One of the most important government policies to support and satisfy financing needs for marginal enterprises or special sectors in economic system is to provide credit guarantee. In Taiwan, while Small and Medium Enterprise Credit Guarantee Fund of Taiwan (SMEG) had been established to help small and medium enterprises (SMEs) acquiring bank loans successfully by providing credit guarantee, there is still a need to set up an appropriate credit rating systems for SMEs. This research proposes three kinds of assessment models to the credit risks of SMEG. While Model one employs a firm¡¦s financial performance, substituting debt level and estimated asset value and volatility into the model to derive probability of default (PD). Model two and three utilize a firm¡¦s risk premium observed from the loan rate to estimate credit level. The former belongs to the application of structure-form approach in the credit risk management model, on the other hand, the latter is the reduced-form approach. On the structure-form approach, due to the difficulties in accessing SMEs¡¦ public trade information in Taiwan, we adopt the Private Firm Model developed by Moody's KMV Company. We had also improved this PD evaluation model by taking some peculiar operating characteristics of Taiwan¡¦s SMEs into consideration. On the reduced-form approach, we apply risk-neutral model to estimate a firm¡¦s PD, which then been utilizing to evaluate the expected value of subrogation payment in the case of default. This can further go deeper to calculate the guarantee fee of a loan. The processes used in this model is same as that of actuarial methodology being used to determine the premium of a term insurance. The three credit risk management models proposed in this research are designed to reflect the market information of a SME, and to the applicability of operating in real world case. The empirical results indicate they could adequately reflect the risk levels of the SMEs to a certain extent. We hope to provide the SMEG with a method of evaluating credit risk of SMEs to establish a fairer and more reasonable guarantee fee, and contribute in enhancing and managing credit guarantee mechanism in Taiwan.

信用衍生性商品於近十年來已快速發展，為反映信用風險管理的迫切需求，本篇論文將以實證的方式探討信用衍生性市場。尤其著重在信用違約交換市場，因其佔信用衍生性市場的交易量高達45％。本篇論文分別討論以下二個議題：第一個議題乃在探討股票報酬率的峰態係數與信用違約交換報酬率的關係。第二個議題乃著重探討拉丁美洲國家的信用違約交換對阿根廷事件的反應。 / The development of credit derivatives in the past decade has brought about pronounced innovations in the markets. To reflect dramatic demand in managing credit risk, this thesis dedicates to the empirical world of credit derivatives markets. We especially focus on Credit Default Swaps (CDS) market due to its most widely trading in credit derivatives markets, capturing almost 45% of the market shares. This thesis encompasses two essays related to CDS. In the first essay, we attempt to extend empirical explanation of CDS premiums by considering the excess kurtosis of equity return distribution. As well, we show how copula functions can be applied to specify both the dependence structure and the tail relationship between CDS return and kurtosis of equity distribution. We contribute to the better specification of the dependence structure between the CDS return and the corresponding kurtosis, and provide an illustration of its implication which may be misled using conventional methods. In the second essay, we turn to focus on CDS in emerging markets. Thereby, further policy-oriented applications for governments can be extra induced. We empirically study the correlated default at sovereign level in Latin America region due to the eruption of Argentina debt crisis in 2001. A comprehensive understanding of correlated default at sovereign level is of critical importance in several respects. From the government and IMF point of views, the comovement in sovereign credit default swaps can serve as one of the leading indicators of financial crises. From the perspectives of mutual funds and banks, correlated movement which exists in sovereign CDS spreads is regarded as one of the measures of country risk premium. The findings and the associated methodology can provide useful insights not only to policymakers but also to whoever is interested in credit derivatives markets, particularly in emerging markets. From the methodology point of view, applying a copula method to identify the contagion corresponds to the arguments from Bae et. al. (2003) and Dungey and Tambakis (2003), the further challenge is to develop a model for capturing the nonlinear property.

Caruthers argues that the mindreading capacity and the introspective capacity are in fact one and the same capacity. This single capacity relies on the same sub-personal "interpretive" mechanism that takes sensory information as input and produces attitudes as output. I use neuroscience research to show that if the “interpretive mechanism” exists, and moreover that it operates in accordance to Caruthers’ description in mindreading tasks, (e.g. detecting external cues and paying attention to others’ behavior), then this operation would have to be handled or implemented at the neural level by the Task Oriented Neural Network. On the other hand, it is well known that self-referential thought, including introspective thought is handled by the Default Mode Network. This consequence is problematic for the view that self and other attitude attributions are done by the same mechanism. The same cognitive operation can not be implemented by two distinct neural networks that are in competition with one another. Moreover, the Default Mode neural network and the Task Oriented networks implement such different types of thinking that they oppose and interrupt one another’s functioning. If the only difference between the two networks were that one simply handles a larger quantity of information than the other, then they wouldn’t be in competition. It appears that there is indeed something special about the very nature of self-referential information such that it determines the type of operations involved in its processing. / text

