Research articles for the 2020-10-21

An Investigation into Factors that Determine the Growth Rate in the Islamic Banking and Finance
Nawaz, Huma
The purpose of this study is to determine the impact of products and services of Islamic finance in Pakistan. This study has involved an empirical analysis of the environmental factors of growth and its impact on the growth of Islamic Financial Institutions. To investigate the factors of growth, a structural equation model develops that incorporates the main determinants of growth of banking assets and equity funds. The growth in the Islamic equity funds and banking assets has been identified as definite antecedents of growth in the Islamic financial system. The empirical investigation by the structural model using Pakistani dataset revealed that four out of ten hypotheses were significant including two direct paths as antecedents of annual growth. This study provides empirical support for the influence of some development factors to control the barriers of growth in the Islamic finance industry. This paper allows the identification of the major development factors of Islamic financial system that takes into account the importance of operational strategy and environment for the growth of Islamic equity funds and banking assets.

Analysis of Regional Cluster Structure By Principal Components Modelling in Russian Federation
Alexander V. Bezrukov

In this paper it is demonstrated that the application of principal components analysis for regional cluster modelling and analysis is essential in the situations where there is significant multicollinearity among several parameters, especially when the dimensionality of regional data is measured in tens. The proposed principal components model allows for same-quality representation of the clustering of regions. In fact, the clusters become more distinctive and the apparent outliers become either more pronounced with the component model clustering or are alleviated with the respective hierarchical cluster. Thus, a five-component model was obtained and validated upon 85 regions of Russian Federation and 19 socio-economic parameters. The principal components allowed to describe approximately 75 percent of the initial parameters variation and enable further simulations upon the studied variables. The cluster analysis upon the principal components modelling enabled better exposure of regional structure and disparity in economic development in Russian Federation, consisting of four main clusters: the few-numbered highest development regions, the clusters with mid-to-high and low economic development, and the "poorest" regions. It is observable that the development in most regions relies upon resource economy, and the industrial potential as well as inter-regional infrastructural potential are not realized to their fullest, while only the wealthiest regions show highly developed economy, while the industry in other regions shows signs of stagnation which is scaled further due to the conditions entailed by economic sanctions and the recent Covid-19 pandemic. Most Russian regions are in need of additional public support and industrial development, as their capital assets potential is hampered and, while having sufficient labor resources, their donorship will increase.

Are Investors Aware of Climate-Related Transition Risks? Evidence from Mutual Fund Flows
Reboredo, Juan C.,Otero, Luis
Using information on climate transition risks embedded in US equity mutual fund portfolios, we report evidence that mutual fund investors consider climate-related transition risk to be an undesirable fund feature and accordingly allocate more money to funds with lower climate-related transition risk. The size of the impact of this risk on fund flows differs depending on the performance expectations of investors, the socially responsible focus and the sustainability of the fund. Our results suggest that mutual fund investors are aware of climate-related transition risks as evidenced by their investment decisions.

Asset Pricing Around Anticipated Announcements: A Swing of Three Days
Chen, Jingjing
This study examines the dynamics of asset pricing around macroeconomic news announcements. Prior literature documents a significantly positive implied and realized market premia on macroeconomic announcement days. I investigate the days before and after announcements and find a significant swing of premia from negative on the day before, to positive on the day of, and negative again on the day after announcements. The average premia over the two-day window â€" the day of announcements plus the day before or the day after â€" are no longer significant. I show that changes in risk and liquidity only partially account for the swings of market premia. On the other hand, I find that investor attention and the perceived price of risk are consistent catalysts of the swings.

