scholarly journals Portfolio selection with transaction costs and default risk

2017 ◽  
Vol 43 (2) ◽  
pp. 231-241 ◽  
Author(s):  
Giovanni Walter Puopolo
Keyword(s):  
Transaction Costs ◽  
Asset Allocation ◽  
Default Risk ◽  
Order Effect ◽  
Investment Model ◽  
Risky Asset ◽  
Liquidity Premium ◽  
Content Type ◽  
First Order ◽  
Order Of Magnitude

Purpose The purpose of this paper is to investigate the effect of default risk and transaction costs on the investor’s asset allocation and the liquidity premium. More precisely, it aims at answering the following question: can default risk generate a first-order effect on the investor’s asset allocation and a liquidity premium of the same order of magnitude as transaction costs? Design/methodology/approach The author proposes a very simple consumption-investment model in which an infinitely lived investor allocates her wealth between a risky asset and a riskless security, and incurs in proportional transaction costs when exchanging them. In addition, the risky asset may default at some random time, thus reducing the available wealth of the agent. Two different scenarios of default risk are considered. In the total default scenario, the value of the risky asset drops to zero when default occurs, whereas, in the partial default case, the proceeds from the liquidation of the risky asset amount to 50 percent of its value. Findings The paper shows that default risk can generate a first-order effect on the investor’s asset allocation. On the contrary, the liquidity premium is one order of magnitude smaller than the transaction costs, implying that the additional source of risk determined by the possibility of default is not able to generate a first-order effect on asset pricing. Originality/value To the author knowledge, this is the first paper that investigates the interaction of default risk and transaction costs on the investor’s asset allocation and its effects on the liquidity premium.

Liquidity premium and the Corwin-Schultz bid-ask spread estimate

2014 ◽  
Vol 4 (2) ◽  
pp. 168-186 ◽  
Author(s):  
Xindong Zhang ◽  
Junxian Yang ◽  
Huimin Su ◽  
Shun Zhang
Keyword(s):  
Asset Pricing ◽  
Transaction Costs ◽  
Price Impact ◽  
Current Debate ◽  
Liquidity Premium ◽  
Cross Sectional ◽  
Content Type ◽  
Bid Ask Spread ◽  
Academic Researchers ◽  
Liquidity Measures

Purpose – The purpose of this paper is to explore the price implication of a newly developed estimator of the bid-ask spread by Corwin and Schultz (2012). The paper focusses on whether the new measure as a liquidity proxy commands a significant premium. The research helps the understanding on the validity of the Corwin-Schultz estimate as a liquidity measure. Design/methodology/approach – The authors carry out their examination based on the portfolio approach, cross-sectional regressions, and time-series regressions. For comparison, the authors also adopt other three liquidity proxies and mainly rely on the Fama-French three-factor model as the benchmark. The sample includes NYSE/AMEX/ARCA/NASDAQ ordinary common stocks over 1926-2010. Findings – The paper finds that Corwin-Schultz spread lacks significant power to predict returns either in the pre- or post-1963 period. In contrast, other liquidity measures such as the price impact of Amihud (2002), trading discontinuity of Liu (2006), and turnover show stronger return predictability than the Corwin-Schultz spread estimate. Research limitations/implications – The evidence indicates the limited ability of the Corwin-Schultz spread estimate to describe liquidity. Practical implications – The comparison of the Corwin-Schultz spread with other liquidity measures helps practitioners and academic researchers to identify the appropriate proxy. Originality/value – This paper, for the first time, provides a thorough assessment of the Corwin-Schultz spread estimate as a liquidity proxy, which distinguish from Corwin and Schultz (2012) who focus on whether their spread estimate measures transaction costs. Our study not only helps practitioners and academic researchers to select an adequate liquidity measure and an asset pricing model to use, but it also sheds light on the current debate about whether transaction costs have the first order importance in asset pricing.

