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1 – 4 of 4William E. Balson and Gordon Rausser
Risk-based clearing has been proposed by Rausser et al. (2010) for over-the-counter (OTC) derivatives. This paper aims to illustrate the application of risk-based margins to a…
Abstract
Purpose
Risk-based clearing has been proposed by Rausser et al. (2010) for over-the-counter (OTC) derivatives. This paper aims to illustrate the application of risk-based margins to a case study of the mortgage-backed securities derivative portfolio of the American International Group (AIG) during the period 2005-2008. There exists sufficient publicly available information to examine AIG’s derivative portfolio and how that portfolio would depend on conjectural changes in margin requirements imposed on its OTC derivative positions. Generally, such data on OTC derivative portfolio positions are unavailable in the public domain, and thus, the AIG data provide a unique opportunity for an objective evaluation.
Design/methodology/approach
This paper uses modern financial methodology to evaluate risk-based margining and collateralization for the major OTC derivative portfolio of the AIG.
Findings
This analysis reveals that a risk-based margin procedure would have led to earlier margin calls of greater magnitude initially than the collateral calls actually faced by AIG Financial Products (AIGFP). The total margin ultimately required by the risk-based procedure, however, is similar in magnitude to the collateral calls faced by AIGFP by August 2008. It is likely that a risk-based clearing procedure applied to AIG’s OTC contracts would have led to the AIG undertaking significant hedging and liquidation of their OTC positions well before the losses built up to the point they had, perhaps avoiding the federal government’s orchestrated restructuring that occurred in September 2008.
Originality/value
There has been no published risk-based evaluations of a major OTC portfolio of derivatives for any company, let alone the AIG.
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Gordon Rausser, William Balson and Reid Stevens
Systemic risk propagated through over‐the‐counter (OTC) derivatives can best be managed by a public‐private central counterparty clearing house. The purpose of this paper is to…
Abstract
Purpose
Systemic risk propagated through over‐the‐counter (OTC) derivatives can best be managed by a public‐private central counterparty clearing house. The purpose of this paper is to outline the market microstructure necessary for such a clearing house.
Design/methodology/approach
The paper proposes using an request for quote platform with an active permissioning system that uses analytic approximations based on Monte Carlo simulation to estimate default risk and a two‐part pricing scheme to efficiently price that risk.
Findings
It is found that comprehensive clearing for complex and standardized derivatives is feasible using the clearing framework.
Research limitations/implications
This research is limited by the authors' ability to give empirical examples. The paper gives a short example with data, but given the constraints on length, cannot go into more detail.
Practical implications
This comprehensive clearing structure, in contrast to current proposed government regulations, will not drive out the “good” with the “bad” OTC derivative instruments.
Originality/value
This is the only paper the authors are aware of that outlines a detailed framework for clearing all OTC derivatives.
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Eduardo Botti Abbade and Homero Dewes
The purpose of this paper is to investigate the situation and trends regarding prevalence of underweight, overweight, and undernourished populations worldwide. Thus, we defend…
Abstract
Purpose
The purpose of this paper is to investigate the situation and trends regarding prevalence of underweight, overweight, and undernourished populations worldwide. Thus, we defend that the conditions of hunger, underweight, overweight, and obesity are seen as anomalies resulting from nutritional and dietary food insecurity related to the concept of malnutrition.
Design/methodology/approach
This investigation was conducted through an ecological study, using indicators related to undernourishment, underweight, and overweight. Data, obtained through the WHO and United Nations, were analyzed through scatter plots and angular coefficient from linear regression.
Findings
Evidence suggests that some nations have high levels of undernourished and overweight populations at the same time. Results showed a significant reduction in the prevalence of underweight children and a significant increase in the prevalence of overweight children worldwide. Western Pacific has shown declining trends in both overweight and underweight children. Southern Africa has shown a strong increase in its child overweight population and no downward trend in its underweight child population.
Practical implications
The authors defend that programs and actions better aligned to diagnoses of some countries that face problems related to both underweight and overweight/obesity conditions are needed. This investigation can help public and private efforts to combat underweight and overweight diagnoses worldwide.
Originality/value
The authors present evidence of the co-occurrence of underweight and overweight in child populations worldwide. Thus, the authors show alarming trends regarding to these diagnoses.
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Maria Bruna Zolin, Danilo Cavapozzi and Martina Mazzarolo
Milk is one of the most produced, consumed and protected agricultural commodities worldwide. The purpose of this paper is to assess how trade-opening policies can foster food…
Abstract
Purpose
Milk is one of the most produced, consumed and protected agricultural commodities worldwide. The purpose of this paper is to assess how trade-opening policies can foster food security in the Chinese milk sector.
Design/methodology/approach
The empirical evidence proposed in our paper is based on time series data from the National Bureau of Statistics of China (2019) and FAOSTAT (2020). Differences in income elasticity between urban and rural areas are estimated by OLS regressions. The data also provide empirical evidence to assess to what extent and to which countries China is resorting to meet its growing demand.
Findings
Per-capita milk consumption of Chinese is rising. The authors’ estimates show that milk income elasticity is higher in rural areas. China is also progressively increasing its dependence on imports. Producers who benefit the most are those from countries implementing trade-opening policies.
Research limitations/implications
Other methods could be applied, by way of example, the gravitational model.
Practical implications
Trade agreements and the removal of barriers could be effective responses to protectionist pressures and to food security concerns.
Social implications
The case examined is of particular interest as it intervenes on food security and safety.
Originality/value
The paper adds value and evidence to the effects of trade on food security in a country with limited and exploited natural resources addressing a health emergency and environmental concerns.
Details