https://hdl.handle.net/10438/20505 2021-11-05T20:36:52Z https://hdl.handle.net/10438/27134 The revealed social welfare function: USA x Brazil Mattos, Enlinson This paper proposes the use of the optimal nonlinear tax formula to derive the social welfare function of policymakers. In particular, it uses PSID and PNAD for 1990 to estimate the implicit social welfare functions associated with income tax imposition for the USA and Brazil. Under assumptions on the household preferences, the estimations suggest that both U.S. and Brazilian social welfare functions are concave and Paretian, but that only the Brazilian function is utilitarian, i.e., the Brazilian social planner is less inequity-averse than her U.S. counterpart. 2008-11-01T00:00:00Z https://hdl.handle.net/10438/27133 Testing the hypothesis of contagion using multivariate volatility models Marçal, Emerson Fernandes; Pereira, Pedro L. Valls The aim of this paper is to test whether or not there was evidence of contagion across the various financial crises that assailed some countries in the 1990s. Data on sovereign debt bonds for Brazil, Mexico, Russia and Argentina were used to implement the test. The contagion hypothesis is tested using multivariate volatility models. If there is any evidence of structural break in volatility that can be linked to financial crises, the contagion hypothesis will be confirmed. Results suggest that there is evidence in favor of the contagion hypothesis. 2008-11-01T00:00:00Z https://hdl.handle.net/10438/27129 Comparing value-at-risk methodologies Lima, Luiz Renato; Néri, Breno de Andrade Pinheiro In this paper, we compare four different Value-at-Risk (V aR) methodologies through Monte Carlo experiments. Our results indicate that the method based on quantile regression with ARCH effect dominates other methods that require distributional assumption. In particular, we show that the non-robust methodologies have higher probability of predicting V aRs with too many violations. We illustrate our findings with an empirical exercise in which we estimate V aR for returns of S˜ao Paulo stock exchange index, IBOVESPA, during periods of market turmoil. Our results indicate that the robust method based on quantile regression presents the least number of violations. 2007-05-01T00:00:00Z https://hdl.handle.net/10438/27130 Earnings inequality in Brazil: is it permanent or transitory? Santos, Antonio Loureiro; Souza, André Portela Fernandes de This paper seeks to analyze the dynamic behavior of prime-age male workers’ earnings inequality in the formal labor market of the State of S˜ao Paulo in the years 1990-1998. The aim is to fit an econometric model of unobserved earnings components into the empirical earnings variance-covariance structure in order to evaluate the relative magnitude of individual characteristics and earnings instability as factors behind overall inequality. The analysis is based on a panel dataset constructed from RAIS data (official formal labor market data); several different models are estimated and tested using minimum distance techniques. Our results show that (i) the relative magnitude of the earnings instability component of inequality is much smaller than the individual characteristics component, and (ii) the observed heterogeneity, as accounted by education and age, explains only a little part of the inequality derived from individual characteristics. 2007-11-01T00:00:00Z https://hdl.handle.net/10438/27128 Pricing and modeling credit derivatives Akat, Muzaffer; Almeida, Caio Ibsen Rodrigues de; Papanicolaou, George The market involving credit derivatives has become increasingly popular and extremely liquid in the most recent years. The pricing of such instruments offers a myriad of new challenges to the research community as the dimension of credit risk should be explicitly taken into account by a quantitative model. In this paper, we describe a doubly stochastic model with the purpose of pricing and hedging derivatives on securities sub ject to default risk. The default event is modeled by the first jump of a counting process Nt , doubly stochastic with respect to the Brownian filtration which drives the uncertainty of the level of the underlying state process conditional on no-default event. By assuming a condition slightly stronger than no arbitrage, i.e., that there is no free lunch with vanishing risk (NFLVR) from Delbaen and Scharchermayer (1994), we provide all the possible equivalent martingale measures under this setting. In order to illustrate the method, two simple examples are presented: the pricing of defaultable stocks, and a framework to price multi-name credit derivatives such as basket defaults. 2007-05-01T00:00:00Z https://hdl.handle.net/10438/27132 Extracting default probabilities from sovereign bonds Meres, Bernardo; Almeida, Caio Ibsen Rodrigues de Sovereign risk analysis is central in debt markets. Considering different bonds and countries, there are numerous measures aiming to identify the way risk is perceived by market participants. In such environment, probabilities of default play a central role in investors’ decisions. This article contributes by providing a parametric arbitrage-free dynamic model to estimate defaultable term structures of sovereign bonds. The proposed model builds on Duffie and Singleton’s (1999) general reduced-form model by proposing a piecewise constant structure for the conditional probabilities of defaults. Once an average recovery rate value is fixed for the whole market, the proposed model estimates implied probabilities of defaults from bond prices, working as a parsimonious tool to quantify investor’s perception of credit risk. We apply this methodology to analyze the behavior of default probabilities within the Brazilian sovereign fixed income market at three different recent economic moments. 