Bank Liquidity Provision across the Firm Size Distribution
Chodorow-Reich, Gabriel,Darmouni, Olivier,Luck, Stephan,Plosser, Matthew C.
Using loan-level data covering two-thirds of all corporate loans from U.S. banks, we document that SMEs (i) obtain much shorter maturity credit lines than large firms; (ii) have less active maturity management and therefore frequently have expiring credit; (iii) post more collateral on both credit lines and term loans; (iv) have higher utilization rates in normal times; and (v) pay higher spreads, even conditional on other firm characteristics. We present a theory of loan terms that rationalizes these facts as the equilibrium outcome of a trade-off between commitment and discretion. We test the model’s prediction that small firms may be unable to access liquidity when large shocks arrive using data on drawdowns in the COVID recession. Consistent with the theory, the increase in bank credit in 2020:Q1 and 2020:Q2 came almost entirely from drawdowns by large firms on pre-committed lines of credit. Differences in demand for liquidity cannot fully explain the differences in drawdown rates by firm size, as we show that large firms also exhibited much higher sensitivity of drawdowns to industry-level measures of exposure to the COVID recession. Finally, we match the bank data to a list of participants in the Paycheck Protection Program (PPP) and show that SME recipients of PPP loans reduced their non-PPP bank borrowing in 2020:Q2 by between 53 and 125 percent of the amount of their PPP funds, suggesting that government-sponsored liquidity can overcome private credit constraints.

Cancellation of principal in banking: Three radical ideas emerge from deep examination of double entry bookkeeping in banking
Brian P. Hanley

Three radical ideas are presented. First, that justification for cancellation of principal is not justified in modern banking. Second, that non-cancellation of loan principal upon payment cures an old problem of maintenance of positive equity in the private sector. And third, that crediting this money to local government, creates an additional virtuous monetary circuit that ties finances of government directly to commercial activity.

This step can cure a problem I have identified with modern monetary theory, which is that breaking the monetary circuit of taxation in the minds of politicians will free them from centuries of restraint, optimizing their opportunities for implementing tyranny. It maintains and strengthens the current circuit, creating a new, more direct monetary circuit that does not enrich modern banks any more than they already are.

CapitalVX: A Machine Learning Model for Startup Selection and Exit Prediction
Ross, Greg,Sciro, Daniel,Das, Sanjiv Ranjan,Raza, Hussain
Using a big data set of venture capital financing and related startup firms from Crunchbase, this paper develops a machine-learning model called CapitalVX (for “Capital Venture eXchange”) to predict the outcomes for startups, i.e., whether they will exit successfully through an IPO or acquisition, or fail. Using a large feature set, the out-of-sample accuracy of predictions on startup outcomes and follow-on funding is 88%. This research suggests that VC/PE firms may be able to benefit from using machine learning to screen potential investments using publicly available information, diverting this time instead into mentoring and monitoring the investments they make.

Chất lượng má»'i quan hệ giữa khách hàng cá nhân và Ngân hàng TMCP Đại Chúng Việt Nam (PVcomBank) chi nhánh Sài gòn (Relationship Quality Between Individual Customers and Vietnam Public Commercial Bank Saigon Branch)
Ha Nam Khanh, Giao
Vietnamese abstract: Nghiên cứu này nhằm mục Ä'ích khám phá và Ä'o lường những nhân tá»' chính tác Ä'á»™ng lên chất lượng má»'i quan hệ giữa khách hàng cá nhân và Ngân hàng TMCP Đại Chúng Việt Nam (Vietnam Public Comercial Bank- PVcomBank) chi nhánh Sài gòn (SG), bằng việc phỏng vấn 350 khách hàng. Nghiên cứu sá»­ dụng công cụ SPSS 20 Ä'ể phân tích Ä'á»™ tin cậy thang Ä'o qua hệ sá»' Cronbach’s Alpha, phân tích nhân tá»' khám phá EFA, phần mềm AMOS 22 Ä'ể phân tích nhân tá»' khẳng Ä'ịnh CFA, kiểm Ä'ịnh mô hình cấu trúc tuyến tính SEM. Kết quả nghiên cứu cho thấy 04 (bá»'n) yếu tá»' tác Ä'á»™ng tích cá»±c Ä'ến chất lượng má»'i quan hệ, sắp xếp theo Ä'á»™ mạnh giảm dần: lòng tin, giải quyết xung Ä'á»™t, năng lá»±c nhân viên cam kết. Chất lượng má»'i quan hệ cÅ©ng có tác Ä'á»™ng tích cá»±c Ä'áng kể Ä'ến lòng trung thành của khách hàng. Kết quả cÅ©ng giúp cho các nhà quản trị chi nhánh có những Ä'iều chỉnh chiến lược và hành Ä'á»™ng phù hợp nhằm nâng cao lòng trung thành của khách hàng cá nhân.English abstract: This research aims at discover and measure the main factors affecting the relationship quality beween individual customers and Vietnam Public Comercial Bank (PVcomBank) Saigon branch, by interviewing 350 customers. SPSS were used to analyze Cronbach’s Alpha, EFA, whereas AMOS were used to analyze CFA and SEM. The results show that there are 04 (four) factors affect positively on the relationship quality, then, in turn, the relationship quality affect positively on customers’ loyalty. The result help branch management to modify suitably strategy and tactics to enhance individual customers’ loyalty.

