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The Market for borrowing securities in Brazil

Mota, Lira Rocha de
Fonte: Fundação Getúlio Vargas Publicador: Fundação Getúlio Vargas
Tipo: Dissertação
Português
Relevância na Pesquisa
26.44%
We report the results of an exploratory data analysis of the Brazilian securities lending market. The analysis is performed over the full historical data set of each individual loan offer and loan contract negotiated between January 2007 and August 2013. We give a quantitative description of volume and loan fee trends and fee dependence on asset characteristics. We also unveil new stylized facts specific to the Brazilian market on market access asymmetries between different types of investors. The emerging picture is that the Brazilian securities lending market is a complex environment with specific frictions and strong asymmetries among players. In particular, we describe a tax arbitrage operation performed by domestic mutual funds which generates a significant distortion in the data. In one such event, we estimate additional aggregate profits of 24.25 million Reais (around 10 million Dollars).

$100 Bills on the Sidewalk: Suboptimal Investment in 401(k) Plans*

Choi, James J.; Laibson, David; Madrian, Brigitte C.
Fonte: PubMed Publicador: PubMed
Tipo: Artigo de Revista Científica
Publicado em /08/2011 Português
Relevância na Pesquisa
26.2%
We identify employees at seven companies whose 401(k) investment choices are dominated because they are contributing less than the employer matching contribution threshold despite being vested in their match and being able to make penalty-free 401(k) withdrawals for any reason because they are older than 59½. At the average firm, 36% of match-eligible employees over 59½ forego arbitrage profits that average 1.6% of their annual pay, or $507. A survey educating employees about the free lunch they are foregoing raised contribution rates by a statistically insignificant 0.67 percent of income among those completing the survey.

$100 Bills on the Sidewalk: Violations of No-Arbitrage in 401(k) Accounts

Choi, James J.; Madrian, Brigitte; Laibson, David I.
Fonte: MIT Press Publicador: MIT Press
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
46.56%
We identify employees at seven companies whose 401(k) investment choices are dominated because they are contributing less than the employer matching contribution threshold despite being vested in their match and being able to make penalty-free 401(k) withdrawals for any reason because they are older than 59½. At the average firm, 36% of match-eligible employees over age 59½ forgo arbitrage profits that average 1.6% of their annual pay, or $507. A survey educating employees about the free lunch they are forgoing raised contribution rates by a statistically insignificant 0.67% of income among those completing the survey.

When is Capital Enough to Get Female Enterprises Growing? Evidence from a Randomized Experiment in Ghana

Fafchamps, Marcel; McKenzie, David; Quinn, Simon; Woodruff, Christopher
Fonte: Banco Mundial Publicador: Banco Mundial
Português
Relevância na Pesquisa
26.52%
Standard models of investment predict that credit-constrained firms should grow rapidly when given additional capital, and that how this capital is provided should not affect decisions to invest in the business or consume the capital. The authors randomly gave cash and in-kind grants to male- and female-owned microenterprises in urban Ghana. Their findings cast doubt on the ability of capital alone to stimulate the growth of female microenterprises. First, while the average treatment effects of the in-kind grants are large and positive for both males and females, the gain in profits is almost zero for women with initial profits below the median, suggesting that capital alone is not enough to grow subsistence enterprises owned by women. Second, for women they strongly reject equality of the cash and in-kind grants; only in-kind grants lead to growth in business profits. The results for men also suggest a lower impact of cash, but differences between cash and in-kind grants are less robust. The difference in the effects of cash and in-kind grants is associated more with a lack of self-control than with external pressure. As a result...

Rain, Agriculture, and Tariffs

Bastos, Paulo; Straume, Odd Rune; Urrego, Jaime A.
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Português
Relevância na Pesquisa
26.41%
This paper examines whether and how rainfall shocks affect tariff setting in the agricultural sector. In a model of strategic trade policy, the authors show that the impact of a negative rainfall shock on optimal import tariffs is generally ambiguous, depending on the weight placed by the domestic policy maker on tariff revenue, profits and the consumer surplus. The more weight placed on domestic profits, the more likely it is that the policy maker will respond to a rainfall shortage by reducing import tariffs. These findings are robust to alternative assumptions about market structure and the timing of the game. Using detailed panel data on applied tariffs and rainfall for 70 nations, the authors find robust evidence that rainfall shortages generally induce policy makers to set lower tariffs on agricultural imports.

