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Book part
Publication date: 23 November 2011

Francesco Bravo, Kim P. Huynh and David T. Jacho-Chávez

This chapter proposes a simple procedure to estimate average derivatives in nonparametric regression models with incomplete responses. The method consists of replacing the…

Abstract

This chapter proposes a simple procedure to estimate average derivatives in nonparametric regression models with incomplete responses. The method consists of replacing the responses with an appropriately weighted version and then use local polynomial estimation for the average derivatives. The resulting estimator is shown to be asymptotically normal, and an estimator of its asymptotic variance–covariance matrix is also shown to be consistent. Monte Carlo experiments show that the proposed estimator has desirable finite sample properties.

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Missing Data Methods: Cross-sectional Methods and Applications
Type: Book
ISBN: 978-1-78052-525-9

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Article
Publication date: 20 March 2017

Amit Ghosh

Using data on 5,491 commercial banks in the USA that were operational between 2001 second quarter and 2016 first quarter, the present study aims to examine the impact of…

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Abstract

Purpose

Using data on 5,491 commercial banks in the USA that were operational between 2001 second quarter and 2016 first quarter, the present study aims to examine the impact of derivative securities and its different constituent categories on bank-specific risks and profitability.

Design/methodology/approach

The study uses panel data fixed effects model and Bayesian model averaging techniques.

Findings

This study finds aggregate derivatives and both interest-rate and exchange-rate derivatives and their different constituent categories to reduce banks insolvency risks for the entire time period and the pre-crisis era. Moreover, aggregate derivatives increase banks’ risk-adjusted return on assets that are driven by exchange-rate derivatives. Such findings are robust to the size of banks, the degree of derivative use and extent of profitability. However, in the post-crisis period, derivatives reduce bank profits.

Practical implications

While the results largely provide evidence of the beneficial effects of derivatives, the findings for the post-crisis period are rather concerning. It underscores a clear need to improve regulation and supervision across different categories of derivatives to ensure the benefits exceed their costs for banks.

Originality/value

Disaggregate analysis of derivatives can not only unmask important differences in how they affect banks risks, profits, etc. but also help banks mitigate risks arising from specific types of derivative securities banks hold. Furthermore, discerning the impact of derivatives on banks risks and profits in the post-crisis era vis-à-vis the pre-crisis one is extremely important to restore a sounder banking system and foster overall financial stability.

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The Journal of Risk Finance, vol. 18 no. 2
Type: Research Article
ISSN: 1526-5943

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Article
Publication date: 16 November 2021

Eduard Bertran, Paula Tercero and Alex Sànchez-Cerdà

This paper aims to overcome the main obstacle to compare the merits of the different control strategies for fixed-wing unmanned aerial vehicles (UAVs) to assess autopilot…

Abstract

Purpose

This paper aims to overcome the main obstacle to compare the merits of the different control strategies for fixed-wing unmanned aerial vehicles (UAVs) to assess autopilot performances. Up to now, the published studies of control strategies have been carried out over disperse models, thus being complicated, if not impossible, to compare the merits of each proposal. The authors present a worked benchmark for autopilots studies, consisting of generalized models obtained by merging UAVs’ parameters gathered from selected literature (journals) with other parameters directly obtained by the authors to include some relevant UAVs whose models are not provided in the literature. To obtain them it has been used a dedicated software (from U.S. Air Force).

Design/methodology/approach

The proposed models have been constructed by averaging both the main aircraft defining parameters (model derivatives) and pole-zero locations of longitudinal transfer functions. The suitability of the used methodologies has been checked from their capability to fit the short period and the phugoid modes. Previous analytical model arrangement has been required to match a uniform set of parameters, as the inner state variables are neither the same along the different published models nor between the additional models the authors have here contributed. Besides, moving models between the space state representation and transfer function is not just a simple averaging process, as neither the parameters nor the model orders are the same in the different published works. So, the junction of the models to a common set of parameters requires some residual’s computation and transient responses assessment (even Fourier analysis has been included to preserve the dominance of the phugoid) to keep the main properties of the models. The least mean squares technique has been used to have better fittings between SISO model parameters with state–space ones.