2008-05-01T00:00:00Z https://hdl.handle.net/10438/27131 The trade-off between incentives and endogenous risk Araújo, Aloísio Pessoa de; Moreira, Humberto; Tsuchida, Marcos Negative relationship between risk and incentives, predicted by standard moral hazard models, has not been confirmed by empirical work. We propose a moral hazard model in which heterogeneous risk-averse agents can control the mean and variance of the profits. The possibility of risk reduction allows the agent’s marginal utility of incentives to be increasing or decreasing in risk aversion. Positive relationship between endogenous risk and incentives is found when marginal utility of incentives and variance are decreasing in risk aversion. Exogenous risk and incentives are negatively related. Those results remain when adverse selection precedes moral hazard. 2007-11-01T00:00:00Z https://hdl.handle.net/10438/27127 Dynamic hedging with stochastic differential utility Bueno, Rodrigo de Losso da Silveira In this paper we study the dynamic hedging problem using three different utility specifications: stochastic differential utility, terminal wealth utility, and a new utility transformation which includes features from the two previous approaches. In all three cases, we assume Markovian prices. While stochastic differential utility (SDU) has an ambiguous effect on the pure hedging demand, it does decrease the pure speculative demand, because risk aversion increases. We also show that in this case the consumption decision is, in some sense, independent of the hedging decision. In the case of terminal wealth utility (TWU), we derive a general and compact hedging formula which nests as special cases all of the models studied in Duffie and Jackson (1990). In the case of the new utility transformation, we find a compact formula for hedging which encompasses the terminal wealth utility framework as a special case; we then show that this specification does not affect the pure hedging demand. In addition, with CRRA- and CARA-type utilities the risk aversion increases, and consequently, the pure speculative demand decreases. If futures prices are martingales, then the transformation plays no role in determining the hedging allocation. Our results hold for a number of different price distributions. We also use semigroup techniques to derive the relevant Bellman equation for each case. 2006-11-01T00:00:00Z https://hdl.handle.net/10438/27122 Determinants of the differential pricing between voting and non-voting shares in Brazil Saito, Richard Several papers suggest that private benefits can explain the differential pricing between share classes with differential voting rights. However, in Brazil the price differential between voting and non-voting shares has been negative for several companies between July 1994 and September 2002. This paper investigates the determinants that imply this discount of voting shares vis-à-vis non-voting shares. Particularly, the paper analyzes the impacts of liquidity, dividend differential, and recent changes in legislation of the Brazilian public equity market on the voting premium. This paper ratifies that liquidity is extremely relevant to the determination of relative prices. In addition, empirical evidence confirms a negative impact of Law 9457 - revoking voting minority shareholders' tag along rights - and a positive impact of the introduction of Law 10303 - reinstating those rights to minority voting shareholders. Finally, ownership structure confirmed a positive relationship with the voting premium, but the major shareholders' voting share participation has not presented a significant relationship as in other countries.; Vários estudos sugerem que os benefícios privados podem explicar o prêmio pelo voto de ações com direitos superiores de voto. Entretanto, no Brasil o diferencial de preço entre ações ordinárias e preferenciais foi negativo para diversas empresas durante o período de julho 1994 até setembro 2002. Este estudo investiga os determinantes que implicam este desconto das ações ordinárias com relação às ações preferenciais. Particularmente, o estudo analisa os impactos de liquidez, diferencial de dividendos e mudanças recentes na legislação brasileira do mercado de ações sobre o prêmio pelo voto. Este estudo documenta que liquidez é extremamente importante na determinação de preços relativos. Além disso, há evidência empírica confirmando o impacto negativo da Lei 9.457 revogando direitos de venda conjunta com o controlador de acionistas minoritários ordinaristas, e um impacto positivo na introdução da Lei 10.303 restabelecendo estes direitos para acionistas com direito a voto. Finalmente, a estrutura de posse confirmou uma relação positiva com o prêmio pelo voto, mas a participação de ações ordinárias do acionista majoritário não apresentou uma relação significativa como em outros países. 2003-05-01T00:00:00Z https://hdl.handle.net/10438/27124 Using spatial covariance function for antitrust market delineation Lucinda, Cláudio Ribeiro de; Barrionuevo Filho, Arthur In this paper, an estimation of a Spatial Covariance Function was proposed for determining the relevant geographic market for a merger. This methodology was applied to a proposed merger between two competing Brazilian supermarket chains. During this application, the shortcomings of the analysis carried out by the Brazilian Antitrust System were initially pointed out, including the geographic dimension of the relevant market, which was found to be separated in each municipality located on the shore of Sao Paulo state. The results, based on the estimated spatial covariance function using price data on 22 products in 43 supermarkets, indicate a single geographic market for all municipalities 2009-05-01T00:00:00Z