small as conceivably possible, that is, consisting of exactly the projective modules. Properties of subprojectivity domains and $sp$-poor modules are studied. In particular, the existence of an $sp$-poor module is attained for artinian serial rings.Comment: Dedicated to the memory of Francisco Raggi; v2 some editorial changes. 'Right hereditary right perfect' replaced by the (equivalent) condition 'right hereditary semiprimary'; v3 a mistake corrected in the statements of Propositions 3.8 and 3.

POLOCALC: a Novel Method to Measure the Absolute Polarization Orientation of the Cosmic Microwave Background

We describe a novel method to measure the absolute orientation of the polarization plane of the CMB with arcsecond accuracy, enabling unprecedented measurements for cosmology and fundamental physics. Existing and planned CMB polarization instruments looking for primordial B-mode signals need an independent, experimental method for systematics control on the absolute polarization orientation. The lack of such a method limits the accuracy of the detection of inflationary gravitational waves, the constraining power on the neutrino sector through measurements of gravitational lensing of the CMB, the possibility of detecting Cosmic Birefringence, and the ability to measure primordial magnetic fields. Sky signals used for calibration and direct measurements of the detector orientation cannot provide an accuracy better than 1 deg. Self-calibration methods provide better accuracy, but may be affected by foreground signals and rely heavily on model assumptions. The POLarization Orientation CALibrator for Cosmology, POLOCALC, will dramatically improve instrumental accuracy by means of an artificial calibration source flying on balloons and aerial drones. A balloon-borne calibrator will provide far-field source for larger telescopes, while a drone will be used for tests and smaller polarimeters. POLOCALC will also allow a unique method to measure the telescopes' polarized beam. It will use microwave emitters between 40 and 150 GHz coupled to precise polarizing filters. The orientation of the source polarization plane will be registered to sky coordinates by star cameras and gyroscopes with arcsecond accuracy. This project can become a rung in the calibration ladder for the field: any existing or future CMB polarization experiment observing our polarization calibrator will enable measurements of the polarization angle for each detector with respect to absolute sky coordinates.Comment: 15 pages, 5 figures, Accepted by Journal of Astronomical Instrumentatio

Initial Performance of BICEP3: A Degree Angular Scale 95 GHz Band Polarimeter

BICEP3 is a 550-mm aperture telescope with cold, on-axis, refractive optics designed to observe at the 95-GHz band from the South Pole. It is the newest member of the BICEP/Keck family of inflationary probes specifically designed to measure the polarization of the cosmic microwave background (CMB) at degree angular scales. BICEP3 is designed to house 1280 dual-polarization pixels, which, when fully populated, totals to ∼9× the number of pixels in a single Keck 95-GHz receiver, thus further advancing the BICEP/Keck program’s 95 GHz mapping speed. BICEP3 was deployed during the austral summer of 2014–2015 with nine detector tiles, to be increased to its full capacity of 20 in the second season. After instrument characterization, measurements were taken, and CMB observation commenced in April 2015. Together with multi-frequency observation data from Planck, BICEP2, and the Keck Array, BICEP3 is projected to set upper limits on the tensor-to-scalar ratio to r ≲ 0.03 at 95 % C.L