Department of Finance (FI) Emner "kep"
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Er Nørbyrapportens anbefalinger til gavn for aktionærerne?Rose, Caspar (København, 2004)[Flere oplysninger][Færre oplysninger]
Resume: Abstract: This article presents an empirical analysis of board composition and financial performance using a unique sample of Danish listed firms. In 2002, a group consisting of four prominent business leaders formulated Denmark’s own code of good corporate governance, entitled the Nørby report, The report consists of various recommendations aiming at strengthen Danish firms competitiveness and value creation including some specific recommendations concerning board composition. However, the analysis shows that none of the recommendations impact Tobin’s Q. Specifically, board size, proportion of insiders, positions held by board members in other firms do not significantly impact Tobin’s Q. The analysis only finds that the average age of the board has a significantly negative impact on performance. Board diversity, measured by the fraction of women and foreigners in boards as well as the educational background of board members does not impact performance either. URI: http://hdl.handle.net/10398/7138 Filer i denne post: 1
endeligt_wp_2004_2.pdf (675.6Kb) 
evidence from the copenhagen stock exchangeVoetmann, Torben (København, 2000)[Flere oplysninger][Færre oplysninger]

Sørensen, Carsten; Trolle, Anders Bjerre (København, 2004)[Flere oplysninger][Færre oplysninger]
Resume: We derive an explicit solution to the portfolio problem of a power utility investor with preferences for wealth at a ¯nite investment horizon. The investor can invest in assets with return dynamics described as part of a general multivariate model. The modeling framework encompasses discretetime VARmodels where some of the statevariables (e.g. expected excess returns) may not be directly observable. A realistic multivariate model is estimated and applied to analyze the portfolio implications of investment horizon and return predictability when real interest rates and expected excess returns on stock and bonds are not directly observed but must be estimated as part of the problem faced by the investor. The solution exhibits small variability in portfolio allocations over time compared to the case when excess returns are assumed observable. JEL Classification: G11 Keywords: Portfolio choice, predictability, VAR, unobserved statevariables, hedging demands URI: http://hdl.handle.net/10398/7151 Filer i denne post: 1
endeligt_wp_2004_8_030105.pdf (427.9Kb) 
Lyse Hansen, Thomas; Astrup Jensen, Bjarne (København, 2004)[Flere oplysninger][Færre oplysninger]
Resume: It is a delicate matter to trade spot products and financial derivatives in energy markets. Op posite to bond and stock markets, the underlying assets are real products and a significant part of the demand for them represents a real need for the products, which can only be substituted away with some difficulties or, in some cases, only in a prohibitively costly manner. This is particularly true in the spot market, where the demand is almost always met, but where the spot price processes can be quite different from the spot price processes conventionally used in the pricing of derivatives. This pattern of real demand is also the main reason for the existence of the wellknown convenience yield in energy markets. URI: http://hdl.handle.net/10398/7185 Filer i denne post: 1
endeligt_wp__2004_10_.pdf (365.3Kb) 
Raahauge, Peter (København, 2004)[Flere oplysninger][Færre oplysninger]
Resume: Kinks and jumps in the payoff function of option contracts prevent an effective implementation of higherorder numerical approximation methods. Moreover, the derivatives (the greeks) are not easily determined around such singularities, even with standard lowerorder methods. This paper suggests a transformation to turn the original illconditioned pricing problem into a wellbehaved numerical problem. For a standard test case, both vanilla and binary call price functions are approximated with (tensor) Bsplines of up to 10’th order. Polynomial convergence rates of orders up to approximately 10 are obtained for prices as well as for first and second order derivatives (delta and gamma). Unlike similar studies, numerical approximation errors are measured both as weighted averages and in the supnorm over a state space including timetomaturities down to a split second. KEYWORDS: Numerical option pricing, Transformed state spaces, Higherorder Bsplines. URI: http://hdl.handle.net/10398/7157 Filer i denne post: 1
2004_5.pdf (467.4Kb) 
Christensen, Bent Jesper; Raahauge, Peter (København, 2004)[Flere oplysninger][Færre oplysninger]
