Note on 2-rational fields

We compute the Galois group of the maximal 2-ramified and complexified pro-2-extension of any 2-rational number field.Comment: This Note is motivated by the paper ``Galois 2-extensions unramified outside 2'' of J. Jossey. We bring into focus some classical technics on abelian $\ell$-ramification which considerably simplify proofs in such subjects; for instance, the main Theorem 2, due to J-F. Jaulent, generalizes the purpose of Jossey's pape

A Portfolio Approach to Venture Capital Financing

This paper studies the contracting choices between an entrepreneur and venture capital investors in a portfolio context. We rely on the mean-variance framework and derive the optimal choices for an entrepreneur with and without the presence of different kinds of venture capitalists. In particular, we show that the entrepreneur always has the incentive to share the risk and benefits of the venture whenever possible. On the basis of their objectives and characteristics, we distinguish the situations of the corporate, independent, and bank-sponsored venture capital funds. Our framework enables us to derive the optimal contract design for the entrepreneur, featuring the choice of investor, the entrepreneur’s investment in the venture, and her dilution in the project’s equity as a function of her bargaining power. This result allows us to characterize the choice of the investor depending on her cost of equity and debt capital. In addition to project size and risk, entrepreneur’s risk aversion turns out to be a critical determinant of VC investor choice –a finding which is strongly supported by a panel analysis of VC fund flows for 5 European countries over the 2002-2009 period.Venture capital, Portfolio choice, Entrepreneur, Risk aversion

Credit Spread Changes within Switching Regimes

Many empirical studies on credit spread determinants consider a single-regime model over the entire sample period and find limited explanatory power. We model the credit cycle independently from macroeconomic fundamentals using a Markov regime switching model. We show that accounting for endogenous credit cycles enhances the explanatory power of credit spread determinants. The single regime model cannot be improved when conditioning on the states of the NBER economic cycle. Furthermore, the regime-based model highlights a positive relation between credit spreads and the risk-free rate in the high regime. Inverted relations are also obtained for some other determinants.Credit spread, switching regimes, market risk, liquidity risk, default risk, credit cycle, NBER economic cycle

Currency Total Return Swaps: Valuation and Risk Factor Analysis

Currency total return swaps (CTRS) are hybrid derivatives instruments that allow to simultaneously hedge against credit and currency risks. We develop a structural credit risk model to evaluate CTRS premia. Empirical test on a sample of 23,005 price observations from 59 underlying issuers yields an average percentage error of around 10%. This indicates that, beyond interest rate risk, firm-specific factors are major drivers of the variations in the valuation of these instruments. Regression analysis of residuals shows that exchange rate determinants account for up to 40% of model pricing errors – indicating that a currency risk premium affects the CTRS price significantly but only marginally, which confirms the prevalence of credit risk in the pricing of CTRS.Credit derivative, credit risk, currency risk

The Value of a Statistical Life: a Meta-Analysis with a Mixed Effects Regression Model

The value of a statistical life (VSL) is a very controversial topic, but one which is essential to the optimization of governmental decisions. Indeed, our society faces any number of risks (health, transportation, work, etc.) and, as resources are limited, their complete elimination is impossible. The role of governments is to act as effectively as possible in reducing these risks. To do so, one must first determine the value that society is willing to pay in order to save a human life. However, we see a great variability in the values obtained from different studies. The source of this variability needs to be understood, in order to offer public decision-makers better guidance in choosing a value and to set clearer guidelines for future research on the topic. This article presents a meta-analysis based on 40 observations obtained from 37 studies (from nine different countries) which all use a hedonic wage method to calculate the VSL. Our meta-analysis is innovative in that it is the first to use the mixed effects regression model (Raudenbush, 1994) to analyze studies on the value of a statistical life. The outcome of our meta-analysis allows us to conclude that the variability found in the results studied stems in large part from differences in methodologies.Value of a statistical life, meta-analysis, mixed effects regression model, hedonic wage method, risk

Poisson Models with Employer-Employee Unobserved Heterogeneity: An Application to Absence Data

