Good deals in markets with friction

Balbás, Alejandro; Balbás, Beatriz; Balbás, Raquel

doi:10.1080/14697688.2013.780132

Cited by 9 publications

(5 citation statements)

References 34 publications

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“…We will not prove the equivalence between Conditions a and b above, as similar results may be found in several papers (see, for instance, Balbás et al [9]).…”

Section: /Pmentioning

confidence: 55%

“…Once the existence of a minimal element∆ L ∈ C has been proven, defineρ L : L p +L −→ R according to (5). The results of Balbás et al [9] show thatρ L satisfies Conditions a, d and e of Theorem 1. Let us show Condition b.…”

Section: Discussionmentioning

confidence: 99%

“…L (y) = M ax − E (yz) ; (z, ξ) ∈∆ L = M ax − E (yΠ q (z, ξ)) ; (z, ξ) ∈∆ L = M ax {− E (yz) ; z ∈ ∆ ρ } = ρ (y) .Let us finally show Condition c. According to Balbás et al[9], there is a bijection:D ↔ Γ (20)between the family D of convex and weak * -compact subsets C ⊂ L q × R m and the family Γ of continuous, sub-additive and homogeneous functionals f :L p + L −→ R. Moreover, if C ∈ D,then its associated functional of Γ is given by:f (y + w) = M ax − E (yz) − m i=1x i ξ i ; (z, ξ 1 , ξ 2 , ..., ξ m ) ∈ C ,…”

mentioning

confidence: 85%

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Measuring Risk When Expected Losses Are Unbounded

Balbás

Blanco

Garrido

2014

Risks

Self Cite

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This paper proposes a new method to introduce coherent risk measures for risks with infinite expectation, such as those characterized by some Pareto distributions. Extensions of the conditional value at risk, the weighted conditional value at risk and other examples are given. Actuarial applications are analyzed, such as extensions of the expected value premium principle when expected losses are unbounded.

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“…We will not prove the equivalence between Conditions a and b above, as similar results may be found in several papers (see, for instance, Balbás et al [9]).…”

Section: /Pmentioning

confidence: 55%

Section: Discussionmentioning

confidence: 99%

mentioning

confidence: 85%

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Measuring Risk When Expected Losses Are Unbounded

Balbás

Blanco

Garrido

2014

Risks

Self Cite

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“…SIA, 2017). The models for the generation of an optimal contract between the manufacturer of space vehicles and the space services providers are based on the models of adverse selection of the two types of operators in the context of the contract theory (Borch 1962;Balbás et al 2013Balbás et al , 2014Bossaerts et al 2010;Ardalan et al 2017) A model for the case of availability of asymmetric information involves finding the optimal contract by imposing the incentive restrictions, described in the works Kurz, Hart 1982). Utility functions for the satellite service providers are selected in such a way that Spence-Mirrlees condition (strict single crossing condition) was met for them (Araujo, Moreira 2010).…”

Section: Introductionmentioning

confidence: 99%

Models for the interaction between space services providers and manufacturers of space vehicles

Ivanov

Belyaeva

Kurilova

et al. 2018

JESI

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The authors have formed the space market structure which is distinguished by the junctional formation of the summed demand for a product or service between the participants at the same stage, which serves as a basis for the formation of demand at the next stages. The peculiarities of participants' interaction on the space services market are associated with incomplete awareness. It is advisable to use the methodological approach considered in the theory of contracts in the case of asymmetric information to develop models of interaction between market participants. Thus, based on the theory of contracts and taking into account the specifics of interaction in this article the authors have described the models for the generation of an optimal contract for the manufacturer of space vehicles and space services providers. The models are presented for the cases with symmetric and asymmetric information. As a result of solution of the task for the generation of an optimal contract, such parameters of the contract as satellite performance, the price of its information throughput unit, as well as the cumulative indicator of its technical and operational characteristics can be found in the course of interaction between these participants of the space market. The determined parameters of the contract allow maximizing the profit of the manufacturer of space vehicles.

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“…We will not prove the equivalence between Conditions a) and b) above as similar results may be found in several papers (see, for instance, Balbás, Balbás, and Balbás (2013)).…”

Section: Preliminaries and Notationsmentioning

confidence: 65%

Three essays on financial markets

Cheng¹

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[ACCESS RESTRICTED TO THE UNIVERSITY OF MISSOURI AT AUTHOR'S REQUEST.] This dissertation consists of three essays. The first essay extends Kyle (1985)'s informed trading model to allow for multiple informed traders, noise in informed traders' private signals and the probability of information events. The first essay's main theoretical findings are: (a) Other than the intuitive effect of incurring loss, noise in private signals may preserve informed traders' profit by dampening competition. When the noise level is relatively low, the competition dampening effect dominates. What's more important, there is an optimal noise level at which informed traders' profit is maximized. (b) If the optimal noise level can be implemented, then strong form informational efficiency is not achievable in days with information events, and the size of potential bias depends on both the probability and magnitude of information events. The theoretical section also includes simulation results which support theoretical finding (b). The empirical part of this essay extends Odders-White and Ready (2008) and finds that: (1) Estimated noise in private signal is higher for small firm stocks, which is intuitive since information leaks are less likely for small firms and small firms are more secretive. (2) Estimated noise level is larger for stock/year combinations with larger estimated number of informed traders and larger estimated magnitude of information events. Result (2) confirms theoretical finding (a), which states that optimal noise level is increasing in the number of informed traders and magnitude of information events. The second essay explains how an airline can hedge more effectively employing dynamic copula models. Since there is no corresponding futures contract available, airlines may have to cross hedge jet fuel with either crude oil or other refined products. Because the dependence between jet fuel and its hedging instrument is time-varying, airlines' cross hedging problem needs a dynamic solution. This essay estimates timevarying optimal cross hedge ratios using dynamic copula based GARCH models. Estimation results show that copula models outperform static hedging models by achieving a smaller hedged portfolio variance in both in-sample (by about 5%) and out-of-sample tests (by about 9%). This essay also finds that heating oil futures is a more effective cross hedging instrument for jet fuel than WTI crude oil futures. The third essay seeks to investigate the impact of corporate hedging. First of all, this essay examines whether oil/jet fuel price increases impact Southwest stock/Dow Jones Transportation index returns and return volatilities significantly. Assuming Southwest airlines' hedging effort is effective, this essay tries to find supportive evidence showing that Southwest stock return and return volatility are less sensitive to positive oil/jet fuel price shocks than the DJT counterparts. While intuition suggests oil/jet fuel price increases, especially the large ones, may reduce transportation firms' profitability substantially, the link between positive oil shocks and stock returns as well as the link between positive oil shocks and stock return volatilities are found to be weak. This essay shows that positive oil shocks' impacts on Southwest/DJT returns and volatilities are very limited, though there is a tail dependence exception: extreme positive oil price increases do make large negative stock returns more likely. Although intuition suggests Southwest stock return and return volatility may be less sensitive to oil/jet fuel price shocks due its hedging effort, the analysis of this essay does not find any profound evidence supporting this conjecture.

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Good deals in markets with friction

Cited by 9 publications

References 34 publications

Measuring Risk When Expected Losses Are Unbounded

Measuring Risk When Expected Losses Are Unbounded

Models for the interaction between space services providers and manufacturers of space vehicles

Three essays on financial markets

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