Findings

Both the SISO (Laplace) and state-space models for the longitudinal transfer function of an “averaged” fixed-wing UAV are proposed.

Research limitations/implications

More complicated situations, such as strong wind conditions, need another kind of models, usually based on finite element method simulation. These particular models apply fluid dynamics to study aerostructural aircraft aspects, such as flutter and other aerolastic aspects, the behavior under icing conditions or other distributed parameter problems. Even some models aim to control other aspects than the autopilot, such as the trajectory prediction. However, these models are not the most suitable for the basic UAV autopilot design (early design), so they are outside the objective of this paper. Obviously, the here-considered UAVs are not all the existing ones, but the number is large enough to consider the result as a reliable and realistic representation. The presented study may be seen as a stepping stone, allowing to include other UAVs in future works.

Practical implications

The proposed models can be used as benchmarks, or as a previous step to produce improved benchmarks, in order to have a common and realistic scenario the compare the benefits of the different control actions in UAV autopilots continuously presented in the published research.

Originality/value

A work with the scope of the presented one, merging model parameters from literature with other (often referred in papers and websites) whose parameters have been obtained by the authors has been never published.

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Aircraft Engineering and Aerospace Technology, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1748-8842

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Book part
Publication date: 15 April 2020

Bolun Li, Robin Sickles and Jenny Williams

Peers and friends are among the most influential social forces affecting adolescent behavior. In this chapter, the authors investigate peer effects on post high school…

Abstract

Peers and friends are among the most influential social forces affecting adolescent behavior. In this chapter, the authors investigate peer effects on post high school career decisions and on school choice. The authors define peers as students who are in the same classes and social clubs and measure peer effects as spatial dependence among them. Utilizing recent developments in spatial econometrics, the authors formalize a spatial multinomial choice model in which individuals are spatially dependent in their preferences. The authors estimate the model via pseudo maximum likelihood using data from the Texas Higher Education Opportunity Project. The authors do find that individuals are positively correlated in their career and college preferences and examine how such dependencies impact decisions directly and indirectly as peer effects are allowed to reverberate through the social network in which students reside.

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Book part
Publication date: 10 April 2019

Luc Clair

Applied econometric analysis is often performed using data collected from large-scale surveys. These surveys use complex sampling plans in order to reduce costs and…

Abstract

Applied econometric analysis is often performed using data collected from large-scale surveys. These surveys use complex sampling plans in order to reduce costs and increase the estimation efficiency for subgroups of the population. These sampling plans result in unequal inclusion probabilities across units in the population. The purpose of this paper is to derive the asymptotic properties of a design-based nonparametric regression estimator under a combined inference framework. The nonparametric regression estimator considered is the local constant estimator. This work contributes to the literature in two ways. First, it derives the asymptotic properties for the multivariate mixed-data case, including the asymptotic normality of the estimator. Second, I use least squares cross-validation for selecting the bandwidths for both continuous and discrete variables. I run Monte Carlo simulations designed to assess the finite-sample performance of the design-based local constant estimator versus the traditional local constant estimator for three sampling methods, namely, simple random sampling, exogenous stratification and endogenous stratification. Simulation results show that the estimator is consistent and that efficiency gains can be achieved by weighting observations by the inverse of their inclusion probabilities if the sampling is endogenous.

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The Econometrics of Complex Survey Data
Type: Book
ISBN: 978-1-78756-726-9

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Article
Publication date: 25 February 2014

Patrick Lecomte

The paper aims to conduct an empirical study of three models of property derivatives: index-based derivatives, factor hedges, and combinative hedges based on index and…

Abstract

Purpose

The paper aims to conduct an empirical study of three models of property derivatives: index-based derivatives, factor hedges, and combinative hedges based on index and factors. The objective is to test whether the latter two models introduced by Lecomte dominate the index-based model used for existing property derivatives such as EUREX futures contracts.

