Research articles for the 2020-10-27

A Theory of Equivalent Expectation Measures for Expected Prices of Contingent Claims
Nawalkha, Sanjay K.,Zhuo, Xiaoyang
This paper introduces a theory of equivalent expectation measures, such as the R measure and the RT1 measure, generalizing the martingale pricing theory of Harrison and Kreps (1979) for deriving analytical solutions of expected prices - both the expected current price and the expected future price - of contingent claims. We also present new R-transforms which extend the Q-transforms of Bakshi and Madan (2000) and Duffie et al. (2000), for computing the expected prices of a variety of standard and exotic claims under a broad range of stochastic processes. Finally, as a generalization of Breeden and Litzenberger (1978), we propose a new concept of the expected future state price density which allows the estimation of the expected future prices of complex European contingent claims as well as the physical density of the underlying asset's future price, using the current prices and only the first return moment of standard European OTM call and put options.

Analyzing Structural Breaks and Volatility Spillover due to Infectious Disease in Japan: Using Spillover Networks
Shigemoto, Hideto,Morimoto, Takayuki
In this paper, we investigate structural breaks and volatility spillover effects on the Japanese stock market. To detect structural breaks, we use an iterated cumulative sum of squares (ICSS) algorithm, which can identify multiple change points. To measure the volatility spillover effect, we apply the BEKK-GARCH model. As a result, many sectors have structural breaks that occurred after the novel coronavirus disease 2019 (COVID-19) shock after January 2020. Furthermore, we find that the transportation sector is heavily affected by volatility spillover during years of infectious disease outbreaks and a pure economic shock affects the financial sector.

Capitalization Versus Disclosure: The Impact of Operating Lease Capitalization on Managerial Leasing Decisions
Yoon, Young S.
Under ASC 842, the lease accounting standard implemented in 2019, companies are required to capitalize operating leases previously disclosed only in footnotes. While this requirement imposes significant changes to balance sheets, the accounting for leases in income statements remains unchanged. Drawing upon this distinction, I isolate the balance sheet effects (i.e., reporting increased assets and liabilities) of lease capitalization and examine whether and how they affect leasing decisions. Exploiting ASC 842's staggered adoption, I employ a difference-in-differences method and find a marked decrease in post-ASC 842 operating lease activity. This decline is driven by firms that benefited most from prior off-balance-sheet treatment of operating leases. I also document a significant increase in capital expenditures upon the standard's adoption, suggesting that ASC 842 affects firms' lease-versus-buy decision-making process. Overall, this study's evidence suggests that disclosure location (footnote versus balance sheet) exerts a real effect on managerial decisions.

Chasing Dividends during the COVID-19 Pandemic
Eugster, Nicolas,Isakov , Dušan,Ducret, Romain,Weisskopf, Jean-Philippe
This paper investigates the impact of the COVID-19 pandemic on the trading behavior of investors around ex-dividend dates in Europe. The sudden decrease in the number of companies paying dividends reduced the opportunities to capture dividends. The firms that have maintained dividend payments during the pandemic thus attracted more interest than before. This led to a doubling in the magnitude of stock return patterns usually observed around ex-dividend days. Our evidence indicates that dividend-seeking investors are likely to be the main driver of the price patterns observed around ex-dividend dates.

Dancing to the Same Tune: Commonality in Securities Lending Fees
Andrews, Spencer,Lundblad, Christian T.,Reed, Adam V.
We document that there is commonality in the loan fees that short sellers pay, and the common component of loan fees explains a significant amount of their variation. The time series of the loan fee common component is highly correlated with several well-documented asset pricing and macro factors, suggesting that loan fee commonality is associated with states of the world that are consequential to investors. At the asset level, we compute sensitivities of stocks’ loan fees to the loan fee common component and document that stocks with high loan fees tend to also exhibit high sensitivity to the loan fee common component. While controlling for other priced short-selling factors, we document a statistically significant negative relationship between the systematic volatility of loan fees (with respect to the loan fee common component) and stock returns, indicating that this commonality is priced in the cross-section of stock returns. In addition to this pricing implications, we present evidence that loan fee commonality is associated with lower price efficiency, suggesting that loan fee commonality is an important limit to arbitrage. Finally, we present evidence that loan demand may be the primary driver of the observed fee commonality.

Debt Default, Recovery and Resolution in a Pandemic: What to Expect in the New Normal
Zaveri, Bhargavi
This article critically analyses three sets of developments in India in connection with standstills and forbearance during the pandemic. First, the moratorium imposed by the Reserve Bank of India (RBI), as the banking regulator, on the recovery of debt by banks and NBFCs. Second, the temporary suspension of the Insolvency and Bankruptcy Code, 2016 (IBC) in its entirety, and third, forbearance offered through court judgements. How will these forbearance measures affect the state of debt recovery in India? Will they impact all kinds of borrowers and credit segments equally? What will their impact be on credit discipline and overall contract enforcement in India? This article attempts to unravel the seen and unseen effects of these developments for the credit market in India.

Deep Learning, Predictability, and Optimal Portfolio Returns
Babiak, Mykola,Baruník, Jozef
We study optimal dynamic portfolio choice of a long-horizon investor who uses deep learning methods to predict equity returns when forming optimal portfolios. The results show statistically and economically significant out-of-sample portfolio benefits of deep learning as measured by high certainty equivalent returns and Sharpe ratios. Return predictability via deep learning generates substantially improved portfolio performance across different subsamples, particularly the recession periods. These gains are robust to including transaction costs, short-selling and borrowing constraints.

Deep learning for CVA computations of large portfolios of financial derivatives
Kristoffer Andersson,Cornelis W. Oosterlee

In this paper, we propose a neural network-based method for CVA computations of a portfolio of derivatives. In particular, we focus on portfolios consisting of a combination of derivatives, with and without true optionality, \textit{e.g.,} a portfolio of a mix of European- and Bermudan-type derivatives. CVA is computed, with and without netting, for different levels of WWR and for different levels of credit quality of the counterparty. We show that the CVA is overestimated with up to 25\% by using the standard procedure of not adjusting the exercise strategy for the default-risk of the counterparty. For the Expected Shortfall of the CVA dynamics, the overestimation was found to be more than 100\% in some non-extreme cases.

