Michayluk, D 2009, 'Stock Splits, Stock Dividends, and Reverse Stock Splits' in Baker, HK (ed), Dividends and Dividend Policy, Wiley, USA, pp. 325-341.
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Bruti-Liberati, N, Nikitopoulos-Sklibosios, C, Platen, E & Schlögl, E 2009, 'Alternative Defaultable Term Structure Models', Asia-Pacific Financial Markets, vol. 16, no. 1, pp. 1-31.
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The objective of this paper is to consider defaultable term structure models in a general setting beyond standard risk-neutral models. Using as numeraire the growth optimal portfolio, defaultable interest rate derivatives are priced under the real-world probability measure. Therefore, the existence of an equivalent risk-neutral probability measure is not required. In particular, the real-world dynamics of the instantaneous defaultable forward rates under a jump-diffusion extension of a HJM type framework are derived. Thus, by establishing a modelling framework fully under the real-world probability measure, the challenge of reconciling real-world and risk-neutral probabilities of default is deliberately avoided, which provides significant extra modelling freedom. In addition, for certain volatility specifications, finite dimensional Markovian defaultable term structure models are derived. The paper also demonstrates an alternative defaultable term structure model. It provides tractable expressions for the prices of defaultable derivatives under the assumption of independence between the discounted growth optimal portfolio and the default-adjusted short rate. These expressions are then used in a more general model as control variates for Monte Carlo simulations of credit derivatives. © 2009 Springer Science+Business Media, LLC.
Comerton-Forde, C & Putniņš, TJ 2009, 'Measuring Closing Price Manipulation', Journal of Financial Intermediation, vol. 20, no. 2, pp. 135-158.
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We quantify the effects of closing price manipulation on trading characteristics and stock price accuracy using a unique sample of prosecuted manipulation cases. Based on these findings we construct an index of the probability and intensity of closing price manipulation. As well as having regulatory applications, this index can be used to study manipulation in the large number of markets and time periods in which prosecution data are not readily available.
Fan, E & Zhao, R 2009, 'Health status and portfolio choice: Causality or heterogeneity?', Journal of Banking & Finance, vol. 33, no. 6, pp. 1079-1088.
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This paper explores the role of unobserved individual characteristics in the health-assets and health-portfolio correlations. We apply various econometrics models to a unique longitudinal dataset with rich information that allows for the exploitation of four different health indices. Our findings show strong cross-sectional correlations between health and both financial and non-financial assets, but these correlations seem to be mainly driven by heterogeneity as the correlations largely disappear in the fixed-effects model. Adverse health shocks, however, are found to motivate a safer portfolio choice even after individual fixed-effects are controlled for - a result consistent with the prediction made by the background risk theory. Our findings suggest that health shocks shift investment from risky assets toward other financial assets, but keep the total financial assets unchanged.
Glover, K, Peskir, G & Samee, F 2009, 'The British Asian Option', Sequential Analysis, vol. 29, no. 3, pp. 311-327.
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Following the economic rationale of [7] and [8] we present a new class of Asian options where the holder enjoys the early exercise feature of American options whereupon his payoff (deliverable immediately) is the ‘best prediction’ of the European payoff under the hypothesis that the true drift of the stock price equals a contract drift. Inherent in this is a protection feature which is key to the British Asian option. Should the option holder believe the true drift of the stock price to be unfavourable (based upon the observed price movements) he can substitute the true drift with the contract drift and minimise his losses. The practical implications of this protection feature are most remarkable as not only is the option holder afforded a unique protection against unfavourable stock price movements (covering the ability to sell in a liquid market completely endogenously) but also when the stock price movements are favourable he will generally receive high returns. We derive a closed form expression for the arbitrage-free price in terms of the rational exercise boundary and show that the rational exercise boundary itself can be characterised as the unique solution to a nonlinear integral equation. Using these results we perform a financial analysis of the British Asian option that leads to the conclusions above and shows that with the contract drift properly selected the British Asian option becomes a very attractive alternative to the classic (European) Asian option.
Hutcheson, TJ 2009, 'A suggestion for using oral presentations to reduce the incidence of plagiarism in business courses', Australasian Journal of Economics Education, vol. 6, no. 2, pp. 44-63.