Deep Reinforcement Learning for Option Replication and Hedging
Du, Jiayi,Jin, Muyang,Kolm, Petter N.,Ritter, Gordon,Wang, Yixuan,Zhang, Bofei
The authors propose models for the solution of the fundamental problem of option replication subject to discrete trading, round lotting and nonlinear transaction costs using state-of-the-art methods in deep reinforcement learning (DRL), including deep Q-learning, deep Q-learning with Pop-Art and proximal policy optimization (PPO). Each DRL model is trained to hedge a whole range of strikes and no retraining is needed when the user changes to another strike within the range. The models are general, allowing the user to "plug-in" any option pricing and simulation library, and then training them with no further modifications to hedge arbitrary option portfolios. Through a series of simulations, the authors show that the DRL models learn similar or better strategies as compared to delta hedging. Out of all models, PPO performs the best in terms of P&L, training time and amount of data needed for training.

Developments in the collective investment industry in Spain between 2008 and 2019
Mayordomo, Sergio,Álvarez Román, Laura
This article shows that collective investment undertakings (CIUs) have grown notably in recent years, both in Spain and other European countries. These developments have come in step with greater sector concentration and a rising percentage of assets managed by entities registered abroad. In line with the evidence documented internationally, the investment portfolios of CIUs domiciled in Spain reflect an increase in risk-taking over the last few years, although the weight of lower credit quality fixed-income instruments is very low. There are very close links between the Spanish banking sector and CIUs. First, a very sizeable share of the assets of Spanish CIUs is managed by subsidiaries of Spanish deposit-taking institutions. Second, a very significant proportion of CIUs’ investment portfolios comprises financial assets issued by the banks themselves. Therefore, in-depth analysis of these interconnections is essential to assess the resilience of CIUs and that of the financial sector as a whole.

Disclosures of CEO inside Debt Changes and the Timing of New Bond Issuance
Nguyen, Phuong Lan
I explore the timing strategies for bond issuances based on disclosures of CEO inside debt by using hand-collected data of 5,775 U.S. public companies from 2006 to 2017. During the months before proxy statement releases, new changes in CEO inside debt are private information to companies' insiders. Companies can exploit this information asymmetry to issue bonds when the market, based on publicly available information of inside debt, perceives these companies' debt agency problems as relatively insignificant. I find that companies cluster their bond offerings in the immediate quarters after (before) disclosures of positive (negative) inside debt changes. The tendencies to time bond issuances based on inside debt disclosures also increase with the magnitudes of the disclosed changes. In addition, the adoption of these timing strategies is more observable when the issuing firms are regular issuers or when the new issues do not include covenants, especially the debt-restriction covenants. Finally, I verify that these timing strategies help reduce the cost of borrowing, as the bonds issued at favorable times, i.e. right after positive disclosures or before negative disclosures, have lower offering yield spreads than those issued at non-favorable times.

