consistent modeling of s p 500 and vix derivatives abstract this study introduces a model that identifies relationships between stylized features on s p 500 vix and derivatives on vix the paper considers a specification with discontinuous correlated jumps in stock prices and stock price volatility with state dependent arrival intensity and examines how these factors impact vix option pricing and hedging the paper finds strong evidence for jumps in volatility and jumps in returns implicit in vix option data

corruption and government size a disaggregated analysis using annual state level data over 1983 1987 this paper examines the effect of government size on corruption by public officials by including both demand and supply side incentives for engaging in corrupt practices our objectives are twofold first we assess the relationship between the incidence of corruption and overall measures of the size of the federal government and the state local sector in each state second we explore what kinds of government activities are more likely to be successful in deterring abuse of public office our results are generally supportive of becker s crime and punishment model regarding the primary focus of the paper our results show that government size in particular spending by state governments does indeed have a strong positive influence on corruption

reassessing the empirical relationship between the oil price and the dollar abstract this paper aims at reassessing the empirical relationship between the real price of oil and the u s dollar real effective exchange rate over the 1974 2015 period we find that changes in both variables are now linked by a negative relationship going from the dollar exchange rate to the real oil price however the same relationship is found positive when ending the sample in the mid 2000s in line with the previous literature to understand and investigate this evolution we rely on a nonlinear smooth transition regression model in which the oil price dollar nexus depends on the dynamics followed by the u s currency our results show that the relationship is negative most of the times but turns positive when the dollar hits very high values as in the early eighties

the role of wages and auditing during a crackdown on corruption in the city of buenos aires abstract we study the prices paid for basic inputs during a crackdown on corruption in the public hospitals of the city of buenos aires argentina during 1996 97 we find a well defined negative effect on the measures used to capture corruption prices paid by hospitals for basic homogeneous inputs decrease by 15 percent during the first 9 months of the crackdown after this period prices increase but they are still 10 percent lower than those prevailing before the crackdown relative to the precrackdown period higher wages play no role in inducing lower input prices when audit intensity can be expected to be maximal during the first phase of the crackdown but have a negative and well defined effect when audit intensity takes intermediate levels the last phase of the crackdown controlling for fixed effects we find that the wage elasticity of input prices exceeds 20 these results are consistent with the standard model of bribes of gary becker and george stigler

on the risk spillover across the oil market stock market and the oil related cds sectors a volatility impulse response approach abstract compared to credit default swap cds literature this study focuses on the magnitude of volatility transmission and the risk spillover mechanism across the oil market financial market risks and the oil related cds sectors our dataset includes futures prices of west texas intermediate wti and seven different measures of markets and credit risks four of the vast risk measures are the oil related cdss for auto chemicals natural gas and utility sectors in addition three measures of the financial market risk the one month expected equity volatility measured by vix move and smove are included the daily dataset covers the period from 6 january 2004 to 2 february 2016 the volatility transmission mechanism across the oil and financial markets and cds sectors is examined using the volatility impulse response model we evaluate the risk transmission due to several recent crisis shocks around the world and the results show complicated transmission mechanisms that spread over long periods among these events the lehman brothers bankruptcy has destabilizing effects on all oil related sectors findings also show that all oil market related shocks have significant risk transmission effects

the impact of the corporate income tax evidence from state organizational form data abstract by taxing the income of corporate firms at a different rate than non corporate firms taxes can play an important role in a firm s choice of organizational form the sensitivity of the organizational form decision to tax rates provides a key indicator of the distortion created by the corporate income tax this paper uses new cross sectional data on organizational form choices across states compiled in the census of retail trade to estimate this sensitivity the results document a significant impact of the relative taxation of corporate to personal income on the share of real economic activity that is done by corporations and that the impact is many times larger than has been found in the previous empirical literature based on time series data the results show little impact however on the actual operations of firms such as their labor intensity wages and the like they do indicate that firms are able to exploit the progressivity of the corporate income tax system by dividing into numerous firms