Deep reinforced learning enables solving discrete-choice life cycle models to analyze social security reforms
Antti J. Tanskanen

Discrete-choice life cycle models can be used to, e.g., estimate how social security reforms change employment rate. Optimal employment choices during the life course of an individual can be solved in the framework of life cycle models. This enables estimating how a social security reform influences employment rate. Mostly, life cycle models have been solved with dynamic programming, which is not feasible when the state space is large, as often is the case in a realistic life cycle model. Solving such life cycle models requires the use of approximate methods, such as reinforced learning algorithms. We compare how well a deep reinforced learning algorithm ACKTR and dynamic programming solve a relatively simple life cycle model. We find that the average utility is almost the same in both algorithms, however, the details of the best policies found with different algorithms differ to a degree. In the baseline model representing the current Finnish social security scheme, we find that reinforced learning yields essentially as good results as dynamics programming. We then analyze a straight-forward social security reform and find that the employment changes due to the reform are almost the same. Our results suggest that reinforced learning algorithms are of significant value in analyzing complex life cycle models.

Do Growth Assets Drive Returns: A Critique of the APRA Heatmap Insights
Evans, John R.,Razeed, Abdul
APRA released their “Heatmap” in December 2019, and the accompanying material related growth assets to investment returns, with the implication that higher exposure to growth assets would result in higher investment returns than otherwise would occur. We have used a statistical and systems analysis to identify the dominant asset allocations related to funds with Quartile 1 and Quartile 4 investment returns and concluded that whilst above average exposure to infrastructure and property was a determinant of Quartile 1 performance, above average equity exposure is not. We also found that funds under management are a significant characteristic of determining investment performance and may well be the characteristic driving the allocations to the assets.

Energy Transition, Asset Price Fluctuations, and Dynamic Portfolio Decisions
Semmler, Willi
This paper analyzes the implications of short-termism on portfolio decisions of investors, and its potential consequences on green investments. We study a dynamic portfolio choice problem that contains two assets, one asset with fluctuating returns and another asset with a constant risk-free return. Fluctuating returns can arise from fossil or from clean energy-related assets. Short-termism is seen to be driven by discount rates (exponential and hyperbolic) and the decision horizon of investors. We also explore the impact of the fluctuating assets returns on the fate of the portfolio, for both a deterministic and stochastic model variant, and in cases where innovation efforts is spent for fossil fuel or clean energy sources. Detailing dynamic portfolio decisions in such a way may allow us for better pathways to empirical tests.

Estimating Macroeconomic Models of Financial Crises: An Endogenous Regime-Switching Approach
Benigno, Gianluca,Foerster, Andrew T.,Otrok, Chris,Rebucci, Alessandro
We estimate a workhorse dynamic stochastic general equilibrium (DSGE) model with an occasionally binding borrowing constraint. First, we propose a new specification of the occasionally binding constraint, where the transition between the unconstrained and constrained states is a stochastic function of the leverage level and the constraint multiplier. This specification maps into an endogenous regime-switching model. Second, we develop a general perturbation method for the solution of such a model. Third, we estimate the model with Bayesian methods to fit Mexico’s business cycle and financial crisis history since 1981. The estimated model fits the data well, identifying three crisis episodes of varying duration and intensity: the Debt Crisis in the early 1980s, the Peso Crisis in the mid-1990s, and the Global Financial Crisis in the late 2000s. These crisis episodes display sluggish and long-lasting build-up and recovery phases driven by plausible combinations of shocks.

Evaluating Rainfall Risk Profile of Indian Subcontinent Based on Index Metrics
V, Bharath
Floods and droughts represent an embedded monsoon factor impacting the Indian economy. Evaluating monsoon risk based on rainfall index metrics could help design appropriate alternative risk transfer products. This study proposes a new set of rainfall indices that can be used to explore the excess rainfall risk profile of the Indian Subcontinent. The study proposed a new set of indices for evaluating excess rainfall risk profiles which are defined as Excess Rainfall Days (ERDs). The methodology proceeds in a step-wise form: Empirical values of ERDs over 50 years for selected MSDs of India are derived, and then these index values are analyzed for determining the degree of variability and volatility, followed by the examination of the degree of inter-correlation amongst indices of selected Meteorological Sub-divisions. The research is based on the applications of econometric models such as the Augmented Dickey-Fuller (ADF) test followed by the GARCH model. The results revealed that several of the statistical properties of ERD indices support the idea that these indices could be used as building blocks for designing rainfall derivatives similar to HDDs/CDDs underlying temperature derivatives.

Evaluating the impact of next generation broadband on local business creation
Philip Chen,Edward J Oughton,Pete Tyler,Mo Jia,Jakub Zagdanski

Basic broadband connectivity is regarded as generally having a positive macroeconomic effect. However, over the past decade there has been an emerging school of thought suggesting the impacts of upgrading to higher speed broadband have been overstated, potentially leading to the inefficient allocation of taxpayer-funded subsidies. In this analysis we model the impacts of Next Generation Access on new business creation using high-resolution panel data. After controlling for a range of factors, the results provide evidence of a small but significant negative impact of high-speed broadband on new business creation over the study period which we suggest could be due to two factors. Firstly, moving from basic to high-speed broadband provides few benefits to enable new businesses being formed. Secondly, strong price competition and market consolidation from online service providers (e.g. Amazon etc.) may be deterring new business start-ups. This analysis provides another piece of evidence to suggest that the economic impact of broadband is more nuanced than the debate has traditionally suggested. Our conjecture is that future policy decisions need to be more realistic about the potential economic impacts of broadband, including those effects that could be negative on the stock of local businesses and therefore the local tax base.

Financial Data Analysis Using Expert Bayesian Framework For Bankruptcy Prediction
Amir Mukeri,Habibullah Shaikh,Dr. D.P. Gaikwad

In recent years, bankruptcy forecasting has gained lot of attention from researchers as well as practitioners in the field of financial risk management. For bankruptcy prediction, various approaches proposed in the past and currently in practice relies on accounting ratios and using statistical modeling or machine learning methods.These models have had varying degrees of successes. Models such as Linear Discriminant Analysis or Artificial Neural Network employ discriminative classification techniques. They lack explicit provision to include prior expert knowledge. In this paper, we propose another route of generative modeling using Expert Bayesian framework. The biggest advantage of the proposed framework is an explicit inclusion of expert judgment in the modeling process. Also the proposed methodology provides a way to quantify uncertainty in prediction. As a result the model built using Bayesian framework is highly flexible, interpretable and intuitive in nature. The proposed approach is well suited for highly regulated or safety critical applications such as in finance or in medical diagnosis. In such cases accuracy in the prediction is not the only concern for decision makers. Decision makers and other stakeholders are also interested in uncertainty in the prediction as well as interpretability of the model. We empirically demonstrate these benefits of proposed framework using Stan, a probabilistic programming language. We found that the proposed model is either comparable or superior to other existing methods. Also resulting model has much less False Positive Rate compared to many existing state of the art methods. The corresponding R code for the experiments is available at Github repository.