Resume: We consider a random utility extension of the fundamental Lucas (1978) equilibrium asset pricing model. The resulting structural model leads naturally to a likelihood function. We estimate the model using U.S. asset market data from 1871 to 2000, using both dividends and earnings as state variables. We find that current dividends do not forecast future utility shocks, whereas current utility shocks do forecast future dividends. The estimated structural model produces a sequence of predicted utility shocks which provide better forecasts of future longhorizon stock market returns than the classical dividendprice ratio. KEYWORDS: Randomutility, asset pricing, maximumlikelihood, structuralmodel, return predictability URI: http://hdl.handle.net/10398/7135 Filer i denne post: 1
endeligt_wp_peter_raahauge_2004_7.pdf (270.6Kb) 
Holst, Anders; Nalholm, Morten (København, 2004)[Flere oplysninger][Færre oplysninger]
Resume: In this paper an investigation of the pricing of callable annuities with interestonly (IO) optionality is conducted. First the IO optionality feature of callable annuities is introduced. Next an algorithm for pricing callable annuities with IO optionality using the finite difference methodology, is formulated. This is then used to investigate optimal strategies of IO bonds and impacts on prices from the IO optionality. It is found that the IO feature necessitates a simultaneous valuation of all elements of the callable IO bond. Following this, the Greeks of the IO bond are investigated. It is found that they are affected by the IO feature, but only to a limited extent. Finally, a model of heterogenous prepayment decisions is incorporated into the framework. The model is extended to model heterogeneity in the IO exercise decisions. The incorporation of heterogeneity in borrower decisions is found to lead to reasonable causalities. URI: http://hdl.handle.net/10398/7149 Filer i denne post: 1

Astrup Jensen, Bjarne (København, 2004)[Flere oplysninger][Færre oplysninger]
Resume: We describe the background and the basic funding mechanisms for the type of adjustable rate mortgage loans that were introduced in the Danish market in 1996. Each loan is funded separately by tap issuing passthrough mortgage bonds ("strict balance principle"). The novelty is a funding mechanism that uses a rollover strategy, where long term loans are funded by sequentially issuing short term passthrough bonds, and the first issuer of these loans obtained a patent on the funding principles in 1999. Publicly available descriptions of the principles leave an impression of very complicated numerical algorithms. The algorithms described here show that the essentials can be reduced to a "back of an envelope" complexity. Keywords: Adjustable rate mortgages, balance principle, patent, yield curve riding URI: http://hdl.handle.net/10398/7173 Filer i denne post: 1
endeligt_wp_2004_11.pdf (244.1Kb) 
Lando, David; Mortensen, Allan (København, 2004)[Flere oplysninger][Færre oplysninger]
Resume: This paper investigates the pricing of stepup bonds, i.e. corporate bonds with provisions stating that the coupon payments increase as the credit rating level of the issuer declines. To assess the riskneutral rating transition probabilities necessary to price these bonds, we introduce a new calibration method within the reducedform ratingbased model of Jarrow, Lando, and Turnbull (1997). We also treat split ratings and adjust for rating outlook. Stepup bonds have been issued in large amounts in the European telecom sector, and we find that, through most of the sample, stepup bonds issued by the two largest issuers have traded at a discount relative to comparable fixedcoupon bonds from the same issuers. Our findings cannot be attributed to traditional liquidity factors, and they suggest that issuing stepup bonds increased the cost of capital for the issuers. Keywords: defaultable bonds, stepup coupons, ratingbased models JEL classification: G12, G13 URI: http://hdl.handle.net/10398/7184 Filer i denne post: 1
endeligt_wp_20049.pdf (412.0Kb) 
Raahauge, Peter (København, 2004)[Flere oplysninger][Færre oplysninger]
Resume: This paper suggests a method for determining rigorous upper bounds on approximation errors of numerical solutions to infinite horizon dynamic programming models. Bounds are provided for approximations of the value function and the policy function as well as the derivatives of the value function. The bounds apply to more general problems than existing bounding methods do. For instance, since strict concavity is not required, linear models and piecewise linear approximations can be dealt with. Despite the generality, the bounds perform well in comparison with existing methods even when applied to approximations of a standard (strictly concave) growth model. KEYWORDS: Numerical approximation errors, Bellman contractions, Error bounds URI: http://hdl.handle.net/10398/7171 Filer i denne post: 1
2004_4.pdf (385.2Kb)
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