a theory of collective reputations with applications to the persistence of corruption and to firm quality the paper is a first attempt at modelling the idea of group reputation as an aggregate of individual reputations a member s current incentives are affected by his past behaviour and because his track record is observed only with noise by the group s past behaviour as well the paper thus studies the joint dynamics of individual and collective reputations and derives the existence of stereotypes from history dependence rather than from a multiplicity of equilibria or from the existence of a common trait as is usually done in the literature it shows that new members of an organization may suffer from an original sin of their elders long after the latter are gone and it derives necessary and sufficient conditions under which group reputations can be rebuilt last the paper applies the theory to analyse when a large firm can maintain a reputation for quality 1 collective reputations collective reputations play an important role in economics and the social sciences countries ethnic racial or religious groups are known to be hard working honest corrupt hospitable or belligerent some firms enjoy substantial rents from their reputations for producing high quality products some departments are reported to treat their faculty or students fairly the paper is a first attempt at modelling the idea of group reputation as an aggregate of individual reputations a member s current incentives are affected by her past behaviour and because her track record is observed only with noise by the group s past behaviour as well the paper studies the joint dynamics of individual and collective reputations in a model in which current generations are progressively replaced by new ones and derives the existence of stereotypes from history dependence rather than from a multiplicity of equilibria or from the existence of a common trait as is usually done in the literature see section 2 for a detailed comparison with the literature it shows that new members of an organization may suffer from an original sin of their elders long after the latter are gone and it derives necessary and sufficient conditions under which group reputations can be rebuilt last the paper applies the theory to analyse when a large firm can maintain a reputation for quality let us spell out the building blocks of our theory in more detail a a group s reputation is only as good as that of its members each member is characterized by individual traits such as talent diligence or honesty past individual behaviour conveys information about these traits and generates individual reputations

an equilibrium queuing model of bribery it is sometimes argued that bribery is inefficient because bureaucrats may cause delays for attracting more bribes this hypothesis is examined in the context of a queue where customers having different values of time are ranked by their bribe payments to the queue s server the nash equilibrium strategies of the customers are derived it is shown that the server is unlikely to slow down the allocation process when bribery is allowed the model does not have stringent informational requirements and the equilibrium outcome minimizes the average value of time costs of the queue it also suggests a useful auctioning procedure

high corruption income in ming and qing china abstract we develop an economic model that explains historical data on government corruption in ming and qing china in our model officials extensive powers result in corrupt income matching land s share in output we estimate corrupt income to be between 14 and 22 times official income resulting in about 22 of agricultural output accruing to 0 4 of the population the results suggest that eliminating corruption through salary reform was possible in early ming but impossible by mid qing rule land reform may also be ineffective because officials could extract the same rents regardless of ownership high officials incomes and the resulting inequality may have also created distortions and barriers to change that could have contributed to china s stagnation over the five centuries 1400 1900s

roughing it up including jump components in the measurement modeling and forecasting of return volatility a rapidly growing literature has documented important improvements in financial return volatility measurement and forecasting via use of realized variation measures constructed from high frequency returns coupled with simple modeling procedures building on recent theoretical results in barndorff nielsen and shephard 2004a 2005 for related bi power variation measures the present paper provides a practical and robust framework for non parametrically measuring the jump component in asset return volatility in an application to the dm exchange rate the s p500 market index and the 30 year u s treasury bond yield we find that jumps are both highly prevalent and distinctly less persistent than the continuous sample path variation process moreover many jumps appear directly associated with specific macroeconomic news announcements separating jump from non jump movements in a simple but sophisticated volatility forecasting model we find that almost all of the predictability in daily weekly and monthly return volatilities comes from the non jump component our results thus set the stage for a number of interesting future econometric developments and important financial applications by separately modeling forecasting and pricing the continuous and jump components of the total return variation process

corruption in russia abstractwe analyze the determinants of corruption in russia using law enforcement data on corruption incidents for a panel of 79 russian regions for the period 2004 13 we find that the relative salaries of bureaucrats determine corruption levels corruption declines as relative salaries rise yet at strongly diminishing rates furthermore we show that even very limited media freedom helps to curtail corruption other important determinants are the strength of law enforcement education levels and unemployment rates

correlated payoffs in the inspection game some theory and an application to corruption the inspection game as formulated by tsebelis am polit sci rev 83 77 91 1989 has the counterintuitive implication that crime is unaffected by the magnitude of the penalty this paper demonstrates that to attain this outcome it is necessary to assume independence of enforcer and offender payoffs given correlated payoffs the comparative statics of the equilibrium yield an inverse relationship between crime and the severity of the sanction in an application we enrich the framework of tsebelis by adding corruption stages and show that this can imply such a correlation of payoffs another interesting finding is that harsher anticorruption measures can increase crime incentives