Financial Services in Humanitarian Crises: Blockchain and the End of the Role of Banking?
Escobar Rodas, Rosa Jacqueline
The potential of blockchain technology for the delivery of aid in humanitarian crises has drawn attention not only for its benefits, but also for the revolutionary nature of its implementation that may involve the displacement of financial entities. This paper describes the problems and limitations of financial services in the humanitarian sector and introduces the role of fintech and blockchain as an opportunity to make the necessary changes in trust between stakeholders to deliver aid in the right place, in the right way. and at the right time: the beginning of a new age of disintermediation seems to be the future of the humanitarian system.

Firm Characteristics, Corporate Governance and Non-Performing Loans (NPLs) of State-Owned Commercial Banks of Bangladesh
Al Masud, Abdullah,Mamun, PhD, FCMA, Syed A.
Non- Performing Loans (NPLs) are the major sources of risk for any lending institution. At present, NPL ratio of State-Owned Commercial Banks (SCBs) of Bangladesh is well beyond comfortable level. This paper examines firm-characteristics and corporate governance measures as the firm-specific determinants of NPLs. The current research considers six years data of six SCBs to assess the relationship of firm-specific determinants such as management quality, moral hazard through excessive lending, cyclicality of credit, board size and board independence with the level of NPLs. Results of this study indicate that cyclicality of credit, moral hazard, and corporate governance attributes such as board size and board independence are significantly associated with NPL ratio. The major implication of these findings is to assist policy makers, regulators and management of banks for enhancing their understanding about the role of different firm-specific factors and corporate governance practices on NPLs in SCBs of Bangladesh.

Firm Life Cycle and Cost of Debt
Amin, Abu,Bowler, Blake,Monzur Hasan, Mostafa,Lobo, Gerald J.,Tresl, Jiri
This paper examines the relation between the corporate life cycle and lending spreads. Using a sample of 20,307 firm-loan observations spanning 5,076 publicly traded U.S. firms, we find that lending spreads follow a U-shape pattern across the life cycle phases. This pattern is in addition to the variation explained by typical controls. In a multivariate analysis, we find that firms in the introduction and decline phases pay lending spreads that are greater than firms in the mature phase (differences of 6 percent and 12 percent, respectively). We explore omitted variables bias and instrumental variable estimation in robustness testing and find that the Ushape pattern persists. Our findings are consistent with theoretical predictions regarding the relationship between the corporate life cycle and various lending risks.

Firm- and Country-Level Determinants of Green Investments: An Empirical Analysis
Barabanov, Sergey,Basnet, Anup,Walker, Thomas John,Wendt, Stefan,Yuan, Wangchao
We explain the determinants of corporate green investments (GI) by using a series of both firm- and country-level factors. Employing environmental expenditures as a proxy for green investments at the firm level, we find that larger firms tend to invest more in green projects, whereas firms that are more profitable are less likely to “go green”. In terms of country-level determinants, we find that GDP per capita and population are positively related with GI, while GDP growth and surface area are negatively associated with GI. Additionally, firms in common-law countries and English-speaking countries invest less in GI than firms in other countries.

Forward BSDEs and backward SPDEs for utility maximization under endogenous pricing
Thai Nguyen,Mitja Stadje

We study the expected utility maximization problem of a large investor who is allowed to make transactions on a tradable asset in a financial market with endogenous permanent market impacts as suggested in [24] building on [6, 7]. The asset price is assumed to follow a nonlinear price curve quoted in the market as the utility indifference curve of a representative liquidity supplier. We show that optimality can be fully characterized via a system of coupled forward-backward stochastic differential equations (FBSDEs) which is equivalent to a highly non-linear backward stochastic partial differential equation (BSPDE). Existence results can be achieved in the case where the driver function of the representative market maker is quadratic or the utility function of the large investor is exponential. Explicit examples are provided when the market is complete or the driver function is positively homogeneous.

French Liquidity Support through the Société de Financement de l’Economie (SFEF) (France GFC)
Fang, Everest
After the collapse of the Lehman Brothers in September 2008, financial panic and uncertainty intensified in Europe. In France, banks faced a widespread confidence crisis driven by fear that they were exposed to the US subprime market. In response, on October 13, 2008, the French government passed the “loi de finances rectificative pour le financement de I'économie.” This provided for the establishment of the Société de Financement de l’Economie Française (SFEF), a special purpose vehicle (SPV) jointly owned by the State and a group of banks and responsible for refinancing major French credit institutions. The SFEF raised funds on the international market and used the proceeds to provide collateralized loans to major credit institutions. SFEF debt was guaranteed by the French government. The SFEF was active from October 2008 to September 2009 and provided approximately €77 billion in funding to a group of institutions that included the vast majority of the major French banks. In September 2009, the Caisse de Refinancement de l’Habitat, a French credit institution specifically focused on housing finance, took over the SFEF’s outstanding debt management.

Interpretable Neural Networks for Panel Data Analysis in Economics
Yucheng Yang,Zhong Zheng,Weinan E

The lack of interpretability and transparency are preventing economists from using advanced tools like neural networks in their empirical work. In this paper, we propose a new class of interpretable neural network models that can achieve both high prediction accuracy and interpretability in regression problems with time series cross-sectional data. Our model can essentially be written as a simple function of a limited number of interpretable features. In particular, we incorporate a class of interpretable functions named persistent change filters as part of the neural network. We apply this model to predicting individual's monthly employment status using high-dimensional administrative data in China. We achieve an accuracy of 94.5% on the out-of-sample test set, which is comparable to the most accurate conventional machine learning methods. Furthermore, the interpretability of the model allows us to understand the mechanism that underlies the ability for predicting employment status using administrative data: an individual's employment status is closely related to whether she pays different types of insurances. Our work is a useful step towards overcoming the "black box" problem of neural networks, and provide a promising new tool for economists to study administrative and proprietary big data.

Intra-Industry Transfer of Information Inferred From Trading Volume
Brushko, Iuliia,Ferris, Stephen P.,Hanousek, Jan,Tresl, Jiri
This study examines the responsiveness of trading volume to a firm’s earnings announcements We find that the volume and earnings surprise information generated at the first earnings announcement within an industry help to explain the stock returns of the non-announcing firm. Specifically, it explains their equity performance at the time of the first industry announcement and then again after their own earnings announcement. These results provide novel insights into how earnings announcements contain both firm specific as well as industry information that is value relevant for investors.