Design/methodology/approach

Based on investment property database (IPD) historical database covering 224 individual office properties from 1981 to 2007, the study assesses ex ante hedging effectiveness of the three models. Nine simulations are run under different hypotheses involving individual buildings and portfolios. The 17 factors included in the study cover both macro-factors (e.g. macroeconomic indicators) and micro-factors linked to the properties (e.g. age).

Findings

Atomization and periodic rebalancing of property derivatives' underlying make it possible to substantially increase hedging effectiveness for a large majority of buildings in the sample. However, combinative hedges are overall superior to factor hedges owing to the overriding role played by IPD indices in capturing risk.

Research limitations/implications

Due to confidentiality requirements inherent to the use of property level data, the study downplays the role of micro-factors on real estate risk at the property level.

Practical implications

The paper introduces a typology of optimal hedges aimed at individual property owners and portfolio holders in the City office property market.

Originality/value

This is the first time a comprehensive analysis of different models of property derivatives is conducted. The value of the paper stems from the use of property level data.

Details

Journal of Property Investment & Finance, vol. 32 no. 2
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 11 April 2008

Andreas A. Jobst

Amid benign monetary policy in mature market countries and high liquidity‐induced demand, lower risk premia have encouraged risk diversification into alternative asset…

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3053

Abstract

Purpose

Amid benign monetary policy in mature market countries and high liquidity‐induced demand, lower risk premia have encouraged risk diversification into alternative asset classes outside the scope of conventional investment. The development of derivative markets in emerging economies plays a special role in this context as more institutional money is managed on a global mandate, with more and more capital being dedicated to emerging market equity. This paper aims to focus on these issues.

Design/methodology/approach

This paper reviews the recent development of equity derivative markets in emerging Asia and informs a critical debate about market practices and prudential supervision. Goal of the paper is also to outline essential elements and key policy considerations in developing derivative markets.

Findings

The supervision of emerging derivative markets depends on the expedient and tractable resolution of challenges arising from consistent risk management, risk mutualization, and prudential standards that guarantee market stability in crisis situations. In particular, further efforts are needed in areas of cash market liquidity, trading infrastructure as well as legal and regulatory frameworks based on a set of coherent principles for capital market development.

Originality/value

The paper offers a comprehensive set of principles for the development of equity derivative markets based on the current state of equity derivative trading in emerging Asia. Given current efforts by national regulators in the region to implement comprehensive guidelines on derivatives and revise short selling restrictions, the scope of this paper has topical appeal from the perspective of market participants and regulators.

Details

International Journal of Emerging Markets, vol. 3 no. 2
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 18 October 2011

Ekaterina E. Emm and Ufuk Ince

The purpose of this paper is to examine the extent of systemic risk and competition in over‐the‐counter (OTC) derivatives dealing. Using derivatives‐related failures…

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1015

Abstract

Purpose

The purpose of this paper is to examine the extent of systemic risk and competition in over‐the‐counter (OTC) derivatives dealing. Using derivatives‐related failures during the 1990s, the authors draw conclusions that are pertinent to the recent financial market turmoil involving OTC derivatives.

Design/methodology/approach

The authors use the event‐study methodology with crude dependence adjustment to examine the wealth effect for the involved derivatives dealers. The authors re‐estimate the parameters using the market‐adjusted model to check for robustness. In addition, a multivariable regression framework was used to estimate the determinants of the abnormal returns.