The international transmission of arbitrage information across futures markets

Bilson, Chris M; Brailsford, Tim; Evans, Twm
Fonte: Universidade Nacional da Austrália Publicador: Universidade Nacional da Austrália
Tipo: Working/Technical Paper Formato: 99769 bytes; 364 bytes; application/pdf; application/octet-stream
Português
Relevância na Pesquisa
26.78%
The paper examines whether deviations from a domestic spot-futures relation, as identified through mispricing series in stock index futures, spillover international boundaries. Such spillovers suggest that information from a mispricing series in one market conveys a signal of similar mispricing in another market. In the presence of arbitrage traders and in the absence of market frictions, mispricing series should be independent across international boundaries. The study employs a VAR analysis of stock index futures mispricing across Australia, the UK and USA. Using time zone differences, tests are conducted for the daily transmission of arbitrage information. The results reveal the relationship between mispricing series is bi-directional. Based on this finding, a trading strategy is employed to examine the economic significance of apparent profits. The results show that some profits are possible but that a long horizon, probably beyond the scope of most traders, is required to exploit the spillover information.; no

Analysis of the Strategic Use of Forward Contracting in Electricity Markets

VAZQUEZ, Miguel
Fonte: Instituto Universitário Europeu Publicador: Instituto Universitário Europeu
Tipo: Trabalho em Andamento Formato: application/pdf; digital
Português
Relevância na Pesquisa
16.56%
Absence of arbitrage is one of the fundamental tools to describe financial markets. The no-arbitrage price of any financial contract represents players’ valuation of the uncertain future income stream that will result from the contract. This reasoning is based on considering future income streams as exogenously defined variables. When spot markets do not behave under the assumption of perfect competition, future income streams might depend on players’ strategies. If this is the case, price differences between the forward and the spot markets do not imply the existence of arbitrage opportunities, as market players cannot take advantage of such differences. The paper will study the forward-spot interaction in the presence of spot market power. It will be shown that, when producers anticipate that forward sales reduce spot price, they can react in the forward market to compensate for the spot price decrease. Hence, players profits are, considering both forward and spot markets, equivalent to the ones obtained in the case where no forward trading is allowed. The paper also develops a multi-period model that considers the role of private information, aimed to represent that past spot prices are signals of the probability of future spot prices. In this context...

Market evaluation of a hypotetical pump-hydro storage plant in the Italian power system

SPISTO AMANDA
Fonte: IEEE Xplore Digital Library Publicador: IEEE Xplore Digital Library
Tipo: Contributions to Conferences Formato: Online
Português
Relevância na Pesquisa
26.41%
This study assesses the profitability of an investment in a pump hydro storage plant (PHS) located in Italy. We model in GAMS the operation of a price-taker PHS during nine years, from 2005 to 2013. Results show positive operation profits in all regions, with the highest results being recorded by the geographical zones SICI and SARD. The NPV analysis shows negative values though, ranging between -148 €/MWh and -75 €/MWh, for the storage investments in all regions. This result might be due to several factors. In general arbitrage profits are higher in correspondence to big price spreads. In Italy, although maximum prices are quite high with respect to other European countries, minimum price levels are also high, which leads to high operation costs and worst business case for storage investment. The study deserves further investigation of the strategic role of storage at system level to include wider benefits to the overall market assessment.; JRC.F.6-Energy Technology Policy Outlook

Integration and arbitrage in the spanish financial markets: an empirical approach

Balbás, Alejandro; Longarela, Iñaki R.; Pardo, Ángel
Fonte: Universidade Carlos III de Madrid Publicador: Universidade Carlos III de Madrid
Tipo: Trabalho em Andamento Formato: application/pdf
Publicado em /12/1997 Português
Relevância na Pesquisa
56.97%
Several authors have introduced different ways to measure the integration between fmancial markets. Most of them are derived from the basic assumptions to price assets, like the Law of One Price or the absence of arbitrage opportunities. Two perfectly integrated markets must give identical price to identical fmal payoffs, and a vector of positive discount factors, common to both markets, must exist. Therefore, if these properties do not hold, their degree of violation can be measured and considered as an integration measure. The present paper empirically test the integration measures in the Spanish fmancial markets. Hence, several interesting values are obtained, like for instance, the state prices or the risk-neutral probabilities. Furthermore, when the risk-neutral probabilities do not exist, explicit cross-market arbitrage portfolios are detected. The results of our test are surprising for several reasons. First of all, the arbitrage opportunities very often appear, and the bid-ask spread and the transaction costs are not able to avoid the arbitrage profits. Furthermore, the criticisms, which are usually argued when empirical papers show the existence of arbitrage opportunities, do not apply here, since we work with perfectly synchronized high frequency data. On the other hand...