Is Factor Momentum More than Stock Momentum?
Falck, Antoine,Rej, Adam,Thesmar, David
Yes, but only at short lags. In this paper we investigate the relationship between factor momentum and stock momentum. Using a sample of 72 factors documented in the literature, we first replicate earlier findings that factor momentum exists and works both directionally and cross-sectionally. We then ask if factor momentum is spanned by stock momentum. A simple spanning test reveals that after controlling for stock momentum and factor exposure, statistically significant Sharpe ratios only belong to implementations which include the last month of returns. We conclude this study with a simple theoretical model that captures these forces: (1) there is stock-level mean reversion at short lags and momentum at longer lags, (2) there is stock and factor momentum at all lags and (3) there is natural comovement between the PNLs of stock and factor momentums at all horizons.

Issues in German Takeover Law (Interview With Researchers From the Max Planck Institute for Private Law)
Baum, Harald,Kumpan, Christoph,Steffek, Felix,Watanabe, Hiroyuki
This is the transcript of a study session with researchers from the Max Planck Institute for Comparative and International Private Law, focused on various issues related to German takeover law. Harald Baum is well-versed in German takeover law and is also known as an expert of Japanese law. Christoph Kumpan has expertise in EU and German takeover law and counseled the Turkish Capital Markets Supervisory Authority on the implementation of the EU Takeover Directive into Turkish law. Felix Steffek, who kindly arranged and chaired this session, is an expert in corporate law.The study session was held in March 2010 at the Max Planck Institute for Comparative and International Private Law, in Hamburg, based on the English paper and questionnaire which is describing the issues and was submitted in advance by Hiroyuki Watanabe.The Issues discussed in the study session are as follows: ・The case of Schaeffler/Continental and the issue of “acting in concert” ・Mandatory offers and voluntary offers ・The case of Porsche/Volkswagen and Porsche’s “strategy” ・Eliminating coerciveness” and the “protection of minority shareholders” in the process of takeover bids ・ “Shareholders’ decision making” and“ worker protection” ・Statement by the target’s supervisory board and the offer price ・“Unternehmensinteresse” and “corporate value” ・Disclosure of the real beneficiary of the takeover bid ・Equity derivatives and “hidden ownership”

Jump Models with delay -- option pricing and logarithmic Euler-Maruyama scheme
Nishant Agrawal,Yaozhong Hu

In this paper, we obtain the existence, uniqueness and positivity of the solution to delayed stochastic differential equations with jumps. This equation is then applied to model the price movement of the risky asset in a financial market and the Black-Scholes formula for the price of European options is obtained together with the hedging portfolios. The option price is evaluated analytically at the last delayed period by using the Fourier transformation technique. But in general, there is no analytical expression for the option price. To evaluate the price numerically we then use the Monte-Carlo method. To this end, we need to simulate the delayed stochastic differential equations with jumps. We propose a logarithmic Euler-Maruyama scheme to approximate the equation and prove that all the approximations remain positive and the rate of convergence of the scheme is proved to be $0.5$.

Labor Unions and Non-Shareholding Stakeholders
Ertugrul, Mine,Marciukaityte, Dalia
Using corporate social responsibility (CSR) scores, we examine the effect of unionization on non-shareholding stakeholders and the value of CSR for unionized firms. Our findings suggest that unionization leads to lower CSR. This negative relation between unionization and CSR is stronger for financially constrained firms. We address endogeneity issues by controlling for firm characteristics including firm fixed effects, examining a quasi-natural experiment, and using regression discontinuity design examining union certification elections. Unionized firms with lower CSR have better alignment of CEO and shareholder interests and higher market values than other unionized firms.

Long-Term Stability of a Life Insurer's Balance Sheet
Diehl, Maximilian,Horsky, Roman,Reetz, Susanne,Sass, Jörn
In this paper we devise a general, stochastic asset-liability management model for life insurance companies, based on the work of Gerstner et al. (2008). While the basic concept and structure are similar, we expand their model and specify several aspects in greater detail. One of the main extensions is the incorporation of new business, i.e. the addition of newly concluded contracts and thus insured in each period. This leads to new results on the consistency of the balance sheet equations. We can then utilize these to analyze the long-term behavior and the stability of the components of the balance sheet for different asset-liability approaches. Furthermore, we explicitly address the problem of the efficient simulation of a given large insurance portfolio by proposing an approach for the generation of cohorts and the integration of new contracts.

M&A Activity and the Capital Structure of Target Firms
Flannery , Mark J.,Hanousek, Jan,Shamshur, Anastasiya,Tresl, Jiri
Using a large sample of European acquisitions, we find that acquired firms substantially close the gap between their actual and optimal leverage ratios. The bulk of this adjustment occurs quite rapidly â€" within a year of the acquisition. The typical over-levered firm adjusts its debt-to-assets ratio from 34.4% in the year before acquisition to 20% in the year after. (The adjustment is smaller, but still quite rapid, for targets that had been under-leveraged.) These adjustments occur primarily through debt issuances or retirements. We also investigate whether target firms’ pre-merger leverage contributes to the probability of them being acquired. We find that firms further away from their optimal leverage are more likely to be acquired: for an average firm, an increase in the absolute leverage deviation from 1% to 10% of total assets increases the probability of being acquired by 4.1% to 5.6% (The larger effect applies to overleveraged firms.) Overall, our results provide support for the trade-off theory of capital structure and suggest that financial synergies have a significant role in the typical European acquisition decision.

Measuring the Alpha of a Convexity-creating Fund: A Two-factor Approach
Diouf, Mouhamadou,Gaussel, Nicolas,Jaffard, Pierre
We show that CAPM alphas of convexity-creating funds are consistently underestimated due to the average cost of their strategies, while the reverse is true for concavity-creating funds. Consequently, we develop an asset pricing model that disentangles convexity/concavity creation from the fund manager’s actual value-added. We illustrate the model using asset class by asset class returns data from a convexity-creating investment strategy, the Epsilon Global Trend Program (trend-following strategy on financial futures). The measurement differentials of value added between the CAPM and the model are found to be qualitatively and quantitatively significant.

Money Illusion and the Effect of Reporting Components of Accounting Estimates on Financial Statement Users’ Investment Decisions
Anderson, Spencer B.,Hodder, Leslie D.,Hopkins, Patrick E.
We hypothesize current financial reporting standards contribute to “money illusion,” in which investors overemphasize nominal cash flows and underemphasize effects of discount rates on valuation. We test our predictions in two experiments using a pool of professional and nonprofessional investors. In the first experiment we vary whether a change in the fair value of debt securities is reported in Net Income or Other Comprehensive Income. We find participants knowledgeable about U.S. GAAP are more (less) likely to attribute fair value changes presented in Net Income (Other Comprehensive Income) to changes in expected nominal cash flows. The perception that such changes are attributable to changes in expected nominal cash flows increases investors’ risk assessments, resulting in lower assessments of value. In a second experiment, we confirm money illusion as the mechanism behind our findings in Experiment 1. We find investor valuations are lower when a negative change in fair value is caused by a decrease in expected nominal cash flows relative to an increase in the discount rate, and that this effect is partially mediated through risk perceptions. Overall, our results provide evidence of a structural mechanism in accounting standards that contributes to money illusion, potentially leading financial statement users to lower-quality investment decisions. Our results have implications for accounting standard setters as well as financial statement users.