competition in bureaucracy and corruption abstract this paper studies the consequences of introducing competition between bureaucrats firms are supposed to invest into eliminating negative externalities of production while bureaucrats administer the process by issuing licences some bureaucrats are corrupt that is they issue a licence to any firm in exchange for a bribe the competition regime is found to create more ex ante incentives for firms to invest while the monopoly regime is better at implementing ex post allocation that is distributing the licences given the firms investment decisions additional results on the effect of punishments and bureaucrats rotation are provided

the incidence and persistence of corruption in economic development abstract economic development and bureaucratic corruption are determined jointly in a dynamic general equilibrium model of growth bribery and tax evasion corruption arises from the incentives of public and private agents to conspire in the concealment of information from the government these incentives depend on aggregate economic activity which in turn depends on the incidence of corruption the model produces multiple development regimes transition between which may or may not occur in accordance with recent empirical evidence the relationship between corruption and development is predicted to be negative

corruption in a model of growth political reputation competition and shocks the article tries to incorporate political corruption toplevel corruption into economic growth analysis we propose amicroeconomic framework an agent of the public sector who wantsto optimize his cash flow resulting from budget misappropriations will be highly sensitive to the instability related to his office the natural equilibrium for the politician will be to fall into a high political instability low growth trap in whichcorruption appears endemic however the control of corruption bysociety will be possible we consider a model in which alternativepoliticians compete with the incumbent politician but benefit from a common political reputation it is shown that this situation leads to dynamic collective reputation which should restrain misappropriationpractices this theoretical framework will be useful in defining a sustainable degree of political competition and inunderstanding the asymmetric effects of extrinsic shocks on thegrowth process

does implied volatility provide any information beyond that captured in model based volatility forecasts this paper contributes to our understanding of the informational content of implied volatility here we examine whether the s p 500 implied volatility index vix contains any information relevant to future volatility beyond that available from model based volatility forecasts it is argued that this approach differs from the traditional forecast encompassing approach used in earlier studies the findings indicate that the vix index does not contain any such additional information relevant for forecasting volatility

notes on bribery and the control of corruption abstract existing models of corruption that allow for bribery have ignored an important recursive problem when an auditor or a policeman bargains over a bribe with a person he has arrested he has to take into account the fact that he may in turn be caught for taking this bribe and be involved in a similar bargain but from the other side the purpose of this paper is to provide a simple model for capturing this recursion having done so it goes on to analyse some conditions for the control of corruption these turn out to be different from what conventional wisdom suggests

corruption as a self fulfilling prophecy evidence from a survey experiment in costa rica an influential body of scholarship argues that corruption behaves as a selffulfilling prophecy the idea of this work is that levels of corruption emerge endogenously as a result of a society wide coordination game in which ther individual returns to corrupt behavior are a function of how disposed towards corruption the other members of society are perceived as being an empirical implication of this logic is that if one were to exogenously perturb beliefs about societal levels of corruption upward willingness to engage in corruption should increase as a consequence the current paper evaluates this claim by utilizing an information experiment embedded in a large scale household survey conducted in the gran area metropolitana gam of costa rica from october 2013 to april 2014 n 4200 changes in beliefs about corruption were induced via the random assignment of an informational display depicting the increasing percentage of costa ricans who have experienced or directly observed an act of corruption from 2006 to 2011 the paper finds that on average assignment to this display relative to the control condition increased the probability that a respondent would be willing to pay a bribe to a police officer by approximately 0 04 to 0 08 thereby providing supporting evidence for the self fulfilling prophecy hypothesis

institutional corruption and election fraud evidence from a field experiment in afghanistan w e investigate the relationship between political networks weak institutions and election fraud during the 2010 parliamentary election in afghanistan combining i data on political connections between candidates and election officials ii a nationwide controlled evaluation of a novel monitoring technology and iii direct measurements of aggregation fraud we find considerable evidence of aggregation fraud in favor of connected candidates and that the announcement of a new monitoring technology reduced theft of election materials by about 60 percent and vote counts for connected candidates by about 25 percent the results have implications for electoral competition and are potentially actionable for policymakers jel c93 d02 d72 k42 o17

on the economic incentives for taking bribes this paper presents an empirical analysis of the factors affecting bribe taking by public officials factors influencing the acceptance of bribes include the probability of being convicted severity of punishment government salary relative to private sector income the demonstration effect and the unemployment rate our results indicate that higher probability of being convicted discourages the acceptance of bribes as does more severe punishment low relative earnings high unemployment and the demonstration effect of aggregate advertising all lead to increased bribe taking