Stochastic measures of financial markets efficiency and integration

Balbás, Alejandro; Muñoz-Bouzo, María José
Fonte: Universidade Carlos III de Madrid Publicador: Universidade Carlos III de Madrid
Tipo: Trabalho em Andamento Formato: application/pdf
Publicado em /12/1997 Português
Relevância na Pesquisa
26.56%
The notion of integration of different fmancial markets is often related to the absence of crossmarket arbitrage opportunities. Under the appropriated asswnptions and in absence of cross-market arbitrage opportunities, a riskneutral probability measure, shared by both markets, must exist. Some authors have considered this to provide some integration measures when the markets do not share any pricing rule, but always in static (or one period) asset pricing models. The purpose or this paper is to extend the refereed notions to a more general context. This is accomplished by introducing a methodology which may be applied in any intertemporal dynamic asset pricing model and without special asswnptions on the assets prices stochastic process. Then, the integration measures introduced here are stochastic processes testing different relative arbitrage profits and depending on the state of nature and on the date. The measures are introduced in a single fmancial market. When this market is not a global market from different ones, the measures simply test the degree of market efficiency. Transaction costs can be discounted in our model. Therefore, one can measure efficiency and integration in models with frictions. The main results are also interesting form a mathematical pint of view...

Measuring arbitrage profits in imperfect markets

Muñoz-Bouzo, María José; Balbás, Alejandro
Fonte: Universidade Carlos III de Madrid Publicador: Universidade Carlos III de Madrid
Tipo: Trabalho em Andamento Formato: application/octet-stream; application/octet-stream; application/pdf
Publicado em /01/2000 Português
Relevância na Pesquisa
46.85%
In this paper we introduce a measure testing the degree of efficiency in securities markets with bidask spreads. The measure tests relative arbitrage profits when there are transaction costs on the prices and payoffs of the assets. Moreover, we prove that the measure is the minimum of the measures of efficiency in all frictionless markets where the prices and payoffs lie between the bid and the ask prices and payoffs respectively. In particular, we fmd that the model is arbitrage-free if and only if there exist convex combinations of the bid and the ask prices and payoffs such that the corresponding frictionless model is arbitrage-free.

Spatial arbitrage value of transmission upgrade investments. An economic and environmental assessment

SPISTO AMANDA; SCHMIDT Johannes
Fonte: International Association of Energy Economists (IAEE) Publicador: International Association of Energy Economists (IAEE)
Tipo: Articles in periodicals and books Formato: Online
Português
Relevância na Pesquisa
26.44%
This study contributes to the current discussion on the economic viability of new investments in transmission line upgrade and the associated environmental impact in terms of changes in CO2 emissions and renewable power integration. The line upgrade investment increases the power capacity between two interconnected zones, thus alleviating intra-zonal congestion. Its operation maximizes spatial arbitrage value by shifting power from the cost-efficient zone (with low marginal generation costs) to the neighbouring zone (with higher marginal costs), up to the interconnection capacity. The investment analysis focuses on the case of Sicily. In the first part of the study we assess the profitability of the line upgrade project. We assume 2013 as the reference year for the NPV analysis, so that profits and costs flow are the same as in 2013 during the entire investment period. In the second part of the study we assess the environmental impact of the project's operation in terms of CO2 emissions and changes in the share of renewable generation in the system. The environmental impact is determined by considering the carbon content/share of renewable of the power transferred from the lower price zone to the neighbouring zone. Both private and system values of investments in line upgrade result to be positive for the considered project. Power flows from one zone to the other as long as marginal costs of the first zone are lower than the marginal costs of the second zone. Power trade allows for economies of scale and improvement in environmental quality...

Incentive Audits : A New Approach to Financial Regulation

Čihák, Martin; Demirgüç-Kunt, Aslı; Johnston, R. Barry
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Tipo: Publications & Research :: Policy Research Working Paper; Publications & Research
Português
Relevância na Pesquisa
26.2%
A large body of evidence points to misaligned incentives as having a key role in the run-up to the global financial crisis. These include bank managers' incentives to boost short-term profits and create banks that are "too big to fail," regulators' incentives to forebear and withhold information from other regulators in stressful times, and credit rating agencies' incentives to keep issuing high ratings for subprime assets. As part of the response to the crisis, policymakers and regulators also attempted to address some incentive issues, but various outside observers have criticized the response for being insufficient. This paper proposes a pragmatic approach to re-orienting financial regulation to have at its core the objective of addressing incentives on an ongoing basis. Specifically, the paper proposes "incentive audits" as a tool that could help in identifying incentive misalignments in the financial sector. The paper illustrates how such audits could be implemented in practice, and what the implications would be for the design of policies and frameworks to mitigate systemic risks.

Essays on financial market imperfections

Wu, Ding, Ph. D. Massachusetts Institute of Technology
Fonte: Massachusetts Institute of Technology Publicador: Massachusetts Institute of Technology
Tipo: Tese de Doutorado Formato: 130 p.
Português
Relevância na Pesquisa
26.2%
This dissertation consists of three chapters on financial market imperfections, in particular, information imperfections. Chapter 1 studies how the existence of a fixed cost per transaction faced by uninformed investors hampers information revelation through price and exacerbates adverse selection. The exacerbated adverse selection explains one long-standing puzzle in finance - the momentum anomaly. Properly adjusting stock returns for adverse selection by using data on trading volume substantially mitigates momentum-based arbitrage profits for the sample period from 1983 to 2004. Chapter 2 studies how information asymmetry prevents perfect risk-sharing and offers insights on stock return behavior. Chapter 3 explores the idea of Tobin's tax in the context of an emerging market and in particular examines the cost effects on speculation in the Chinese stock market.; by Ding Wu.; Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2007.; Includes bibliographical references.