New Zealand’s Wholesale Funding Guarantee (NZ GFC)
Fang, Everest
In 2008, the United States subprime mortgage crisis sparked international financial turmoil, with effects becoming particularly severe after the collapse of Lehman Brothers on September 15. Due to their banks’ dependence on foreign funding, New Zealand’s money market experienced significant friction spilling over from the United States and Europe. Liquidity premiums rose, and interbank lending became increasingly restricted. Although the crisis was not as severe in New Zealand as it was in many other countries, the problems in the money market caused some level of financial strain. To combat the crisis, the Minister of Finance announced on November 1, 2008, that the government would offer a wholesale funding guarantee to investment-grade financial institutions with substantial borrowing and lending in New Zealand. The program was intended to facilitate access to international financial markets for New Zealand financial institutions in a time of risk aversion for international investors. The program was administered as an opt-in system, with eligible banks applying for a guarantee for each security for which they desired the government backing. Participants were charged a fee for the guarantee, with the amount determined by the riskiness of the issuer, the currency of issuance, and the maturity of the loan. A total of five institutions made 24 guaranteed issuances worth $10.3 billion NZD before the issuance window closed on April 30, 2010. There were no defaults, and $290 million NZD was collected from the program.

Risk Preferences and Efficiency of Household Portfolios
Agostino Capponi,Zhaoyu Zhang

We propose a novel approach to infer investors' risk preferences from their portfolio choices, and then use the implied risk preferences to measure the efficiency of investment portfolios. We analyze a dataset spanning a period of six years, consisting of end of month stock trading records, along with investors' demographic information and self-assessed financial knowledge. Unlike estimates of risk aversion based on the share of risky assets, our statistical analysis suggests that the implied risk aversion coefficient of an investor increases with her wealth and financial literacy. Portfolio diversification, Sharpe ratio, and expected portfolio returns correlate positively with the efficiency of the portfolio, whereas a higher standard deviation reduces the efficiency of the portfolio. We find that affluent and financially educated investors as well as those holding retirement related accounts hold more efficient portfolios.

Russia’s Banking Sector in 2019
Zubov, Sergey
At 2019-end, Russian banking sector numbered 442 lending institutions. Over the year the number of operational lending institutions decreased by 42 (in 2018 â€" down by 77). Seven years ago in early 2013 the number of operational institutions exceeded one thousand (1094). Consequently, the Central Bank of Russia consistently has been conducting the bank resolution process. As of January 1, 2020, 373 lending institutions’ profit hit RUB 2,196.4 billion and losses of 69 banks amounted to RUB 159.6 billion. On the whole, the share of loss-making institutions over the year went down from 29 to 16 percent.

Shifting Influences on Corporate Governance: Capital Market Completeness and Policy Channeling
Gilson, Ronald J.,Milhaupt, Curtis J.
Corporate governance scholarship is typically portrayed as driven by single factor models, for example, shareholder value maximization, director primacy or team production. These governance models are Copernican; one factor is or should be the center of the corporate governance solar system. In this essay, we argue that, as with binary stars, the shape of the governance system is at any time the result of the interaction of two central influences, which we refer to as capital market completeness and policy channeling. In contrast to single factor models, which reflect a stable normative statement of what should drive corporate governance, in our account the relation between these two governance influences is dynamic. Motivated by Albert Hirschman’s Shifting Involvements, we posit that all corporate governance systems undergo repeated shifts in the relative weights of the two influences on the system. Capital market completeness determines the corporate ownership structure and privileges shareholder governance and value maximization by increasing the capacity to slice risk, return, and control into different equity instruments. The capability to specify shareholder control rights makes the capital market more complete, tailoring the character of influence associated with holding particular equity securities and its reciprocal, the exposure of management to capital market oversight. Policy channeling, the real government’s instrumental use of the corporation for distributional or social ends, pushes the corporate governance gravitational center toward purposes other than maximizing shareholder value. We show that this pattern is not limited to a particular country, and illustrate our argument by tracing the cyclical reframing of Berle and Means’ thesis in the U.S., Japan’s sluggish shift from policy channeling in its postwar heyday toward capital market completeness under the Abenomics reforms, and the distinctive case of China, where capital market completeness has itself been used as a policy channeling instrument under the pervasive influence of the Chinese Communist Party, creating the world’s most stakeholder-oriented system of corporate governance.We close by examining the means through which the current shift toward policy channeling in U.S. and U.K. corporate governance is taking place â€" the “stewardship” movement and the debate over “corporate purpose.” We view both as a reaction to the reduced managerial discretion caused by the reconcentration of ownership in the hands of institutional investors, and analyze factors suggesting that this reform movement, like others before it, is likely destined to result in a disappointment-driven shift in the opposite direction, what we label a shifting influence.

Stewardship 2021: The Centrality of Institutional Investor Regulation to Restoring a Fair and Sustainable American Economy
Strine, Leo
In this essay, which formed the basis for the luncheon keynote speech at the Rethinking Stewardship online conference presented by the Ira M. Millstein Center for Global Markets and Corporate Ownership at Columbia Law School and ECGI, the European Corporate Governance Institute, the essential, but not sufficient, role of regulation to promote more effective stewardship by institutional investors is discussed. To frame specific policy recommendations that align the responsibilities of institutional investors with the best interests of their human investors in sustainable wealth creation, environmental responsibility, the respectful treatment of stakeholders, and, in particular, the fair pay and treatment of workers, the essay: 1) explains how the corporate governance system we now have is fundamentally different than the system we had when the regulatory structures governing institutional investors were put in place; 2)identifies the suboptimal results that have ensued by increasing the power of institutional investors, and thus the stock market, over public companies, while diminishing the protections for other stakeholders and society generally; 3) discusses why leaving needed change to the industry itself is not an adequate answer; and 4) sets forth a series of specific, measured public policy changes for mutual funds, pension funds, and hedge funds. In sum, the essay explains and addresses the reality that companies that make products and deliver services cannot focus more on sustainable profitability, respectful treatment of stakeholders, and social responsibility than the powerful investors that control them permit. Like any powerful economic interest, institutional investors should be expected to be responsible citizens and faithful fiduciaries.