corruption and allocation efficiency abstract in this paper we investigate the possibility of allocation inefficiencies associated with corrupt practices specifically we consider the case in which two firms compete via bribery of a corrupt government official for a to be awarded project the economy may suffer allocation inefficiencies whenever there is some degree of discrimination given additional assumptions it is shown that the possibility of inefficient allocations increases as the degree of discrimination increases although empirical verification of discrimination is difficult due to the observational equivalence of an alternative imperfect knowledge model two possible explanations for the determination of discrimination coefficients indicate that it is a general phenomenon in competitive bribery games

the relation between implied and realized volatility abstract previous research finds the volatility implied by s p 100 index option prices to be a biased and inefficient forecast of future volatility and to contain little or no incremental information beyond that in past realized volatility in contrast we find that implied volatility outperforms past volatility in forecasting future volatility and even subsumes the information content of past volatility in some of our specifications our results differ from previous studies because we use longer time series and nonoverlapping data a regime shift around the october 1987 crash explains why implied volatility is more biased in previous work

corruption and development a review of issues in this paper we start with a discussion of some of the different denotations of the problem of corruption we then consider the ways in which the damaging consequences of corruption operate in a developing economy while not ignoring its possible redeeming features in some cases we pursue the question of why corruption is perceptibly so different in different societies and also persistent finally we examine the feasible policy issues that arise in this context

corruption in tax administration abstract we extend the game theoretic model of graetz reinganum and wilde 1986 to allow for corruption in tax administration in the presence of corruption audit rates are generally higher than in its absence in fact in the presence of corruption it is possible to sustain equilibria in which all returns are audited moreover when some auditors accept bribes it is possible for increases in the fine rate or the tax rate to reduce expected government revenue

the jump component of s p 500 volatility and the vix index much research has investigated the differences between option implied volatilities and econometric model based forecasts implied volatility is a market determined forecast in contrast to model based forecasts that employ some degree of smoothing of past volatility to generate forecasts implied volatility has the potential to reflect information that a model based forecast could not this paper considers two issues relating to the informational content of the s p 500 vix implied volatility index first whether it subsumes information on how historical jump activity contributed to the price volatility followed by whether the vix reflects any incremental information pertaining to future jump activity relative to model based forecasts it is found that the vix index both subsumes information relating to past jump contributions to total volatility and reflects incremental information pertaining to future jump activity this issue has not been examined previously and expands our understanding of how option markets form their volatility forecasts

the information content of implied volatilities and model free volatility expectations evidence from options written on individual stocks abstract we measure the volatility information content of stock options for individual firms using option prices for 149 us firms and the s p 100 index we use arch and regression models to compare volatility forecasts defined by historical stock returns at the money implied volatilities and model free volatility expectations for every firm for 1 day ahead estimation a historical arch model outperforms both of the volatility estimates extracted from option prices for 36 of the firms but the option forecasts are nearly always more informative for those firms that have the more actively traded options when the prediction horizon extends until the expiry date of the options the option forecasts are more informative than the historical volatility for 85 of the firms however at the money implied volatilities generally outperform the model free volatility expectations

on controlling crime with corrupt officials abstract this paper attempts to synthesize the recently developed strategic approach towards modeling corruption and the classical views the following propositions are sought to be proved a if reward schemes are introduced the classical and the strategic approaches yield similar results so far as controlling crime is concerned b with probability of detection being dependent on the effort of a corrupt official crime cannot be controlled and c in the context of an infinitely repeated game of crime the corrupt law enforcing agent might choose less bribes and lower effort level than the myopic optimal and hence would strategically pamper crime

corruption clubs empirical evidence from kernel density estimates a common finding of many analytical models is the existence of multiple equilibria of corruption countries characterized by the same economic social and cultural background do not necessarily experience the same levels of corruption in this article we use kernel density estimation techniques to analyse the cross country distribution of corruption particular emphasis will be given to the question whether the distribution of corruption shows more than one peak we find that most of the estimated densities exhibit twin peaks we also provide some evidence on the intra distribution dynamics and the persistence of corruption we find the group of countries classified within the two clubs to be very stable corruption is a highly persistent phenomenon substantial changes in the economic political and cultural environment of countries within the corruption club are required before a significant decline of corruption is to be expected

corruption as a gamble abstract in the following model of corruption a simple game is set up whose players are a government official granting a permit conditional on a test and a candidate requesting the permit the game is solved under different assumptions as to the information sets of the players perfect information asymmetric information and imperfect information on both sides in the latter case after characterizing the solution and presenting some important comparative statics results the paper moves on to show the emergence of multiple equilibria in corruption illustrating the interaction of corruption at different hierarchical levels of an administration