Fire Sales, the LOLR and Bank Runs with Continuous Asset Liquidity
Ulrich Bindseil,Edoardo Lanari

Bank's asset fire sales and recourse to central bank credit are modelled with continuous asset liquidity, allowing to derive the liability structure of a bank. Both asset sales liquidity and the central bank collateral framework are modeled as power functions within the unit interval. Funding stability is captured as a strategic bank run game in pure strategies between depositors. Fire sale liquidity and the central bank collateral framework determine jointly the ability of the banking system to deliver maturity transformation without endangering financial stability. The model also explains why banks tend to use the least liquid eligible collateral with the central bank and why a sudden non-anticipated reduction of asset liquidity, or a tightening of the collateral framework, can trigger a bank run. The model also shows that the collateral framework can be understood, beyond its aim to protect the central bank, as financial stability and non-conventional monetary policy instrument.

Information Design in Financial Markets
Cianciaruso, Davide,Marinovic, Ivan,Smith, Kevin
We study the optimal disclosure policy of a firm that wishes to maximize its expected stock price in the classic setting in which its stock is traded by risk-averse investors and noise traders. We find that the optimal disclosure policy is imprecise and leads to skewed posterior beliefs. This policy subjects short positions to tail risk, causing investors to demand a large increase in price to absorb noise-trader purchases and leading to overvaluation. Despite providing purely firm-specific information, this policy impacts the firm's expected returns. We further show the firm can inflate its price even when restricted to simple policies that withhold news lying above or below a threshold.

Money Markets, Central Bank Balance Sheet and Regulation
Corradin, Stefano,Eisenschmidt, Jens,Hoerova, Marie,Linzert, Tobias,Schepens, Glenn,Sigaux, Jean-David
This paper analyses money market developments since 2005, and examines factors that have affected money market functioning. We consider several metrics of activity in both secured and unsecured euro area money markets, and study interactions with new Basel III regulations and with central bank policies (liquidity provision, asset purchases and the Securities Lending Programme). Using aggregate data, we document that, prior to 2015, heightened financial market volatility coincided with worsening money market conditions, while higher central bank liquidity provision was associated with reduced money market stress. After 2015, the evidence is consistent with central bank asset purchases inducing scarcity effects in some money market segments, and with active securities lending supporting money market functioning. Using transactions-level money market data combined with supervisory data, we further document that the leverage ratio regulation impacts money markets at quarter-ends due to “window-dressing” effects, reducing money market volumes and rates. We also consider the macroeconomic impact of changing money market conditions, finding that the impact depends on whether frictions originate in secured or unsecured markets and on central bank policies in place.

Nhận biết và nhận thức về ngân hàng xanh tại Việt Nam (Awareness and Awareness About Green Bank in Vietnam)
Ha Nam Khanh, Giao
Vietnamese abstract: Nghiên cứu này nhằm khám phá sá»± nhận biết và nhận thức của công chúng về các ứng dụng ngân hàng xanh, chủ yếu các vấn Ä'ề: tiết kiệm năng lượng (energy conservation), dá»… thá»±c hiện (easy procedures), thời gian hợp lý (time feasibility), tiết kiệm chi phí (cost effective) và tính tiếp cận sản phẩm (accessibility of product), Ä'ặc biệt là khi Ngân hàng phát triền nhà TPHCM (Housing Development Bank- HDB) trở thành ngân hàng Ä'ầu tiên của Việt nam Ä'ược ngân hàng châu Á chứng nhận là ngân hàng thân thiện vá»›i môi trường nhất Việt Nam. PhÆ°Æ¡ng pháp thá»'ng kê mô tả dùng trung bình có trọng sá»' (weighted mean) và mode Ä'ược sá»­ dụng, kết hợp việc sá»­ dụng các phÆ°Æ¡ng tiện thá»'ng kê ANOVA, t-test và Chi-square test. Kết quả cho thấy nhận thức, hiểu biết của công chúng thá»±c sá»± chÆ°a sâu, Ä'iều Ä'ó giúp cho ban quản lý ngân hàng cần có má»™t tầm nhìn sâu sát hÆ¡n, và hoạch Ä'ịnh những chiến lược căn cÆ¡ hÆ¡n hÆ°á»›ng về những ứng dụng ngân hàng xanh bền vững tại Việt Nam.English abstract: This study explores the public awareness and awareness of green banking applications, focusing on issues such as energy conservation, easy procedures, and reasonable time. (time feasibility), cost effective and accessibility of products, especially when Ho Chi Minh City Housing Development Bank (HDB) becomes the first bank in Vietnam Nam was certified by Asia Bank as the most environmentally friendly bank in Vietnam. The descriptive statistical method uses weighted mean and mode used, combining the use of ANOVA, t-test and Chi-square test statistical means. The results show that public awareness and understanding are not really deep, which helps bank management need to have a closer view, and plan more radical strategies towards financial applications. Sustainable green goods in Vietnam.