Stock Price Prediction Using CNN and LSTM-Based Deep Learning Models
Sidra Mehtab,Jaydip Sen

Designing robust and accurate predictive models for stock price prediction has been an active area of research for a long time. While on one side, the supporters of the efficient market hypothesis claim that it is impossible to forecast stock prices accurately, many researchers believe otherwise. There exist propositions in the literature that have demonstrated that if properly designed and optimized, predictive models can very accurately and reliably predict future values of stock prices. This paper presents a suite of deep learning based models for stock price prediction. We use the historical records of the NIFTY 50 index listed in the National Stock Exchange of India, during the period from December 29, 2008 to July 31, 2020, for training and testing the models. Our proposition includes two regression models built on convolutional neural networks and three long and short term memory network based predictive models. To forecast the open values of the NIFTY 50 index records, we adopted a multi step prediction technique with walk forward validation. In this approach, the open values of the NIFTY 50 index are predicted on a time horizon of one week, and once a week is over, the actual index values are included in the training set before the model is trained again, and the forecasts for the next week are made. We present detailed results on the forecasting accuracies for all our proposed models. The results show that while all the models are very accurate in forecasting the NIFTY 50 open values, the univariate encoder decoder convolutional LSTM with the previous two weeks data as the input is the most accurate model. On the other hand, a univariate CNN model with previous one week data as the input is found to be the fastest model in terms of its execution speed.

Sweden's Guarantee Scheme (Sweden GFC)
Engbith, Lily,Kiernan, Kevin
Although Sweden was not as directly impacted by the Global Financial Crisis as some other economies, Lehman Brothers’ bankruptcy on September 15, 2008, prompted Swedish authorities to take preemptive measures to protect domestic banks and financial institutions. One such program, announced on October 20, 2008, and implemented on October 29, 2008, was designed to preserve credit extension to businesses and households through what became known as the Swedish Guarantee Scheme. Per the terms of the Scheme, new short- and medium-term debt of maturities ranging from 90 days to five years issued by eligible banks would be guaranteed by the Swedish government in exchange for a fee based on the maturity of the guaranteed debt and the risk profile of the issuing institution. The Scheme would be funded by a more general stabilization fund and initially capped at a maximum of SEK 1500 billion ($195.1 billion). Peak utilization reached SEK 354 billion in 2009. None of the six participating institutions experienced defaults. The issuance window for the program expired on June 30, 2011, and all outstanding debt had matured by May 13, 2015.

Tax Reforms and Inter-Temporal Shifting of Corporate Income: Evidence from Tax Records in Slovakia
Bukovina, Jaroslav,Lichard, Tomas,Palguta, Jan
We use administrative tax return data for all corporations in Slovakia to demonstrate how policies facilitating inter-temporal income shifting result in elevated corporate income tax (CIT) elasticity estimates. Our strategy exploits kinks in the statutory tax schedules and policy reforms of tax carry-forwards. If inter-temporal shifting is neglected, our bunching estimates imply CIT elasticity of up to 0.65, suggesting a highly sensitive tax base with respect to the marginal tax rate. However, we show that CIT elasticity drops at least 21.2-49.1% when we remove the inter-temporal shifting component. This correction significantly reduces the estimated marginal excess burden of corporate taxation.

The Case for a Normatively Charged Approach to Regulating Shadow Banking
Troeger, Tobias H.,Thiemann, Matthias
This paper contributes to the debate on the adequate regulatory treatment of non-bank fi-nancial intermediation (NBFI). It proposes an avenue for regulators to keep regulatory arbitrage under control and preserve sufficient space for efficient financial innovation at the same time. We argue for a normative approach to supervision that can overcome the proverbial race between hare and hedge-hog in financial regulation and demonstrate how such an approach can be implemented in practice.We first show that regulators should primarily analyse the allocation of tail risk inherent in NBFI. Our paper proposes to apply regulatory burdens equivalent to prudential banking regulation if the respective transactional structures become only viable through indirect or direct access to (ad hoc) public backstops.Second, we use insights from the scholarship on regulatory networks as communities of inter-pretation to demonstrate how regulators can retrieve the information on transactional innovations and their risk-allocating characteristics that they need to make the pivotal determination. We suggest in particular how supervisors should structure their relationships with semi-public gatekeepers such as lawyers, auditors and consultants to keep abreast of the risk-allocating features of evolving transac-tional structures.Finally, this paper uses the example of credit funds as non-bank entities economically engaged in credit intermediation to illustrate the merits of the proposed normative framework and to highlight that multipolar regulatory dialogues are needed to shed light on the specific risk-allocating character-istics of recent contractual innovations.

The Dutch Credit Guarantee Scheme (Netherlands GFC)
Engbith, Lily
As fallout from the global financial crisis intensified in October 2008, governments around the world sought to implement stabilization measures in order to calm and protect their domestic markets. While not directly exposed to the subprime mortgage crisis, the Kingdom of the Netherlands announced the creation of the Dutch Credit Guarantee Scheme (the Guarantee Scheme) on October 13, 2008, to boost confidence in interbank lending markets and to ensure the flow of credit to Dutch households and companies. In establishing this program, the Dutch State Treasury Agency of the Ministry of Finance (DSTA) committed €200 billion to support the issuance of debt to be guaranteed by the government. Dutch financial institutions meeting liquidity and solvency requirements enforced by De Nederlandsche Bank, including foreign subsidiaries established in the Netherlands with substantial business in the country, were eligible to apply for coverage under the Guarantee Scheme. Initially, only newly issued “plain vanilla” commercial paper, certificates of deposit, and fixed- or floating-rate medium-term notes with maturities of between three months and three years could be guaranteed. Additionally, debt instruments would need to be denominated in euros, US dollars, or pounds sterling. Between October 23, 2008, and December 1, 2009, the Guarantee Scheme was utilized by six Dutch financial institutions for a total utilization of €54.2 billion. No guaranteed debt was issued after December 1, 2009. The issuance window, though originally set to expire December 31, 2009, was extended twice, to December 31, 2010. No institutions defaulted on any guaranteed debt.

The Dynamics and Pattern of Economic Growth in Russia in 2019
Izryadnova, Olga,Kaukin, Andrey,Miller, Evgenia
Unlike the previous two years when the domestic market’s weakness was made up for by growth in the foreign trade balance and net exports, in 2019 the development of the Russian economy took place amid a simultaneous decline of the growth rates of overall domestic demand and foreign trade. In 2019, GDP growth rates calculated as per the methods of the system of national accounts (SNA) amounted to 101.3 percent, a decrease of 1.2 percentage point as compared with the index value of the previous year. For the first time in the past decade, in 2019 the economic situation became complicated owing to a 2.1 percent decrease in exports’ volumes as per the SNA methods in comparable prices relative to the previous year’s index value. Consequently, in 2019 net exports’ contribution to GDP as per SNA methods fell to 2.5 percent against 3.6 percent a year before.