predictable dynamics in implied volatility surfaces from otc currency options recent empirical studies report predictable dynamics in the volatility surfaces that are implied by observed index option prices such as those prescribed by general equilibrium models using an extensive data set from the over the counter options market we document similar predictability in the factors that capture the daily variation of surfaces implied by options on 25 different foreign exchange rates we proceed to demonstrate that simple vector autoregressive specifications for the factors can help produce accurate out of sample forecasts of the systematic component of the surface at short horizons profitable delta hedged positions can be set up based on these forecasts however profits disappear when typical transaction costs are taken into account and when trading rules on wide segments of the surface are sought

on the impact of volatility on the real exchange rate terms of trade nexus revisiting commodity currencies abstract the aim of this paper is to study the relationship between terms of trade and real exchange rates in commodity producing countries on both the short and the long run we investigate potential non linearity in the real exchange rate terms of trade nexus according to the level of volatility in commodity and financial markets to this end we consider a panel of 68 commodity exporters split in sub samples of advanced intermediate and low income countries we first show that there is a long run relationship between real exchange rates and terms of trade taking also into account productivity and net foreign assets then we run panel smooth transition regressions to estimate the adjustment process of the real effective exchange rate to its equilibrium value depending on different proxies of volatility our results show that only advanced oil exporters currencies are sensitive to changes in terms of trade in the short run especially when volatility is high on commodity markets

an axiomatic approach to the measurement of corruption theory and applications in this paper we demonstrate that the axiomatic measurement approach developed in the poverty and inequality literature can be usefully applied to the measurement of corruption we develop a conceptual framework for organizing corruption data and discuss several objective aggregate corruption measures consistent with axiomatic requirements we then provide an empirical application of the methodology and estimate the respective corruption measures for a sample of over 25 countries during the year of 2000 our empirical analysis reveals significant discrepancies between the country rankings generated by these measures and those provided by the corruption perception index cpi from transparency international to our knowledge this paper represents a first analysis of corruption measurement using an axiomatic framework

corruption cooperation and endogenous time discount rates virtually all uses of repeated games tostudy of cooperation assume that people stime discount rates are exogenous andfixed here we offer an evolutionary gameembedded in a multi period model ofinvestment and consumption in whichindividual time discounts are determined bytheir convergence to values determined byevolutionary stable strategies oursubstantive motivation though iscorruption and its relationship to economicgrowth to understand the observedrelationship between levels of corruptionand economic indicators of social welfare we argue that corruption is a form ofcooperation that requires closeinterpersonal monitoring if we assume moreover that when people discount thefuture greatly the only sustainable formsof cooperation are those that allow forclose monitoring then our analysis can beinterpreted as a dynamic model of therelationship between corruption andinvestment

a theory of misgovernance this paper tries to explain why government bureaucracies are often associated with red tape corruption and lack of incentives the paper identifies two specific ingredients that together can provide an explanation the fact that governments often act precisely in situations where markets fail and the presence of agency problems within the government we show that these problems are exacerbated at low levels of development and in bureaucracies dealing with poor people we also argue that we need to posit the existence of a welfare oriented constituency within the government in order to explain red tape and corruption

how corruption may corrupt abstract the incidence of corruption appears to vary strongly across societies even for comparable activities the model highlights how the profitability of bureaucratic corruption may be related to its frequency and points toward a few mechanisms that can be used in explaining the stylized facts of varying incidence of corruption there might be multiple self fulfilling equilibria levels of corruption even when both supply and demand of corrupt acts are considered

risk spillovers in oil related cds stock and credit markets abstract this paper examines risk transmission and migration among six us measures of credit and market risk during the full period 2004 2011 period and the 2009 2011 recovery subperiod with a focus on four sectors related to the highly volatile oil price there are more long run equilibrium risk relationships and short run causal relationships among the four oil related credit default swaps cds indexes the expected equity volatility vix index and the swaption expected volatility smove index for the full period than for the recovery subperiod the auto sector cds spread is the most error correcting in the long run and also leads in the risk discovery process in the short run on the other hand the cds spread of the highly regulated natural monopoly utility sector does not error correct the four oil related cds spread indexes are responsive to vix in the short and long run while no index is sensitive to smove which in turn unilaterally assembles risk migration from vix the 2007 2008 great recession seems to have led to localization and less migration of credit and market risk in the oil related sectors