scholarly journals Dectin-2-Targeted Antifungal Liposomes Exhibit Enhanced Efficacy

mSphere ◽  
2019 ◽  
Vol 4 (5) ◽  
Author(s):  
Suresh Ambati ◽  
Emma C. Ellis ◽  
Jianfeng Lin ◽  
Xiaorong Lin ◽  
Zachary A. Lewis ◽  
...  
Keyword(s):  
Candida Albicans ◽  
Aspergillus Fumigatus ◽  
Effective Dose ◽  
Cryptococcus Neoformans ◽  
Amphotericin B ◽  
Antifungal Drugs ◽  
Extracellular Matrices ◽  
Content Type ◽  
Order Of Magnitude ◽  
Life Threatening

ABSTRACT Candida albicans, Cryptococcus neoformans, and Aspergillus fumigatus cause life-threatening candidiasis, cryptococcosis, and aspergillosis, resulting in several hundred thousand deaths annually. The patients at the greatest risk of developing these life-threatening invasive fungal infections have weakened immune systems. The vulnerable population is increasing due to rising numbers of immunocompromised individuals as a result of HIV infection or immunosuppressed individuals receiving anticancer therapies and/or stem cell or organ transplants. While patients are treated with antifungals such as amphotericin B, all antifungals have serious limitations due to lack of sufficient fungicidal effect and/or host toxicity. Even with treatment, 1-year survival rates are low. We explored methods of increasing drug effectiveness by designing fungicide-loaded liposomes specifically targeted to fungal cells. Most pathogenic fungi are encased in cell walls and exopolysaccharide matrices rich in mannans. Dectin-2 is a mammalian innate immune membrane receptor that binds as a dimer to mannans and signals fungal infection. We coated amphotericin-loaded liposomes with monomers of Dectin-2’s mannan-binding domain, sDectin-2. sDectin monomers were free to float in the lipid membrane and form dimers that bind mannan substrates. sDectin-2-coated liposomes bound orders of magnitude more efficiently to the extracellular matrices of several developmental stages of C. albicans, C. neoformans, and A. fumigatus than untargeted control liposomes. Dectin-2-coated amphotericin B-loaded liposomes reduced the growth and viability of all three species more than an order of magnitude more efficiently than untargeted control liposomes and dramatically decreased the effective dose. Future efforts focus on examining pan-antifungal targeted liposomal drugs in animal models of fungal diseases. IMPORTANCE Invasive fungal diseases caused by Candida albicans, Cryptococcus neoformans, and Aspergillus fumigatus have mortality rates ranging from 10 to 95%. Individual patient costs may exceed $100,000 in the United States. All antifungals in current use have serious limitations due to host toxicity and/or insufficient fungal cell killing that results in recurrent infections. Few new antifungal drugs have been introduced in the last 2 decades. Hence, there is a critical need for improved antifungal therapeutics. By targeting antifungal-loaded liposomes to α-mannans in the extracellular matrices secreted by these fungi, we dramatically reduced the effective dose of drug. Dectin-2-coated liposomes loaded with amphotericin B bound 50- to 150-fold more strongly to C. albicans, C. neoformans, and A. fumigatus than untargeted liposomes and killed these fungi more than an order of magnitude more efficiently. Targeting drug-loaded liposomes specifically to fungal cells has the potential to greatly enhance the efficacy of most antifungal drugs.

Interpretation of Electron Transfer Spectra of Iridium (IV) and Osmium(IV) Mixed Chloro-Bromo Complexes

1967 ◽  
Vol 22 (6) ◽  
pp. 945-954 ◽  
Author(s):  
Chr. Klixbüll Jørgensen ◽  
W. Preetz
Keyword(s):  
Electron Transfer ◽  
Faraday Effect ◽  
Spin Orbit Coupling ◽  
Spin Orbit ◽  
University Of Virginia ◽  
First Order ◽  
Order Of Magnitude ◽  
Moderate Difference ◽  
The University ◽  
As If

The previous M.O. treatment of unsubstituted hexahalides has been modified, taking the results on Faraday effect obtained at the University of Virginia into account. The absorption spectra previously measured of the complexes (M=Os, Ir) trans-MCl4Br2— and trans-MCl2 Br4— are interpreted by a M.O. treatment for the symmetry D4h as electron transfer transitions, including a first-order relativistic (spin-orbit coupling) correction. The concept of holohedrized symmetry is sufficiently valid to allow a description of MCl5Br— and MClBr5— as if they were tetragonal with centre of inversion and ƒac-(or cis-)MCl3Br3— as if they were cubic. It is shown that the ligand-ligand antibonding effects have the same order of magnitude as the moderate difference in optical electronegativity between Cl- and Br-.