The Effect of Lead VC Presence on the Probability and Outcome of Merger-Related Litigation
Basnet, Anup,Walker, Thomas John
Employing a sample of 697 M&A offers for VC-backed IPO companies from 1996 to 2018, we find that takeover bids that occur in the presence of lead VCs command a higher initial premium and are less likely to be legally contested compared to bids for companies from which the lead VC has already exited. In addition, these companies enjoy higher stock price returns in response to the M&A announcement and muted price declines around the litigation date. We also document the importance of several lead VC characteristics in determining their portfolio companies’ litigation risk.

The Effect of Securities Class Action Lawsuits on Mergers and Acquisitions
Basnet, Anup,Davis, Frederick James,Walker, Thomas John,Zhao, Kun
This paper investigates whether shareholder class action litigation affects the takeover candidacy, premium, and completion rate of mergers and acquisitions involving defendant target firms. We use a comprehensive data set of publicly traded U.S. firms that became the targets of takeover bids between 1998 and 2016 and find that firms subject to shareholder class action lawsuits within the previous two years are more likely to be targeted for acquisition while commanding a significantly higher premium. Firms that face such litigation after a takeover announcement experience a significant decrease in takeover completion.

The Greek Credit Guarantee Scheme (Greece GFC)
Thompson, Daniel
Beginning in 2008, many Greek banks began to face liquidity strains and capital problems as a result of the global financial crisis. In October 2008, Eurozone leaders released a declaration requiring all participating nations to ensure adequate liquidity, facilitate ease of funding, and recapitalize banks. On November 7, 2008, the Greek Ministry of Economy and Finance submitted a draft law, Law 3723, to the European Commission to fulfill the above directives through the Bank of Greece (BOG). While Law 3723 consisted of three main “pillars,” the focus for this case is pillar II, the credit guarantee scheme, otherwise known as the guarantee scheme. The guarantee scheme allowed eligible banks to guarantee their newly issued senior debt for a fee that was based on the maturity of the debt and the risk profile of the issuing institution. All credit institutions (or branches of foreign banks) licensed by the BOG were eligible to participate in the scheme. Few banks participated in the scheme until the onset of the sovereign debt crisis in late 2009. Following this onset, Greek banks borrowed heavily pursuant to the guarantee scheme. All four systemically important Greek banks participated, along with other regional banks. Greece raised the guarantee scheme’s commitment limit several times, ultimately increasing it from €15 billion in 2008 to €93 billion in 2016. The number of banks participating in the scheme decreased beginning in 2013. As of October 2020, the Greek credit guarantee scheme is still operational and has a current expiration date of November 30, 2020.

The Hungarian Guarantee Scheme (Hungary GFC)
Buchholtz, Alec
In the midst of the global financial crisis, in October 2008, the Magyar Nemzeti Bank (MNB), the Hungarian national bank, noticed a selloff of government securities by foreign banks and a large depreciation in the exchange rate of the Hungarian forint (HUF) in foreign exchange (FX) markets. Hungarian banks experienced liquidity pressures due to margin calls on FX swap contracts, prompting the MNB and Minister of Finance to seek assistance from the International Monetary Fund (IMF), the European Central Bank (ECB) and the World Bank. The IMF and ECB approved Hungary’s requests in late 2008 to create a €20 billion facility, with €2.3 billion intended to back a bank support package. The program involved the creation of two schemes, one of which, the guarantee scheme, was funded by a Refinancing Guarantee Fund (RGF) and aimed to provide domestic banks with guarantees on newly issued interbank loans and wholesale debt contracts with foreign counterparties. Some analyses deemed the guarantee scheme unsuccessful, since no banks ever participated in the scheme, in large part due to Hungary’s own low sovereign debt rating. This prompted the Hungarian government to use a portion of the bank support program to extend direct on-lending measures under a liquidity scheme to three of its largest domestic financial institutions in March 2009.

The Italian Guarantee Scheme (Italy GFC)
Engbith, Lily
The collapse of Lehman Brothers on September 15, 2008, and its severe impact on global credit markets impelled governments around the world to enact stabilization measures to calm and protect their domestic economies. The Italian Republic, while not directly affected by the US subprime mortgage crisis, preemptively implemented emergency procedures and programs to ensure the stability of their banking system. Announced with the passage of Decree-Law No. 157 on October 13, 2008, and legally enforced under Law 190/2008 of December 4, 2008, the Italian Guarantee Scheme (the Guarantee Scheme) was aimed at protecting institutions whose interbank lending abilities had the potential to be impacted by the global credit crunch. Specifically, the Guarantee Scheme allowed Italian banks, including Italian subsidiaries of foreign banks, deemed to be solvent by the Banca d’Italia to apply for guarantee coverage for debt instruments issued after October 13, 2008, with maturities of between three months and five years. Although no overall cap was initially specified, Italian authorities determined individual participation according to official capital requirements. The Guarantee Scheme was never utilized and concluded with the expiration of its issuance window on December 31, 2009.

The Polish Guarantee Scheme (Poland GFC)
Leon Hoyos, Manuel
Faced with the global financial crisis of 2007â€"2009, Poland implemented a scheme of State support for financial institutions. In view of a potential global credit crunch, it aimed at improving short- and medium-term liquidity of domestic financial institutions. The scheme came into force on March 13, 2009, and was approved by the European Commission under European Union State Aid rules on September 25, 2009. The scheme enabled the Ministry of Finance, on behalf of the State Treasury, to provide support in the form of Treasury guarantees on newly issued bank debt and the exchange of Treasury bonds for less liquid assets. This case exclusively examines Treasury guarantees on debt securities. Initially, only domestic banks, including subsidiaries of foreign financial institutions, could apply for guarantees. In 2011, eligibility was expanded to include cooperative savings and credit institutions and the National Cooperative Savings and Credit Institution. An initial overall cap was set at PLN 40 billion ($13.7 billion) before being raised to PLN 160 billion in 2012. The European Commission approved 19 prolongations of the schemeâ€"the last in December 2018. No institutions applied for coverage and the issuance window expired on May 31, 2019.