business culture and tax evasion why corruption and the unofficial economy can persist abstract this paper shows that business and tax inspection culture can create multiple equilibria in bad equilibria high cheating and corruption increases in penalties or auditing can have perverse impacts and increase cheating the source of the multiple equilibria is the externalities created by business and tax inspection cultures as tax evasion and corruption become more common they become more acceptable and their cost is lowered a third externality that between firms and inspectors is the source of the perverse effect more cheating by firms is good for bribe taking inspectors and more bribe taking inspectors are good for cheating firms

a dynamic model of corruption deterrence abstract this paper presents a model of corruption deterrence with a simple overlapping generations structure built into it a crucial assumption is that when corruption becomes more prevalent in the economy it is harder to audit a corrupt official effectively it is shown that this assumption may give rise to several stationary equilibrium levels of corruption this possibility has been exploited to explain why sometimes a government may temporarily resort to an extremely severe deterrence policy and why the same deterrence scheme may imply quite different levels of corruption a case study is provided to give empirical support to the model

forecasting currency volatility a comparison of implied volatilities and ar fi ma models we compare forecasts of the realized volatility of the pound mark and yen exchange rates against the dollar calculated from intraday rates over horizons ranging from one day to three months our forecasts are obtained from a short memory arma model a long memory arfima model a garch model and option implied volatilities we find intraday rates provide the most accurate forecasts for the one day and one week forecast horizons while implied volatilities are at least as accurate as the historical forecasts for the one month and three month horizons the superior accuracy of the historical forecasts relative to implied volatilities comes from the use of high frequency returns and not from a long memory specification we find significant incremental information in historical forecasts beyond the implied volatility information for forecast horizons up to one week

distribution and development in a model of misgovernance abstract this paper presents an analysis of bureaucratic corruption income inequality and economic development the analysis is based on a dynamic general equilibrium model in which bureaucrats are appointed by the government to implement a redistributive programme of taxes and subsidies designed to benefit the poor corruption is reflected in bribery and tax evasion as bureaucrats conspire with the rich in providing false information to the government in accordance with empirical evidence the model predicts a positive relationship between corruption and inequality and a negative relationship between corruption and development

the predictive power of the implied volatility of options traded otc and on exchanges abstract this paper investigates the efficiency of stock index options traded over the counter otc and on the exchanges in hong kong and japan our findings suggest that implied volatility is superior to either historical volatility or a garch type volatility forecast in predicting future volatility in both the otc and exchange markets this paper is also one of the first to compare the predictive power of the implied volatility of stock index options traded otc to that of exchange traded stock index options our evidence suggests that the otc market is more efficient than the exchanges in japan but that the opposite is true in hong kong

an empirical comparison of continuous time models of implied volatility indices abstract we explore the ability of alternative popular continuous time diffusion and jump diffusion processes to capture the dynamics of implied volatility indices over time the performance of the various models is assessed under both econometric and financial metrics to this end data are employed from major european and american implied volatility indices and the rapidly growing cboe volatility futures market we find that the addition of jumps is necessary to capture the evolution of implied volatility indices under both metrics mean reversion is of second order importance though the results are consistent across the various metrics markets and construction methodologies

a model of bureaucracy and corruption we analyze bureaucracy and corruption in a market with decentralized exchange and lemons exchange is modeled as a sequence of bilateral random matches agents have private information about the quality of goods they produce and can supplement trade with socially inefficient bribes bureaucracy is modeled as a group of agents who enjoy centralized production and consumption transaction patterns between the bureaucracy and the private sector are fully endogenous centralized production and consumption in the bureaucracy give rise to low power incentives for the individual bureaucrats as a result private agents might bribe bureaucrats whereas they do not bribe each other an equilibrium with corruption and an equilibrium without corruption can coexist we discuss some welfare implications of the model

a non structural investigation of vix risk neutral density abstract we propose a non structural method to retrieve the risk neutral density rnd implied by options on the cboe volatility index vix the methodology is based on orthogonal polynomial expansions around a kernel density and yields the rnd of the underlying asset without the need for a parametric specification the classic family of laguerre expansions is extended to include the gig and the generalized weibull kernels we show that orthogonal polynomial expansions yield accurate approximations of the rnd of vix and they generally outperform commonly used non parametric methods when controlling for accuracy based on a panel of observed vix options we retrieve the variance swap term structure the time series of vvix the vix risk neutral moments and the volatility at risk which reveal a number of stylized facts on the rnd of vix