Mar, J, Bird, R, Casavecchia, L & Yeung, D 2009, 'Fundamental Indexation: An Australian Investigation', Australian Journal of Management, vol. 34, no. 1, pp. 1-20.
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Capitalisation-weighted indexes provide the basis for passive investment strategies designed to capture market performance. However, these cap-weighted indexes are claimed to be sub-optimal because of their tendency to overweight overvalued shares and underweight undervalued shares. U.S. evidence suggests that fundamental indexes, which select, rank and weight stocks according to fundamental measures of size such as book value and revenue, outperform cap-weighted indexes. This study examines fundamental indexation in an Australian context over the period 1995 to 2006 and finds support for the U.S. results. However, we also find that the superiority of fundamental indexation is largely explained by its inherent bias towards value stocks, which raises the question as to whether a more overt value tilt may not provide a superior means for exploiting mispricings in markets.
Michayluk, D & Zhao, L 2009, 'Stock Splits and Bond Yields: Isolating the Signaling Hypothesis', Financial Review, vol. 45, no. 2, pp. 375-386.
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One explanation offered for stock splits is that the split signals positive information by reducing the stock price range in expectation of improved future prospects. Price declines also lead to changes in stock price dynamics, but related securities are not subject to these other changes and therefore can be used to provide a separate assessment of the markets’ interpretation of the split. We examine corporate bond issues around stock splits and find a significant decline in the bond yield spread following stock splits, supporting the signaling hypothesis. We also confirm improvements in forecasted and realized earnings subsequent to stock splits. © 2010, The Eastern Finance Association.
Putniņš, TJ 2009, 'Naked Short Sales and Fails to Deliver: An Overview of Clearing and Settlement Procedures for Stock Trades in the US', Journal of Securities Operations and Custody, vol. 2, no. 4, pp. 340-350.
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This article outlines the process of clearing and settlement for stock trades in the US. It pays particular attention to what happens when the seller of a stock fails to deliver that stock at settlement and describes the mechanisms to resolve delivery failures. Fails to deliver can occur for a number of reasons, such as human error, administrative delays and the controversial practice of naked short selling. This article helps understand the implications of naked short selling for trade counterparties and, more generally, the effects of naked short selling on the clearing and settlement system.
Roesch, D & Scheule, HH 2009, 'Credit Portfolio Loss Forecasts for Economic Downturns', Financial Markets, Institutions & Instruments, vol. 18, no. 1, pp. 1-26.
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Recent studies find a positive correlation between default and loss given default rates of credit portfolios. In response, financial regulators require financial institutions to base their capital on 'Downturn' loss rates given default which are also known as Downturn LGDs. This article proposes a concept for the Downturn LGD which incorporates econometric properties of credit risk as well as the information content of default and loss given default models. The concept is compared to an alternative proposal by the Department of the Treasury, the Federal Reserve System and the Federal Insurance Corporation. An empirical analysis is provided for US American corporate bond portfolios of different credit quality, seniority and security. © 2009 New York University Salomon Center and and Wiley Periodicals, Inc.
Roesch, D & Scheule, HH 2009, 'Credit Rating Impact on CDO Evaluation', Global Finance Journal, Vol. 19, vol. 19, no. 3, pp. 235-251.
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One of the most significant developments in international credit markets in recent years has been the trade in Collateralized Debt Obligations (CDO), which has enabled financial institutions to repackage the credit risk of an asset portfolio into tranches to be transferred to investors. The present paper evaluates the credit risk of such a portfolio and the related tranches by applying two prominent prototypes for credit ratings, namely the point-in-time and through-the-cycle approach. The central parameters default probability and correlation are forecast for multiple years and related forecasting errors are included. The article's main findings are that banks which transfer debt tranches but retain an equity part and apply a through-the-cycle rating approach may be exposed to higher insolvency risk. Firstly, the credit risk retained may be underestimated resulting in an inadequate capital allocation. Secondly, the credit risk transferred may be overestimated resulting in additional risk-based transfer costs. © 2008 Elsevier Inc. All rights reserved.