Obfuscation through Complexity: Evidence from the Market for Retail Financial Products
Straumann, Simon
This paper examines the role of obfuscation in financial innovations. By exploiting the staggered adoption of a price disclosure policy for issuers of retail structured products, I show that issuers subject to price disclosure significantly increase the complexity of their products over time. This finding is further confirmed in a difference-in-difference-in-differences setting. Moreover, complexity significantly reduces the price elasticity of demand, thus raising the concern that complexity induces social welfare costs. Overall, these findings are consistent with the model predictions of Carlin and Manso (2011) on the strategic obfuscation activities of financial institutions.

Response of Bank Loans to the Bank of Japan's Quantitative and Qualitative Easing Policy: A Panel Data Analysis
Shioji, Etsuro
In recent years, many central banks around the world have conducted quantitative easing, namely a massive expansion of their balance sheets. This paper studies commercial banks’ lending behaviors under such a policy regime, using the Japanese data. Since April 2013, the Bank of Japan has executed quantitative easing of an extraordinary magnitude. This is known as the “Quantitative and Qualitative Monetary Easing (QQE)”. During this period, the overall size of bank reserves outstanding has become eight times larger in just six years. Yet aggregate data indicates that bank lending and money stock hardly responded. This seems to indicate that the traditional money creation process has totally collapsed. But is the money multiplier really completely “dead”? This paper utilizes a panel data on balance sheets of Japan’s regional banks to answer this question. The data is semiannual, consisting of observations from March and September between years 2013 and 2019. I study if a bank, which inherited a larger stock of reserves at the end of a period, would tend to expand its loans more aggressively in the subsequent period. It turns out to be important to divide the entire QQE period into two. During the first half of our sample period, between March 2013 and September 2015, I find no significant response of bank lending to an increased bank reserves. In the second half, between March 2016 and September 2019, a significantly positive response is observed. However, even for the latter period, the coefficients on bank reserves and government bonds turn out to be about the same: this suggests that injection of bank reserves by the central bank through purchases of government bonds, which has been the most dominant form of central bank transactions under the QQE, has not been effective.

Runs to Banks: The Role of Cash Sweeps During Market Downturns
Mitchell, Mark L.
Sweep deposits from brokerage firms to banks vary inversely with the stock market. When the stock market declines, retail investors reduce risk and sell stocks, with the proceeds typically swept out of brokerage firms and into banks. This result holds for monthly data obtained from a large brokerage firm with affiliated banks and for estimated aggregate quarterly data for sweep deposits across banks. Overall, sweep deposits are a primary driver backing the inverse relation between total bank deposits and the stock market, and are not destabilizing, but instead stabilizing for banks as households reduce risk by converting stock to cash during periods of high stress. They also play a role in the bank lending channel by providing additional funds for loan commitments or credit lines during stressful periods. Absent the recent innovation of sweep deposits swept from brokerage firms to banks, client cash would reside on the balance sheets of brokerage firms and invested in short-dated Treasuries and comparable low-risk securities. Lastly, we find support for the deposits channel in monetary policy, namely that sweep deposits of brokerage clients have a high elasticity to the Federal Funds rate, holding the stock market constant.