risky adjustments or adjustments to risks decomposing bank leverage by use of cointegration analysis this paper splits bank leverage into a short and long run dimension regarding the long run if banks leverage ratios or related liability shares are stable over time they form a cointegrating relationship thus cointegration tests indicate whether banks liability ratios were stable or subject to structural breaks during the financial crisis in 2007 and 2008 by endogenous identification of structural breaks my analysis tracks the precise channels of banks leverage adjustments findings on the long run suggest that banks cut their leverage twice in june 2007 banks significantly reduced their foreign debt while in april 2008 they withdrew from interbank borrowing regarding the short run i study how banks adjust to the dynamics of risk proxies from distinct financial markets findings on the short run point out that banks reactions to risks differ considerably across different types of financial markets

the environmental effect of car free housing a case in vienna abstract a case control study of the car free model housing project in vienna was conducted to evaluate whether people living in this settlement have more sustainable lifestyles than people living in comparable buildings in vienna another aim was to identify the lifestyle characteristics and household activities which significantly influence the environmental impact of the residents of the car free housing project and a control group the control group referred to as the reference settlement was chosen from a nearby building complex with similar characteristics but without the car free feature household consumption patterns were estimated based on interviews in combination with data from the austrian consumer expenditure survey and the national accounts the evaluation of household environmental impacts uses emissions estimates from the austrian national accounting matrices including environmental accounts and data from life cycle assessments households from the car free settlement have substantially lower environmental impacts in the categories of ground transportation and energy use their co 2 emissions of these two categories are less than 50 of those living in the reference settlement the households in the car free settlement have somewhat higher emissions in the categories air transport nutrition and other consumption reflecting the higher income per capita as a result the co 2 emissions are only slightly lower than in the reference settlement but the emissions intensity is 20 lower both household groups have significantly lower environmental impacts than the austrian average reflecting less car use and cleaner heating energy in vienna

corruption and local democratization in indonesia the role of islamic parties indonesia has a tradition of corruption among local officials who harass and collect bribes from firms this paper examines whether corruption is affected by local democratization and by the party composition of local assemblies democratization occurred in 1999 and decentralization in 2001 we have firm level data for 2001 and 2004 the 2001 data benchmark corruption at the time of decentralization we find that corruption declines between 2001 and 2004 overall but much less so in districts with more secular party as opposed to islamic party representatives in district assemblies for a larger sample of districts correspondingly we find that corruption in 2004 is more in districts which voted more in favor of secular party representatives in the first elections in 1999 we argue that the effects seem to be causal over above any effects of changing religiosity and economic circumstances across districts

deals and delays firm level evidence on corruption and policy implementation times whether demands for bribes for particular government services are associated with expedited or delayed policy implementation underlies debates around the role of corruption in private sector development the grease the wheels hypothesis which contends that bribes act as speed money implies three testable predictions first on average bribe requests should be negatively correlated with wait times second this relationship should vary across firms with those with the highest opportunity cost of waiting being more likely to pay and facing shorter delays third the role of grease should vary across countries with benefits larger where regulatory burdens are greatest the data are inconsistent with all three predictions according to the preferred specifications ceteris paribus firms confronted with demands for bribes take approximately 1 5 times longer to get a construction permit operating license or electrical connection than firms that did not have to pay bribes and respectively 1 2 and 1 4

how corruptible are you bribery under uncertainty abstract we model corruption in a society as a result of bargaining for bribes between private citizens and public officials we investigate the role that incomplete information with respect to the intrinsic moral cost of one s potential corruption partner plays out in his or her propensity to engage in bribery and consequently the equilibrium level of corruption in the society we assume that the cost of engaging in corruption is subject to strategic complementarities which may lead to multiple corruption equilibria we find that corruption is lowest when potential bribers and potential bribees are uncertain regarding each other s corruptibility and have asymmetric bargaining powers our uncertainty result provides theoretical support in favor of anti corruption strategies such as staff rotation in public offices aimed at decreasing the social closeness of bribers and bribees our bargaining power result suggests that under uncertainty monopolistic public good provision has the same corruption reducing effect as competitive public good provision

misreaction or misspecification a re examination of volatility anomalies abstract existing research examines the impact of volatility shocks on the relative pricing of long term vs short term options and documents patterns of short horizon underreaction and long horizon overreaction in the options market these studies however rely on implied volatilities derived from specific option pricing models and are thus subject to model specification errors in this paper we show that these anomalous patterns are the result of model misspecification as opposed to market misreaction we provide evidence that these patterns are consistent with in both direction and magnitude inherent biases in the misspecified models we also apply a model free approach to re examine the anomalous patterns and find no evidence of market misreaction