Portfolio revision and optimal diversification strategy choices

2014 ◽  
Vol 10 (4) ◽  
pp. 537-564
Author(s):  
Mourad Mroua ◽  
Fathi Abid
Keyword(s):  
Transaction Costs ◽  
Tracking Error ◽  
Investment Strategy ◽  
Selection Strategy ◽  
Revision Procedure ◽  
Content Type ◽  
Efficient Frontiers ◽  
Statistical Inferences ◽  
Diversification Strategies ◽  
International Portfolios

Purpose – Since equity markets have a dynamic nature, the purpose of this paper is to investigate the performance of a revision procedure for domestic and international portfolios, and provides an empirical selection strategy for optimal diversification from an American investor's point of view. This paper considers the impact of estimation errors on the optimization processes in financial portfolios. Design/methodology/approach – This paper introduces the concept of portfolio resampling using Monte Carlo method. Statistical inferences methodology is applied to construct the sample acceptance regions and confidence regions for the resampled portfolios needing revision. Tracking error variance minimization (TEVM) problem is used to define the tracking error efficient frontiers (TEEF) referring to Roll (1992). This paper employs a computation method of the periodical after revision return performance level of the dynamic diversification strategies considering the transaction cost. Findings – The main finding is that the global portfolio diversification benefits exist for the domestic investors, in both the mean-variance and tracking error analysis. Through TEEF, the dynamic analysis indicates that domestic dynamic diversification outperforms international major and emerging diversification strategies. Portfolio revision appears to be of no systematic benefit. Depending on the revision of the weights of the assets in the portfolio and the transaction costs, the revision policy can negatively affect the performance of an investment strategy. Considering the transaction costs of portfolios revision, the results of the return performance computation suggest the dominance of the global and the international emerging markets diversification over all other strategies. Finally, an assessment between the return and the cost of the portfolios revision strategy is necessary. Originality/value – The innovation of this paper is to introduce a new concept of the dynamic portfolio management by considering the transaction costs. This paper investigates the performance of a revision procedure for domestic and international portfolios and provides an empirical selection strategy for optimal diversification. The originality of the idea consists on the application of a new statistical inferences methodology to define portfolios needing revision and the use of the TEVM algorithm to define the tracking error dynamic efficient frontiers.

scholarly journals UTILITY MAXIMIZATION IN A BINOMIAL MODEL WITH TRANSACTION COSTS: A DUALITY APPROACH BASED ON THE SHADOW PRICE PROCESS

2014 ◽  
Vol 17 (04) ◽  
pp. 1450022 ◽  
Author(s):  
CHRISTIAN BAYER ◽  
BEZIRGEN VELIYEV
Keyword(s):  
Growth Rate ◽  
Asymptotic Expansion ◽  
Transaction Costs ◽  
Continuous Time ◽  
Shadow Price ◽  
Optimal Growth ◽  
Order Effect ◽  
Explicit Construction ◽  
Binomial Model ◽  
Price Process

We consider the problem of optimizing the expected logarithmic utility of the value of a portfolio in a binomial model with proportional transaction costs with a long time horizon. By duality methods, we can find expressions for the boundaries of the no-trade-region and the asymptotic optimal growth rate, which can be made explicit for small transaction costs (in the sense of an asymptotic expansion). Here we find that, contrary to the classical results in continuous time, see Janeček and Shreve (2004), Finance and Stochastics8, 181–206, the size of the no-trade-region as well as the asymptotic growth rate depend analytically on the level λ of transaction costs, implying a linear first-order effect of perturbations of (small) transaction costs, in contrast to effects of orders λ1/3 and λ2/3, respectively, as in continuous time models. Following the recent study by Gerhold et al. (2013), Finance and Stochastics17, 325–354, we obtain the asymptotic expansion by an almost explicit construction of the shadow price process.