Findings

OTC derivatives dealers experience negative returns when their clients announce derivatives losses. In contrast, rival dealers uninvolved in the loss event exhibit positive returns. The extent of the positive returns for the rival dealers grows as new events unfold, and the dealers continue to steer clear of derivatives trouble. A broader industry portfolio of securities brokers, dealers, and advisors is affected negatively, indicating possible industry contagion. The cross‐sectional analysis of the abnormal returns indicates the presence of information (and not pure) contagion implying that in a financial crisis involving derivatives systemic failure is not likely.

Originality/value

The authors extend the literature by examining an exhaustive set of derivatives loss events. The sample includes a more diverse set of derivatives dealers and it spans a longer time period than prior studies did. This is also the first study confirming the distorting impact of the “too big to fail” and “federal safety net” phenomena in the context of OTC derivatives dealing.

Details

Managerial Finance, vol. 37 no. 12
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 21 October 2021

Philipp Kliewe, Antoine Laurain and Kersten Schmidt

Motivated by the acoustics of motor vehicles, a coupled fluid–solid system is considered. The air pressure is modeled by the Helmholtz equation, and the structure…

Abstract

Purpose

Motivated by the acoustics of motor vehicles, a coupled fluid–solid system is considered. The air pressure is modeled by the Helmholtz equation, and the structure displacement is described by elastodynamic equations. The acoustic–structure interaction is modeled by coupling conditions on the common interface. First, the existence and uniqueness of solutions are investigated, and then, after recalling fundamental notions of shape optimization, the tensor form of the distributed shape derivative is obtained for the coupled problem. It is then applied to the minimization of the sound pressure by variation of the structure shape through the positioning of beads.

Design/methodology/approach

The existence and uniqueness of solutions up to eigenfrequencies are shown by the Fredholm–Riesz–Schauder theory using a novel decomposition into an isomorphism and a compact operator. For the design optimization, the distributed shape derivative is obtained using the averaged adjoint method. It is then used in a closed 3D optimization process of the position of a bead for noise reduction. In this process, the C++ library concepts are used to solve the differential equations on hexahedral meshes with the finite element method of higher order.

Findings

The existence and uniqueness of solutions have been shown for the case without absorption, where the given proof allows for extension to the case with absorption in the domain or via boundary conditions. The theoretical results show that the averaged adjoint can be applied to compute distributed shape derivatives in the context of acoustic–structure interaction. The numerical results show that the distributed shape derivative can be used to reduce the sound pressure at a chosen frequency via rigid motions of a nonsmooth shape.

Originality/value

The proof of shape differentiability and the calculation of the distributed shape derivative in tensor form allows to consider nonsmooth shapes for the optimization, which is particularly relevant for the optimal placement of beads or stampings in a structural-acoustic system.

Details

Engineering Computations, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0264-4401

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Book part
Publication date: 5 July 2012

Ales Berk Skok, Igor Loncarski and Matevz Skocir

We investigate the evolution of corporate risk management practices in Slovenian non-financial firms in the period 2004–2009 and compare the findings several surveys…

Abstract

We investigate the evolution of corporate risk management practices in Slovenian non-financial firms in the period 2004–2009 and compare the findings several surveys conducted for other countries. We mail questionaires to non-financial companies, where the target group included non-financial companies listed on Ljubljana Stock Exchange and the largest exporting companies in Slovenia. We find that the current use of derivatives for hedging purposes is still at a lower level than in the majority of developed countries. The great expansion of Slovenian economy in the period 2004–2008, the development of Slovenian financial system, the convergence of Slovenian and EU accounting standards and recent financial crisis did not sufficiently induce Slovenian firms to adopt risk management practices. The most often stated reasons for the low use of derivatives are (1) insufficient risk exposure, (2) problems with the evaluation and monitoring of derivatives and (3) the costs associated with the implementation of derivatives programme. In our opinion, the institutional environment in Slovenia does not induce managers to undertake proper risk management activities. We argue that not only managers, but also owners and creditors should be more accountable for the decisions they take (or do not take).

Details

Derivative Securities Pricing and Modelling
Type: Book
ISBN: 978-1-78052-616-4

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