point process models for extreme returns harnessing implied volatility forecasting the risk of extreme losses is an important issue in the management of financial risk there has been a great deal of research examining how option implied volatilities iv can be used to forecast asset return volatility however the role of iv in the context of predicting extreme risk has received relatively little attention the potential benefit of iv in forecasting extreme risk is considered within a range of models beginning with the traditional garch based approach along with a number of novel point process models univariate models where iv is included as an exogenous variable are considered along with a novel bivariate approach where extreme movements in iv are treated as another point process it is found that in the context of forecasting value at risk the bivariate models produce the most accurate forecasts across a wide range of scenarios

vix option pricing and cboe vix term structure a new methodology for volatility derivatives valuation abstract this study integrates cboe vix term structure and vix futures to simplify vix option pricing in multifactor models exponential and hump volatility functions with one to three factor models of the vix evolution are used to examine their pricing for vix options across strikes and maturities the results show that using exponential volatility functions presents an effective choice as pricing models for vix calls whereas hump volatility functions provide efficient out of sample valuation for most vix puts in particular with deep in the money and deep out of the money pricing errors for calls can be further reduced with a two factor model

integrity for hire an analysis of a widespread customs reform abstract can governments improve bureaucratic performance by hiring integrity from the private sector in the past 2 decades a number of developing countries have hired private firms to conduct preshipment inspections of imports generating independent data on the value and tariff classification of incoming shipments i find that countries implementing such inspection programs subsequently experience large increases in import duty collections by contrast the growth rate of other tax revenues does not change appreciably additional evidence suggests that declines in falsification of import documentation are behind the import duty improvements the programs also lead to declines in undervaluation and misreporting of goods classifications historically this hired integrity appears to have been cost effective with improvements in import duty collections in the first 5 years of a typical inspection program amounting to 2 6 times the program s costs

dynamics and causality in industry specific volatility abstract this paper presents comprehensive empirical evidence on the dynamics and causality within 30 us industry specific volatilities during july 1963 and june 2008 we find that linear trends are present in 17 of the 30 industry volatilities granger causality tests reveal that the industry of business supplies and the industry of finance are the most important lead indicators of industry volatilities to uncover contemporaneous causal relationships in the market we implement an emerging data driven method of directed acyclic graphs the results suggest that volatility shocks originating from business supplies machinery and consumer goods industries are sources of risks that affect most other industries by contrast volatilities in the two traditionally important industries oil and autos do not appear to have a substantial influence on other large industries in the contemporaneous time finally business equipment and services both containing information technology components are the most important driving forces of the industry volatility surge in the late 1990s

corruption across countries and regions some consequences of local osmosis abstract large and persistent differences in corruption across comparable countries is a challenging research issue even more intriguing are such differences across regions within the same country because the typically considered socioeconomic and governance characteristics are generally more similar across such regions than across different countries this paper s principal theme is that individuals perceptions of their environments are influenced by the realities that they have faced in the past these perceptions affect their current and future actions which in turn influence the current and future realities an articulation and analysis of these dynamics yields significant observations concerning individuals behavior and societal outcomes

does oil corrupt evidence from a natural experiment in west africa abstract this paper explores the oil discovery announcements in sao tome and principe 1997 1999 to assess the role of natural resources in determining corruption for this purpose we use a natural experiment framework which contrasts sao tome and principe to cape verde a control west african country sharing the same colonial past and important recent economic and political shocks our measurement is based on tailored household surveys we conducted in both island countries the unique survey instrument was retrospective and used personal histories to elicit memories from the respondents we analyze changes in perceived corruption across a wide range of public services and allocations we find clearest increases on vote buying education namely in the allocation of scholarships and customs ranging from 31 to 40 of the subjective scale we interpret these findings as symptoms of increased competition for core state resources

optimal portfolios when volatility can jump abstract we consider an asset allocation problem in a continuous time model with stochastic volatility and jumps in both the asset price and its volatility first we derive the optimal portfolio for an investor with constant relative risk aversion the demand for jump risk includes a hedging component which is not present in models without volatility jumps we further show that the introduction of derivative contracts can have substantial economic value we also analyze the distribution of terminal wealth for an investor who uses the wrong model either by ignoring volatility jumps or by falsely including such jumps or who is subject to estimation risk whenever a model different from the true one is used the terminal wealth distribution exhibits fatter tails and in some cases significant default risk