Stablecoins 2.0: Economic Foundations and Risk-based Models
Ariah Klages-Mundt,Dominik Harz,Lewis Gudgeon,Jun-You Liu,Andreea Minca

Stablecoins are one of the most widely capitalized type of cryptocurrency. However, their risks vary significantly according to their design and are often poorly understood. We seek to provide a sound foundation for stablecoin theory, with a risk-based functional characterization of the economic structure of stablecoins. First, we match existing economic models to the disparate set of custodial systems. Next, we characterize the unique risks that emerge in non-custodial stablecoins and develop a model framework that unifies existing models from economics and computer science. We further discuss how this modeling framework is applicable to a wide array of cryptoeconomic systems, including cross-chain protocols, collateralized lending, and decentralized exchanges. These unique risks yield unanswered research questions that will form the crux of research in decentralized finance going forward.

The Causes of Trade Tensions and their Consequences for Financial Stability
Rose, Andrew Kenan
I have two objectives in this short paper. First, I explore some of the reasons why the world is currently experiencing so much tension associated with international trade. Second, I discuss some of the consequences of this trade tension for financial stability.

The Economics of Climate Change
Chi, Joseph,Pellerin, Mathieu,Rodriguez, Jacobo
This paper summarizes the economics of climate change. We first review the basics of climate science and the historical evolution of greenhouse gas emissions. We then discuss the relation between climate change and economics and assess the economic costs, direct and indirect, of climate change. These costs are uncertain and sensitive to the choice of discount rate, but overall, the expected costs are economically significant, and early mitigation efforts may be more cost-effective than later actions. We discuss the tradeoffs associated with different potential actions, such as carbon taxation and cap-and-trade programs. Finally, we examine the implications of climate change for asset pricing and investment choices.

The European Commission's Sustainable Corporate Governance Report: A Critique
Roe, Mark J.,Spamann, Holger,Fried, Jesse M.,Wang, Charles C. Y.
In July 2020, the European Commission published the “Study on directors’ duties and sustainable corporate governance” by EY. The Report purports to find evidence of debilitating short-termism in EU corporate governance and recommends many changes to support sustainable corporate governance. In this paper, we point out deep flaws in the Report’s evidence and analysis. We recently submitted the content of this paper in response to the European Commission’s call for feedback. First, the Report defines the corporate governance problem as one of pernicious short-termism that damages the environment, the climate, and stakeholders. But the Report mistakenly conflates time-horizon problems with externalities and distributional concerns. Cures for one are not cures for the others and a cure for one may well exacerbate the others. Second, the Report’s main ostensible evidence for an increase in corporate short-termism is rising gross payouts to shareholders (dividends and stock repurchases). However, the more relevant payout measure to assess corporations’ ability to fund long-term investment is net payouts (gross payouts minus equity issuances), which is much lower and has left plenty of funds available for long-term and short-term investment. Third, when the Report turns to other evidence for short-termism, it selectively picks academic studies that support its views on short-termism, while failing to engage substantial contrary literature. Significant studies fail to detect short-termism and some substantial studies show excessive long-termism. Conceptually, some short-termism is an unfortunate but an inevitable side effect of effective corporate governance and may not be a first-order problem warranting wholesale reform. Finally, the Report touts cures whose effectiveness has little evidentiary support and, for some, there is real evidence that the cures could be counterproductive and costly.