Walker, S & Partington, G 2009, 'A market valuation for Optus pre-listing: a case note', Accounting Research Journal, vol. 13, no. 2, pp. 90-94.
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Predicting the price at which a stock will first list on a stock exchange is not an easy task. In this paper we present a market valuation of Optus based on data available before the listing date. As a by-product of our analysis we provide a method of valuing some non-renounceable rights issues. The valuation of Optus is based on the price behaviour of shares in Mayne Nickless. A large tranche of the Optus shares were to be made available through a non-renounceable e~titlement offer to shareholders in Mayne NIckless. In principle, by observing the exentitlement price drop on Mayne Nickless shares, an estimate can be made of the value of Optus. In reality there are complications in this approach. For example, Mayne Nickless went ex-dividend and ex-entitlement on the same day. We overcome these problems by utilising price differences from concurrent trading in Mayne Nickless shares, ex-dividend/exentitlement, and ex-dividend/cum-entitlement.
Bruti-Liberati, N, Sklibosios Nikitopoulos, C, Platen, E & Schlogl, E 1970, 'Alternative Defaultable Term Structure Models', Quantitative Finance Research Centre Research Paper, X Workshop on Quantitative Finance to the Memory of Nicola Bruti-Liberati, Milan, Italy.
Casavecchia, L & Hulley, H 1970, 'The fee-performance relationship does not demand unsophisticated investors', Seminar Presentation, University of Queensland Business School, Brisbane, Australia.
Fernandez, L & Michayluk, D 1970, 'Are short sellers really informed?', Northern Finance Association Annual Meeting, Niagra-on-the-Lake, Canada.
Glover, K 1970, 'Path dependent British options', Seminar Presentation, School of Finance and Economics, University of Technology, Sydney, Sydney, Australia.
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We examine the British payoff mechanism (introduced in Peskir and Samee, 2008) in the context of path dependent options. In particular, we focus on the âBritish Asianâ and the âBritish Russianâ option. Such options provide their holder with an endogenous protection against unfavourable stock price movements. The price of such options can be characterised as the unique solution to a parabolic free-boundary problem, whose properties and solution we investigate. Finally, we provide a preliminary financial analysis of both options and conclude that in many circumstances these options can be considered an attractive alternative to existing path dependent options.
Glover, K 1970, 'Path dependent British options', Quantitative Methods in Finance 2009 Conference, Sydney, Australia.
Glover, K, Peskir, G & Samee, F 1970, 'Path dependent British options', PDEs and Mathematical Finance III Conference, Stockholm, Sweden.
Glover, K, Peskir, G & Samee, F 1970, 'Path dependent British options', Optimal Stopping with Applications Symposium, Turku, Finland.
Glover, K, Peskir, G & Samee, F 1970, 'Path dependent British options', Seminar Presentation, Nottingham University Business School, Nottingham, UK.
Hambusch, G 1970, 'Intertemporal effects of capital requirements on risk taking behaviour of banks', European Financial Management Association Conference, Milan, Italy.
Hambusch, G 1970, 'Intertemporal effects of capital requirements on risk taking behaviour of banks', 27th Australasian Economic Theory Workshop, Auckland, New Zealand.
Hambusch, G 1970, 'Optimal management of mean reverting losses', Quantitative Methods in Finance 2009 Conference, Sydney, Australia.
Hambusch, G, Shaffer, S & Finnoff, D 1970, 'Intertemportal effects of capital requirements on risk taking behavior of banks', Seminar Presentation, Centre for Macroeconomic Analysis, Australian National University, Canberra, Australia.
Michayluk, D & Van de Venter, G 1970, 'Does financial risk tolerance change over time?', Seminar Presentation, University of Virginia, Charlottesville, USA.
Professor Ronald Geoffrey Bird, R 1970, 'How do investors react under uncertainty?', Paul Woolley Centre for Capital Market Dysfunctionality 2009 Annual Conference, Sydney, Australia.
Thorp, SJ, Hulley, H, McKibbin, R & Pedersen, A 1970, 'Means-tested income support, portfolio choice and decumulation in retirement', 17th Australian Colloquium of Superannuation Researchers, Sydney, Australia.