The Portuguese Guarantee Scheme (Portugal GFC)
Arnous, Julia
By October 2008, Portuguese banks’ access to liquidity was severely restricted due to strains in international wholesale markets. On October 12-13, 2008, the Portuguese government notified the European Commission of a guarantee scheme intended to promote solvent credit institutions’ access to liquidity as part of the European policy response to the acute financial crisis aiming to achieve and maintain financial stability. Under the scheme, the Portuguese government guaranteed financing agreements and banks’ issuance of non-subordinated short- and medium-term debt. To obtain a guarantee under the Scheme, banks paid a fee based on the maturity of the debt and a risk proxy for the issuer. Banks that called on a guarantee were required to either pay back the Portuguese state or exchange the loan for preference shares. Eight credit institutions participated in the Scheme, including three of the largest Portuguese banks. Collectively they issued approximately €21.5 billion in guaranteed debt. Initially set to close on December 31, 2009, the Scheme’s issuance window was repeatedly extended until February 9, 2019. The most recent issuance under the Scheme was made in early 2013. The last remaining bond guaranteed under the Scheme matured on February 17, 2017. The Scheme is considered to have been successful in promoting debt issuance and increasing liquidity in the Portuguese financial system.

The Relationship Between Commodity Prices and Freight Rates in the Dry Bulk Shipping Segment: A Threshold Regression Approach
Melas, Konstantinos (Kostis),Michail, Nektarios
In the current paper, we examine the existence of possible threshold relationships in the commodity price â€" freight rate nexus, under or over which the relationship between the two changes. Using the first lag of the commodity price change as the threshold variable, we find that, in the case of large drops in commodity prices relationships can strongly change. In such cases, the impact is more passed on to freight rates than under normal conditions, while the prevalence of oil prices becomes less significant. Furthermore, in such occurrences, the relationship of freight rates with their lags is statistically significant suggesting that the shock is maintained in the system for longer. Intuitively, the empirical findings suggest that as commodity prices fall sharply, the freight rate needs to adjust more dynamically to such changes in order to maintain a more or less constant ratio of the transport cost to the end price of the commodity. As such, it appears that a change in the previous relationship between the two is warranted for this to happen. Finally, the results are also supportive of the existence of a lead-lag relationship between commodity prices and freight rates, in the large drop regime, in accordance with the literature.

The Return on Purpose: Before and during a Crisis
Milano, Gregory V.,Tomlinson, Brian,Whately, Riley,YiÄŸit, Alexa
In this paper, we analyze the impact of corporate purpose on performance through a new dataset, developed by BERA Brand Management, based on consumer perceptions of corporate purpose for 13 different attributes across over 200 brands. Our paper also reviews the state of play in the debate on corporate purpose and draws on the results of a survey of CEOs of large-cap US companies.Our paper finds that companies associated with high-purpose outperformed on common measures of financial performance, valuation, and value creation:- Average valuation multiples for high-purpose brands are over four times EBITDA higher than that of low-purpose brands.- High-purpose brands demonstrate a nearly 20 percentage point advantage in annualized total shareholder returns over low-purpose brands.- High-purpose brands double their market value over four times faster than low-purpose brands.During Covid-19 the gap between top and bottom quartile performers increased. Companies with the best purpose scores generally moved up and into the top quartile of total shareholder return performance, suggesting that the capital markets expected companies with stronger corporate purpose to maintain a stronger connection to their consumers and deliver more resilient financial performance. These results suggest that operating with strong corporate purpose is good for shareholders, as well as stakeholders more generally. The results of our CEO survey indicate that CEOs increasingly see corporate purpose as a key element in competitive differentiation and strategy development.

The Sonderfonds Finanzmarktstabilisierung (SoFFin) Guarantee Scheme (Germany GFC)
Simon, Claire
Following a series of ad hoc interventions throughout 2007 and early 2008, the collapse of Lehman Brothers in the fall of 2008 and the resulting liquidity crisis caused the German government to adopt a new framework for bank support. The Financial Market Support Act established a new fund, the Financial Market Stabilization Fund (Sonderfonds Finanzmarktstabilisierung, “SoFFin”), to provide up to €400 billion of guarantees on newly issued unsubordinated debt instruments of German financial institutions and German subsidiaries of foreign financial institutions. SoFFin also provided support through recapitalizations and asset purchases, in addition to guarantees. The scheme was extended multiple times before the issuance window closed initially on December 31, 2010. A subsequent reactivation of the scheme in 2012 extended this issuance window to December 31, 2015. The total volume of guarantees provided through SoFFin peaked at €174 billion in the third quarter of 2010. By the end of 2013, there were no guarantees outstanding and none had been triggered. €2.15 billion in fees were collected as a result of the program.

The State Guarantee of External Debt of Korean Banks (South Korea GFC)
Engbith, Lily
Following the Lehman Brothers bankruptcy of September 15, 2008, a number of foreign governments enacted stabilization measures in order to bolster their currencies and inject much-needed liquidity into domestic markets. As part of its effort, the Korean Ministry of Strategy and Finance announced a series of government interventions that included a three-year guarantee of foreign debt issued (including extensions of maturity) by domestic banks between October 20, 2008, and June 30, 2009. This opt-in program was introduced as a preemptive step in ensuring that Korean financial institutions would retain competitive access to external funding in the wake of the global credit crunch. Though the guarantee cap was set at $100 billion, maximum utilization totaled only $1.3 billion issued by a single participant (Hana Bank). On June 30, 2012, the guarantee scheme was terminated with the repayment of all obligations by Hana Bank.

The investor problem based on the HJM model
Szymon Peszat,Dariusz Zawisza

We consider a consumption-investment problem in which the investor has an access to the bond market. In our approach prices of bonds with different maturities are described by the general HJM factor model. We assume that the bond market consist of entire family of rolling bonds and the investment strategy is a general signed measure distributed on all real numbers representing time to maturity specifications for different rolling bonds. The investor's objective is to maximize time-additive utility of the consumption process. We solve the problem by means of the HJB equation for which we prove required regularity of its solution and all required estimates to ensure applicability of the verification theorem. Explicit calculations for certain particular models are presented.

Trade Secrets Laws and Technology Spillovers
Wang, Yanzhi
This paper examines whether and to what extent the Uniform Trade Secrets Act (UTSA) affects technology spillovers between focal firms (i.e., receivers of spillovers) and peers (i.e., senders of spillovers). I find that technology spillovers from peers located in states adopting the UTSA are 27% to 75% lower than technology spillovers from peers located in states not adopting the UTSA. Focal firms whose peers come from the UTSA states have lower R&D investments and fewer migrant inventors than firms whose peers come from non-UTSA states. I also find that the Defend Trade Secrets Act has weak effect on technology spillovers.