Chapter 1 develops a model of parallel trading of corporate securities (shares, bonds) and derivatives in which a large trader can sometimes profitably acquire securities and the corporate control rights inherent therein for the sole purpose of reducing the corporation's value and gaining on a net short position in the corporation created through off-setting derivatives. At other times, the large trader profitably takes a net long position in the corporation and exercises its control rights to maximize the corporation's value. This strategy is profitable if and because other market participants cannot observe the large trader's orders and hence cannot predict how the control rights will be exercised. In effect, the large trader is benefitting from trading on private information about payoff uncertainty that the large trader itself creates. This problem is most likely to manifest in transactions that give blocking powers to small minorities, particularly out-of-bankruptcy restructurings and freezeouts, and is bound to become more severe when derivatives trade on an exchange rather than over-the-counter. Chapter 2 investigates in parallel the cross-country determinants of crime and punishment in the largest possible sample of countries with data on homicides, victimization by common crimes (ICVS), incarceration rates, and the death penalty. While models with a small number of plausible covariates predict much of the variation of homicide and incarceration rates between major developed countries, they predict only one seventh of the actual US incarceration rate. Chapter 3 probes into the pervasive correlations between legal origins, modern regulation, and economic outcomes around the world. Where legal origin is exogenous, it is almost perfectly correlated with another set of potentially relevant background variables: the colonial policies of the European powers that spread the "origin" legal systems through the world. The chapter attempts to disentangle these factors by exploiting the imperfect overlap of colonizer and legal origin, and looking at possible channels, such as the structure of the legal system, through which these factors might influence contemporary economic outcomes. It find strong evidence in favor of non-legal colonial explanations for economic growth. For other dependent variables, the results are mixed. / Economics

Goal-directed episodic simulation, the imaginative construction of a hypothetical personal event or series of events focused on a specific goal, is essential to our everyday lives. We often imagine how we could solve a problem or achieve a goal in the future, or how we could have avoided a misstep in the past, but many of the behavioral and neural mechanisms underlying such goal-directed simulations have yet to be explored. The three papers of this dissertation investigated the neural correlates of three types of future episodic simulations in Papers 1 and 2 and examined a fourth such simulation directed at past events as an adaptive, constructive process in Paper 3. Some research has associated default network activity with internally-focused, but not with goal-directed cognition. Papers 1 and 2 of this dissertation showed that regions of the default network could form functional networks with regions of the frontoparietal control network while participants imagined solving specific problems or going through a sequence of steps necessary to achieve a personal goal. When participants imagined events they associated with actually attaining a goal, default network regions flexibly coupled with reward-processing regions, providing evidence that the default network can join forces with other networks or components thereof to support goal-directed episodic simulations. Using two distinct paradigms with both young and older adults, Paper 3 focused on episodic counterfactual simulations of how past events could have turned out differently and tested whether counterfactual simulations could affect participants' memory of the original events. Our results revealed that episodic counterfactual simulations can act as a type of internally generated misinformation by causing source confusion between the original event and the imagined counterfactual outcome, especially in older adults. The findings of the three papers in this dissertation lay the groundwork for further research on the behavioral and neural mechanisms of goal-directed episodic simulations, as well as their adaptive functions and possible downsides. / Psychology

Banks represent one of the most important parts of the economy in the world. As a result, decisions of bank management affect not just the direct bank stakeholders but the state of the economy and society as a whole. This became evident during the latest financial crisis in 2007 where the failure of one bank resulted in the domino falling that affected banks globally. The regulators increase their attention to the risks that bank face and their measures and requirements. Therefore, the research within the banking area has important consequences from both theoretical and practical side.   The purpose of this project is to investigate whether there is a relationship between dividends that Nordic banks pay and different types of risks such as market, credit (including default), liquidity and operational. The results of the research will contribute to the knowledge in finance and help different stakeholders to understand possible reasons for different dividends level.   The methodological position works as a foundation for the conduction of the research. The epistemological and ontological views applied in this project are positivism and objectivism. The deductive research approach and quantitative research strategy are used for the research and thus the collection and analysis of the archival data of 19 Nordic banks over five year time horizon. The research can therefore be described as a panel study.   Based on the previous research papers the following proxies for risks have been used in the research: market risk – capital requirement for market risk to total assets, credit risk – loan loss provisions to total assets, default risk – Altman Z-score, liquidity risk –liquidity coverage ratio, operational risk – economic capital (capital requirement) for operational risk to total asset.   Ordinary Least Square regression analysis is performed over the collected data in order to fulfil the purpose of the project. The tests results identify that there are no statistically significant relationship between dividends and market, credit, default and liquidity risks and the statistically significant negative relationship between the dividends and operational risk in Nordic banks. These findings contribute to a new knowledge within the finance and banking area in particular. Additionally, this project might be used as a foundation for the further research within the field. The findings are also useful for stakeholders in understanding banks risk level.