We propose a parametric model based on the Poisson distribution that permits to take into account both unobserved worker and workplace heterogeneity as long as both effects are nested. By assuming that workplace and worker unobserved heterogeneity components follow a gamma and a Dirichlet distribution respectively, we obtain a closed form the unconditional density function. We estimate the model to obtain the determinants of absenteeism using linked employer-employee Canadian data from the Workplace and Employee Survey (2003). Coefficient estimates are interpreted in the framework of the typical labor-leisure model. We show that omitting unobserved heterogeneity on either side of the employment relationship leads to notable biases in the estimated coefficients. In particular, the impact of wages on absences is underestimated in simpler models.Absenteeism, Linked Employer-Employee Data, Employer-Employee Unobserved Heterogeneity, Count Data Models, Dirichlet Distribution

Detecting Regime Shifts in Corporate Credit Spreads

Using an innovative random regime shift detection methodology, we identify and confirm two distinct regime types in the dynamics of credit spreads: a level regime and a volatility regime. The level regime is long lived and shown to be linked to Federal Reserve policy and credit market conditions, whereas the volatility regime is short lived and, apart from recessionary periods, detected during major financial crises. Our methodology provides an independent way of supporting structural equilibrium models and points toward monetary and credit supply effects to account for the persistence of credit spreads and their predictive power over the business cycle.Credit spread regimes, level regimes, volatility regimes, credit cycle, economic cycle, monetary effect, credit supply effect

A Structural Balance Sheet Model of Sovereign Credit Risk

This article studies sovereign credit spreads using a contingent claims model and a balance sheet representation of the sovereign economy. Analytical formulae for domestic and external debt values as well as for the financial guarantee are derived in a framework where recovery rate is endogenously determined as the solution of a strategic bargaining game. The approach allows to relate sovereign credit spreads to observable macroeconomic factors, and in particular accounts for contagion effects through the corporate and banking sectors. Pricing performance as well as predictions about credit spread determinants are successfully tested on the Brazilian economy.Sovereign credit spread, Balance sheet, Recovery rate, Contingent claims analysis, Contagion effects

Modeling Stiffness and Damping in Rotational Degrees of Freedom Using Multibond Graphs

A contribution is proposed for the modeling of mechanical systems using multibond graphs. When modeling a physical system, it may be needed to catch the dynamic behavior contribution of the joints between bodies of the system and therefore to characterize the stiffness and damping of the links between them. The visibility of where dissipative or capacitive elements need to be implemented to represent stiffness and damping in multibond graphs is not obvious and will be explained. A multibond graph architecture is then proposed to add stiffness and damping in hree rotational degrees of freedom. The resulting joint combines the spherical joint multibond graph relaxed causal constraints while physically representing three concatenated revolute joints. The mathematical foundations are presented, and then illustrated through the modeling and simulation of an inertial navigation system; in which stiffness and damping between the gimbals are taken into account. This method is particularly useful when modeling and simulating multibody systems using Newton-Euler formalism in multibond graphs. Future work will show how this method can be extended to more complex systems such as rotorcraft blades' connections with its rotor hub.Fondation Airbus Grou

Poisson Models with Employer-Employee Unobserved Heterogeneity: An Application to Absence Data

We propose a parametric model based on the Poisson distribution that permits to take into account both unobserved worker and workplace heterogeneity as long as both effects are nested. By assuming that workplace and worker unobserved heterogeneity components follow a gamma and a Dirichlet distribution respectively, we obtain a closed form for the unconditional density function. We estimate the model to obtain the determinants of absenteeism using linked employer-employee Canadian data from the Workplace and Employee Survey (2003). Coefficient estimates are interpreted in the framework of the typical labor-leisure model. We show that omitting unobserved heterogeneity on either side of the employement relationship leads to notable biases in the estimated coefficients. In particular, the impact of wages on absences is underestimated in simpler models.Absenteeism; Linked Employer-Employee Data; Employer- Employee Unobserved Heterogeneity; Count Data Models; Dirichlet Distribution