Conditional stock liquidity premium: is Warsaw stock exchange different?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Szymon Stereńczak
Keyword(s):  
Emerging Markets ◽  
Stock Returns ◽  
Stock Exchange ◽  
Emerging Market ◽  
Market Liquidity ◽  
Investment Horizon ◽  
Liquidity Premium ◽  
Stock Liquidity ◽  
Content Type ◽  
Bear Market

Purpose This paper aims to empirically indicate the factors influencing stock liquidity premium (i.e. the relationship between liquidity and stock returns) in one of the leading European emerging markets, namely, the Polish one. Design/methodology/approach Various firms’ characteristics and market states are analysed as potentially affecting liquidity premiums in the Polish stock market. Stock returns are regressed on liquidity measures and panel models are used. Liquidity premium has been estimated in various subsamples. Findings The findings vividly contradict the common sense that liquidity premium raises during the periods of stress. Liquidity premium does not increase during bear markets, as investors lengthen the investment horizon when market liquidity decreases. Liquidity premium varies with the firm’s size, book-to-market value and stock risk, but these patterns seem to vanish during a bear market. Originality/value This is one of the first empirical papers considering conditional stock liquidity premium in an emerging market. Using a unique methodological design it is presented that liquidity premium in emerging markets behaves differently than in developed markets.

Angola mounting debt burden raises future default risk

2021 ◽  
Keyword(s):  
World Bank ◽  
Default Risk ◽  
Content Type ◽  
Currency Depreciation ◽  
Debt Burden ◽  
The World Bank ◽  
High Inflation ◽  
African Development Bank ◽  
Central Bank Autonomy ◽  
Domestic Banks

Significance The IMF's willingness to turn a blind eye may enable Angola to retain access to concessional finance over the next 18 months; however, Luanda needs a plan to address deferred principal payments and recapitalise a key escrow account in 2023. Impacts The IMF's latest funding review will unlock USD500mn from the World Bank and USD200mn from the African Development Bank. Persistent IMF pressure for greater central bank autonomy will help curb inflation, which recently reached 25%, pending new legislation. Domestic banks remain vulnerable to economic shocks amid a lengthy recession, persistent high inflation and continued currency depreciation.

Merton-type default risk and financial performance: the dynamic panel moderation of firm size

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Mushafiq ◽  
Syed Ahmad Sami ◽  
Muhammad Khalid Sohail ◽  
Muzammal Ilyas Sindhu
Keyword(s):  
Financial Performance ◽  
Firm Size ◽  
Default Risk ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Dynamic Panel Data ◽  
Dynamic Panel ◽  
Content Type ◽  
Nonfinancial Firms ◽  
The Relationship

PurposeThe main purpose of this study is to evaluate the probability of default and examine the relationship between default risk and financial performance, with dynamic panel moderation of firm size.Design/methodology/approachThis study utilizes a total of 1,500 firm-year observations from 2013 to 2018 using dynamic panel data approach of generalized method of moments to test the relationship between default risk and financial performance with the moderation effect of the firm size.FindingsThis study establishes the findings that default risk significantly impacts the financial performance. The relationship between distance-to-default (DD) and financial performance is positive, which means the relationship of the independent and dependent variable is inverse. Moreover, this study finds that the firm size is a significant positive moderator between DD and financial performance.Practical implicationsThis study provides new and useful insight into the literature on the relationship between default risk and financial performance. The results of this study provide investors and businesses related to nonfinancial firms in the Pakistan Stock Exchange (PSX) with significant default risk's impact on performance. This study finds, on average, the default probability in KSE ALL indexed companies is 6.12%.Originality/valueThe evidence of the default risk and financial performance on samples of nonfinancial firms has been minimal; mainly, it has been limited to the banking sector. Moreover, the existing studies have only catered the direct effect of only. This study fills that gap and evaluates this relationship in nonfinancial firms. This study also helps in the evaluation of Merton model's performance in the nonfinancial firms.

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