Background: The financial crisis of 2007-2010 had a massive impact on the financial markets worldwide. The crisis was partly blamed on the credit derivatives collateralized debt obligations and credit default swaps. These instruments were used to create leverage and speculation, which led to uncertainty in the financial system worldwide. There has been no recent documentation of how credit derivatives are used in Swedish banks, and what risks and opportunities they bring along. Purpose: The purpose of this thesis is to describe the use of credit derivatives in Swedish banks, what benefits and risks they may generate and how the recent financial crisis has affected their use. Research Method: This is a qualitative multiple case study which uses an inductive approach. The study covers four cases, three of the largest Swedish commercial banks, and a bank that specializes on international financing. Seven people working in different fields in these banks have been interviewed. Conclusions: Credit derivatives are mostly used for hedging in Swedish banks, which mainly involves the use of credit default swaps, and sometimes iTraxx. Purely speculative trades are rare. The risks that arise are mainly due to lack of transparency in OTC trading, and abusive use of these instruments. Credit derivatives greatly facilitate risk management in banks. Regulations have increased since the financial crisis and the demand for more complex products greatly decreased.

Credit derivative market has experienced an exponential growth during the last 10 years with credit default swap (CDS) as an undoubted leader within this group. CDS contract is a bilateral agreement where the seller of the financial instrument provides the buyer the right to get reimbursed in case of the default in exchange for a continuous payment expressed as a CDS spread multiplied by the notional amount of the underlying debt. Originally invented to transfer the credit risk from the risk-averse investor to that one who is more prone to take on an additional risk, recently the instrument has been actively employed by the speculators betting on the financial health of the underlying obligation. It is believed that CDS contributed to the recent turmoil on financial markets and served as a weapon of mass destruction exaggerating the systematic risk. However, the latest attempts to curb the destructive force of the credit derivative for the market by means of enhancing the regulation over the instrument, bringing it on the stock-exchange and solving the transparency issue might approve CDS in the face of investor who seeks to diminish the risk of his financial portfolio. In our thesis we provide empirical evidence of CDS ability to fulfil the diversification function in the portfolio of such credit sensitive claims as bonds and stocks. Our data for the empirical analysis consist of 12 European companies whose debt underlies the most frequently traded single-name CDS with the maturity of 5 years. Through multivariate vector autoregressive models we have tested the intertemporal relation between stock returns, CDS and bond spreads changes as well as the magnitude of this relation depending on the stock market state.   The results we have achieved for our sample are the following: 1) stock returns are mainly negatively related to the CDS and bond spread changes; 2) stock returns are the least affected by both credit spread changes, whereas changes in bond spreads are the best explained by the stock and CDS market movements; 3) the strength of the relation between three variables differs over the time: the relationship between stock returns and CDS spreads is the most dominant during the pre and post-crisis periods, while during the financial crisis time the relation between stock returns and bond spread changes as well as that of between both credit spreads comes to the foreground.   The above described relations between the three markets serve as a proof of the possibility to work out diversification strategies employing CDS. During the time of turbulence on the markets the investor may exert bigger diversification gains with the help of CDS. Thus, in spite of all the recent blame of the instrument from the investor perspective it is still remains one of the sources of profit.

This dissertation focuses on mortgage defaults in Southern California during the housing bubble of the 2000s. The rapid decline in the housing market that precipitated the current recession has been accompanied by an unprecedented number of loan defaults and foreclosures. Recent studies have identified two major theories of default--the "double trigger" hypothesis, where negative equity and an income shock are necessary conditions for default--and "strategic default" where negative equity is a sufficient condition for default. This paper adds to the default literature by adding short sale as another possible outcome of mortgage default. The primary goal is to analyze the determinants of mortgage default to assist in understanding the conditions under which strategic behavior of home sales is most likely to occur. Data from Los Angeles County was analyzed from 2007 to 2010 for every closed sale, then coded into three possible sales outcomes: 1) Organic 2) Short Sale 3) Real Estate Owned (REO). A multinomial probit model was used to model homeowner decision-making based on the sale outcome. The model rejected the "double trigger" hypothesis, as it was found that income shocks do no have a significant effect on impacting the predicted probability for distressed sales. Education levels, the sales price of homes, credit card debt, and market price reductions were found to be significant variables in determining distressed sales outcomes, thereby confirming the strategic default hypothesis. The next section studied spatial association of short sales and REO to see if any contagion effects were present. It was found that both short sales and REO form into clusters of hot and cold spots. Social stigma is believed to impact consumer behavior, the theory was confirmed through the findings of contagion and spatial lag. The final section constructed a hedonic price model to capture the price effects that distressed sales have on neighborhood pricing. Foreclosures were found to have three times the negative impact on neighborhood pricing compared to short sales.

This paper empirically explores how the introduction of Credit Default Swap (CDS) trading affects firm systematic risk. By treating the introduction as an event study and imploring propensity score matching and difference-in-differences analysis, this research finds that firm exposure to market risk increases after the introduction of CDS instruments, controlling for higher debt levels. These findings change, however, in times of financial crisis when the impact of CDS trading actually reduces systematic risk. These results show that CDS introduction enables a firm to more dramatically change its exposure to systematic risk in comparison to its counterpart to reflect market conditions.