We propose a structural credit risk model for consumer lending using option theory and the concept of the value of the consumer’s reputation. Using Brazilian empirical data and a credit bureau score as proxy for creditworthiness we compare a number of alternative models before suggesting one that leads to a simple analytical solution for the probability of default. We apply the proposed model t...

We provide an introduction and overview to operational risk modeling according to the Basel II legal documents and summarize observed practices and issues as well as suggested approaches for measuring and quantifying operational risk.

Predictability of Asset Returns and the Efficient Market Hypothesis This paper is concerned with empirical and theoretical basis of the Efficient Market Hypothesis (EMH). The paper begins with an overview of the statistical properties of asset returns at different frequencies (daily, weekly and monthly), and considers the evidence on return predictability, risk aversion and market efficiency. T...

all societies face the need to make judgments about what interventions (both public health and personal medical) to provide to their populations under reasonable resource constraints. their decisions should be informed by good evidence and arguments from health technology assessment (hta). but if hta restricts itself to evaluations of safety, efficacy, and cost-effectiveness, it risks being vie...

The almost universal approach to the economic evaluation of health technologies is to compare the cost-effectiveness of treatments, using metrics such as the „cost per quality adjusted life year‟. This is based on the reasonable view that a prime objective of the health system is to maximize health. However, another fundamental role of universal health insurance is to protect citizens from fina...

This study explores the effects of patent protection in a distance-to-frontier R&D-based growth model with financial frictions. We find that whether stronger patent protection stimulates or stifles innovation depends on credit constraints faced by R&D entrepreneurs. When credit constraints are non-binding (binding), strengthening patent protection stimulates (stifles) R&D. The overall effect of...

In this paper, under the assumption that the claimsize is Negatively dependent subexponentially distributed and the constant interest force is considered, a simple asymptotics of ruin probability for renewal risk model within finite horizon is obtained. The results obtained extended the corresponding results of related papers.

The volatility surface implied by option prices presents a structure that changes over time. The aim of this study is to present a framework to model the implied volatility of the FTSE options in real time, and to present a prototype application that implements this framework. We adapt the parametric models presented in Dumas et al (1998) to estimate the surfaces across moneyness instead of acr...

We consider a financial model where the prices of risky assets are quoted by a representative market maker who takes into account an exogenous demand. We characterize these prices in terms of a system of BSDEs with quadratic growth. We show that this system admits a unique solution for every bounded demand if and only if the market maker’s risk-aversion is sufficiently small. The uniqueness is ...

We consider a small-open, collateral-constrained AK economy. We show that the combination of CARA preferences and uncertainty on capital inflows in such an economy generates long-term (expected) growth while the deterministic counterpart does not. In this framework, long-term growth is entirely driven by precautionary savings. In particular, we show that the asymptotic growth rate of the expect...