Thorp, SJ, Hulley, H, McKibbin, R & Pedersen, A 1970, 'Means-tested income support, portfolio choice and decumulation in retirement', Seminar Presentation, School of Economics, Australian National University, Canberra, Australia.
Bruti Liberati, N, Nikitopoulos Sklibosios, C, Platen, E & Schlogl, E 2009, 'Alternative Defaultable Term Structure Models', Quantitative Finance Research Paper Series.
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The objective of this paper is to consider defaultable term structure models in a general setting beyond standard risk-neutral models. Using as numeraire the growth optimal portfolio, defaultable interest rate derivatives are priced under the real-world probability measure. Therefore, the existence of an equivalent risk-neutral probability measure is not required. In particular, the real-world dynamics of the instantaneous defaultable forward rates under a jump-diffusion extension of a HJM type framework are derived. Thus, by establishing a modelling framework fully under the real-world probability measure, the challenge of reconciling real-world and risk-neutral probabilities of default is deliberately avoided, which provides significant extra modelling freedom. In addition, for certain volatility specifications, finite dimensional Markovian defaultable term structure models are derived. The paper also demonstrates an alternative defaultable term structure model. It provides tractable expressions for the prices of defaultable derivatives under the assumption of independence between the discounted growth optimal portfolio and the default-adjusted short rate. These expressions are then used in a more general model as control variates for Monte Carlo simulations of credit derivatives.
Glover, K, Peskir, G & Samee, F 2009, 'The British Asian Option', Quantitative Finance Research Centre, University of Technology, Sydney.
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Research Paper Number: 249 Abstract: Following the economic rationale of [7] and [8] we present a new class of Asian options where the holder enjoys the early exercise feature of American options whereupon his payoff (deliverable immediately) is the âbest predictionâ of the European payoff under the hypothesis that the true drift of the stock price equals a contract drift. Inherent in this is a protection feature which is key to the British Asian option. Should the option holder believe the true drift of the stock price to be unfavourable (based upon the observed price movements) he can substitute the true drift with the contract drift and minimise his losses. The practical implications of this protection feature are most remarkable as not only is the option holder afforded a unique protection against unfavourable stock price movements (covering the ability to sell in a liquid market completely endogenously) but also when the stock price movements are favourable he will generally receive high returns. We derive a closed form expression for the arbitrage-free price in terms of the rational exercise boundary and show that the rational exercise boundary itself can be characterised as the unique solution to a nonlinear integral equation. Using these results we perform a financial analysis of the British Asian option that leads to the conclusions above and shows that with the contract drift properly selected the British Asian option becomes a very attractive alternative to the classic (European) Asian option.
Thorp, SJ, Hulley, H, McKibbin, R & Pedersen, A 2009, 'Means-tested income support, portfolio choice and decumulation in retirement', Working Paper Series, Centre for Applied Macroeconomic Analysis.
Thorp, SJ, Hulley, H, McKibbin, R & Pedersen, A 2009, 'Means-tested income support, portfolio choice and decumulation in retirement', Research Paper Series, Quantitative Finance Research Centre, University of Technology, Sydney.
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Research Paper Number: 248 Abstract: We investigate the impact of means tested public income transfers on post-retirement decumulation and portfolio choice using theoretical simulations and panel data on Australian Age Pensioners. Means tested public pension payments in Australia have broad coverage and give insight into the incentive responsiveness of well-o¤, as well as poorer households. Via numerical solutions to a discrete time, fi?nite horizon dynamic programming problem, we simulate the optimal consumption and portfolio allocation strategies for a retired household subject to assets and income tests. Relative to benchmark, means tested households should optimally decumulate faster early in retirement, and choose more risky portfolios. Panel data tests on inferred wealth for pensioner households show evidence of more rapid spending early in retirement. However they also show that better-o¤ households continue to accumulate, even when facing a steeper implicit tax rate on wealth than applies to poorer households. Wealthier households also hold riskier portfolios. Results from tests for Lorenz dominance of the panel wealth distribution show no decrease in wealth inequality over the ?five years of the study.