The Interaction Between Macroprudential Policy and Monetary Policy: Overview
Bussière, Matthieu,Cao, Jin,de Haan, Jakob,Hills, Bob,Lloyd, Simon,Meunier, Baptiste,Pedrono, Justine,Reinhardt, Dennis,Sinha, Sonalika,Sowerbutts, Rhiannon,Styrin, Konstantin
This paper presents the main findings of an International Banking Research Network initiative examining the interaction between monetary policy and macroprudential policy in determining international bank lending. We give an overview on the data, empirical specifications and results of the seven papers from the initiative. The papers are from a range of core and smaller advanced economies, and emerging markets. The main findings are as follows. First, there is evidence that macroprudential policy in recipient countries can partly offset the spillover effects of monetary policy conducted in core countries. Meanwhile, domestic macroprudential policy in core countries can also affect the crossâ€'border transmission of domestic monetary policy via lending abroad, by limiting the increase in lending by less strongly capitalised banks. Second, the findings highlight that studying heterogeneities across banks provides complementary insights to studies using more aggregate data and focusing on average effects. In particular, we find that individual bank characteristics such as bank size or Gâ€'SIB status play a firstâ€'order role in the transmission of these policies. Finally, the impacts differ considerably across prudential policy instruments, which also suggests the importance of more granular analysis.

The Liquefied Natural Gas Spot Market and Valuation of the Rerouting Option
Geman, Hélyette,Philippou, Sofia
The liquefied natural gas (LNG) market has experienced remarkable changes in the last few years, with long-term contracts being replaced by short-term ones and optionalities being granted by suppliers in the context of a large increase in natural gas production. Flexible LNG contracts give buyers the option to redirect their cargo if they identify a higher spot price at a point different from the original destination. The goal of this paper is twofold: (1) to describe the new outlook of LNG markets, which has become more and more spot-centric, with Asian LNG futures bringing transparency to spot and forward prices; and (2) to address the valuation of the rerouting option, a number that must be accounted for by the buyer when assessing the profitability of a given cargo. As an example, we apply the rerouting option valuation methodology to a scenario in which the supplier is the United States, the original destination is Germany and the alternative destination is Japan. We assume the rerouting of the vessel takes place when the cargo reaches the waters of Germany. This approach can be used for any group of three countries by adjusting the transportation costs. Our paper also depicts the value of the option as a function of the volatility of the natural gas spot prices in the alternative destination.

The Role of Options in Goals-Based Wealth Management
Das, Sanjiv Ranjan,Ross, Greg
We develop a facile methodology using dynamic programming for goals-based wealth management over long horizons where rebalancing uses the standard securities and also derivative securities. A kernel density estimation approach is developed to accommodate any number of derivative assets, solving a high dimensional problem with fast computation. The approach easily accommodates skewed and fat-tailed distributions. Portfolio performance is much better with the use of options, especially for investors with aggressive goals.

The UK Equity Release Market: Views from the Regulatory Authorities, Product Providers and Advisors
Sharma, Tripti,French, Declan,McKillop, Donal G.
This study investigates the factors driving the development of the UK equity release market. The results of a thematic review of semi-structured interviews with industry stakeholders (comprising senior representatives of product providers, advice providers and regulators) suggest that the attractiveness of the equity market for insurance companies (the main funders of the market), has diminished following a decline in annuity business and complications around the capital maturity matching requirements under Solvency II. Product costs (interest charges, and the cost of financial advice) are high. Trust in the market has improved, but remains fragile. Increased entry into the market by recognised brand names, (such as the traditional mortgage providers) would increase competition, reduce costs and promote trust. The risk of reputational damage limits the appeal of the market to new entrants. The no negative equity guarantee, a cost in terms of lower than otherwise loan-to-value ratios, promotes demand by way of the protection it affords to customers and their beneficiaries. Equity release is unsuitable for funding long-term care and policymakers advocating it as such damage the market.

Trading Volume and Dispersion of Signals
Vidhani, Nikhil
I propose a new measure of investor disagreement based on trading signals identified from the return-predicting anomaly literature. Disagreement significantly explains the next period trading volume over and above the factors identified in earlier literature. A move from 25th to 75th disagreement percentile predicts 27.4% higher turnover next period. The positive and significant relationship is robust to different specifications, alternative measures of turnover and disagreement, across size groups, and different time-periods. I also document that disagreement is higher for small, growth, and riskier stocks, which exhibit high fundamental uncertainty. Disagreement-volume relationship captures the information dissemination inefficiency of firms. Using properties of firms’ 10-K reports, I find that investors rely more on return anomalies when the flow of information from firms is convoluted, opaque, disrupted, or delayed.