A limit order book model for latency arbitrage

Cohen, Samuel N.; Szpruch, Lukasz
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 21/10/2011 Português
Relevância na Pesquisa
26.52%
We consider a single security market based on a limit order book and two investors, with different speeds of trade execution. If the fast investor can front-run the slower investor, we show that this allows the fast trader to obtain risk free profits, but that these profits cannot be scaled. We derive the fast trader's optimal behaviour when she has only distributional knowledge of the slow trader's actions, with few restrictions on the possible prior distributions. We also consider the slower trader's response to the presence of a fast trader in a market, and the effects of the introduction of a `Tobin tax' on financial transactions. We show that such a tax can lead to the elimination of profits from front-running strategies. Consequently, a Tobin tax can both increase market efficiency and attract traders to a market.

Limited profit in predictable stock markets

Rothenstein, R.; Pawelzik, K.
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 24/03/2004 Português
Relevância na Pesquisa
26.41%
It has been assumed that arbitrage profits are not possible in efficient markets, because future prices are not predictable. Here we show that predictability alone is not a sufficient measure of market efficiency. We instead propose to measure inefficiencies of markets in terms of the maximal profit an ideal trader can take out from a market. In a stock market model with an evolutionary selection of agents this method reveals that the mean relative amount of realizable profits $P$ is very limited and we find that it decays with rising number of agents in the markets. Our results show that markets may self-organize their collective dynamics such that it becomes very sensitive to profit attacks which demonstrates that a high degree of market efficiency can coexist with predictability.; Comment: 4 pages, 4 figures

Reinvestigating the Uncovered Interest Rate Parity Puzzle via Analysis of Multivariate Tail Dependence in Currency Carry Trades

Ames, Matthew; Bagnarosa, Guillaume; Peters, Gareth W.
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
26.41%
The currency carry trade is the investment strategy that involves selling low interest rate currencies in order to purchase higher interest rate currencies, thus profiting from the interest rate differentials. This is a well known financial puzzle to explain, since assuming foreign exchange risk is uninhibited and the markets have rational risk-neutral investors, then one would not expect profits from such strategies. That is uncovered interest rate parity (UIP), the parity condition in which exposure to foreign exchange risk, with unanticipated changes in exchange rates, should result in an outcome that changes in the exchange rate should offset the potential to profit from such interest rate differentials. The two primary assumptions required for interest rate parity are related to capital mobility and perfect substitutability of domestic and foreign assets. Given foreign exchange market equilibrium, the interest rate parity condition implies that the expected return on domestic assets will equal the exchange rate-adjusted expected return on foreign currency assets. However, it has been shown empirically, that investors can actually earn arbitrage profits by borrowing in a country with a lower interest rate, exchanging for foreign currency...

On arbitrages arising from honest times

Fontana, Claudio; Jeanblanc, Monique; Song, Shiqi
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
26.64%
In the context of a general continuous financial market model, we study whether the additional information associated with an honest time gives rise to arbitrage profits. By relying on the theory of progressive enlargement of filtrations, we explicitly show that no kind of arbitrage profit can ever be realised strictly before an honest time, while classical arbitrage opportunities can be realised exactly at an honest time as well as after an honest time. Moreover, stronger arbitrages of the first kind can only be obtained by trading as soon as an honest time occurs. We carefully study the behavior of local martingale deflators and consider no-arbitrage-type conditions weaker than NFLVR.; Comment: 25 pages, revised version

Statistical Arbitrage in the Black-Scholes Framework

Goncu, Ahmet
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
26.56%
In this study we prove the existence of statistical arbitrage opportunities in the Black-Scholes framework by considering trading strategies that consists of borrowing from the risk free rate and taking a long position in the stock until it hits a deterministic barrier level. We derive analytical formulas for the expected value, variance, and probability of loss for the discounted cumulative trading profits. No-statistical arbitrage condition is derived for the Black-Scholes framework, which imposes a constraint on the Sharpe ratio of the stock. Furthermore, we verify our theoretical results via extensive Monte Carlo simulations.

A Systematic Approach to Constructing Market Models With Arbitrage

Ruf, Johannes; Runggaldier, Wolfgang
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
26.44%
This short note provides a systematic construction of market models without unbounded profits but with arbitrage opportunities.; Comment: Very minor changes