Về Ä'á»™ng lá»±c làm việc của nhân viên Eximbank Chi nhánh Cá»™ng Hòa (Researching the Work Motivation of Staff at Eximbank â€" Cong Hoa Branch)
Ha Nam Khanh, Giao
Vietnamese abstract: Nghiên cứu này Ä'ược thá»±c hiện nhằm Ä'ánh giá các yếu tá»' tác Ä'á»™ng Ä'ến Ä'á»™ng lá»±c làm việc của nhân viên tại Ngân hàng Eximbank - chi nhánh Cá»™ng Hòa, bằng việc khảo sát 192 nhân viên, công cụ Cronbach’s Alpha, EFA và phân tích há»"i quy bá»™i Ä'ược sá»­ dụng. Kết quả Ä'ã Ä'Æ°a ra Ä'ược mô hình 4 yếu tá»' có tác Ä'á»™ng dÆ°Æ¡ng Ä'ến Động lá»±c làm việc, sắp theo thứ tá»± giảm dần: Phong cách lãnh Ä'ạo, Bản chất công việc, Môi trường làm việc, Đánh giá khen thưởng. Từ Ä'ó, nghiên cứu Ä'ề xuất các giải pháp Ä'ến ban quản lý chi nhánh nhằm nâng cao Ä'á»™ng lá»±c làm việc của nhân viên.English abstract: This research is to examine factors affecting the work motivation of staff at Vietnam Export Import Commercial Joint Stock Bsank - Cong Hoa Branch through interviewing 192 employees. Cronbach’s Alpha, exploratory factor analysis and linear multiple regressioning were used in this research. The research’s results show that there are four main factors affecting the work motivation. These factors which are listed in descending order of importance include Leadership, Work nature, Working condition and Achievement recognition. Based on these results, the research proposes some suggestions for management to enhance the work motivation of staff.

What are the Financial Systemic Implications of Access and Non-access to Federal Reserve Deposit Accounts for Central Counterparties?
Sklar, Maggie
In this working paper, I examine the interconnections between designated derivatives central counterparties (CCPs) with Federal Reserve deposit accounts and non-designated CCPs and the potential financial stability implications. This working paper notes the interconnections between the non-designated and designated derivatives CCPs through their clearing members and the commercial custodial banks they utilize to hold and transfer collateral. The paper then identifies additional potential contagion risks and financial stability risks, including liquidity risk, market risk, concentration risk, and loss of confidence more broadly. Although there are a number of research articles addressing these topics with respect to designated CCPs or OTC derivatives, this working paper includes the perspective looking at U.S. futures CCPs and non-designated CCPs.

Worst-case sensitivity
Jun-ya Gotoh,Michael Jong Kim,Andrew E.B.Lim

We introduce the notion of Worst-Case Sensitivity, defined as the worst-case rate of increase in the expected cost of a Distributionally Robust Optimization (DRO) model when the size of the uncertainty set vanishes. We show that worst-case sensitivity is a Generalized Measure of Deviation and that a large class of DRO models are essentially mean-(worst-case) sensitivity problems when uncertainty sets are small, unifying recent results on the relationship between DRO and regularized empirical optimization with worst-case sensitivity playing the role of the regularizer. More generally, DRO solutions can be sensitive to the family and size of the uncertainty set, and reflect the properties of its worst-case sensitivity. We derive closed-form expressions of worst-case sensitivity for well known uncertainty sets including smooth $\phi$-divergence, total variation, "budgeted" uncertainty sets, uncertainty sets corresponding to a convex combination of expected value and CVaR, and the Wasserstein metric. These can be used to select the uncertainty set and its size for a given application.