<p> This dissertation consists of two chapters that concern with the consumption cycle and corporate finance. The first chapter analyzes the role of durability in characterizing the consumption cycle. There is strong empirical evidence demonstrating that decreases in residential investments and durable expenditures are early indicators of economic downturns. Analogously, once the economy goes into recession, early increases in residential investments and durable expenditures signal economic recoveries. So far, little work has been done detailing the mechanisms explaining these important empirical stylized facts. In this article, I develop a general equilibrium asset pricing production model that includes durability and substitutability between perishable and durable service consumption. Results indicate that large shocks in the productivity of the capital accumulation process and a high elasticity of intertemporal substitution are both needed to create the correct timing of changes in durable expenditures and nondurable consumption characterized in the data. The study also uses this general equilibrium model as a framework to make predictions about the term structure of forward contracts settled on a national housing price index. Such work will create a foundation for further developing this important derivatives market.</p><p> The second chapter analyzes the link between debt maturity and the term spread. This chapter is co-authored with Pratish Anilkumar Patel. Evidence shows that a firm's debt maturity and term spread are intricately linked. Firms issue short term debt when the term spread is significantly positive and they increase maturity as the term spread decreases. The current literature explains this link with market frictions such as agency problems, asymmetric information, and liquidity risk. We explain the link between debt maturity and term spread using the trade-off theory of capital structure. When the term spread is small or even negative, transaction costs of debt rollover outweigh bankruptcy costs. Therefore, the firm optimally chooses to increase debt maturity. On the other hand, when the term spread is significantly positive, bankruptcy costs outweigh transaction costs of debt rollover. Therefore shorter debt maturity is optimal as it minimizes the chance of bankruptcy. In addition, we contribute to the current discussion in the literature concerning the speed of adjustments of capital structure, finding that firms are active in adjusting their capital structure. The model is consistent with a variety of stylized facts concerning debt maturity.</p>

<p> High Frequency Trading (HFT) represents an ever growing proportion of all financial transactions as most markets have now switched to electronic order book systems. This dissertation proposes a novel methodology to analyze idiosyncrasies of the high frequency market microstructure and embed them in classical continuous time models. </p><p> The main technical result is the derivation of continuous time equations which generalize the self-financing relationships of frictionless markets to electronic markets with limit order books. We use NASDAQ ITCH data to identify significant empirical features such as price impact and recovery, rough paths of inventories and vanishing bid-ask spreads. Starting from these features, we identify microscopic identities holding on the trade clock, and through a diffusion limit argument, derive continuous time equations which provide a macroscopic description of properties of the order book. </p><p> These equations naturally differentiate between trading via limit and market orders. We give several applications to illustrate their impact and how they can be used to the benefit of Low Frequency Traders (LFTs). In particular, option pricing and market making models are proposed and solved, leading to new insights as to the impact of limit orders and market orders on trading strategies.</p>

<p> There are conservative estimates that the amount of money laundered each year is anywhere between 2 and 5 percent of the annual gross domestic product of the world economy. That figure in dollars is between $800 billion and $2 trillion in U.S. dollars. Research has shown that the majority of money that is laundered across the globe either enters the United States or comes from the United States. It can be argued that the use of wire transfers is the preferred method used by criminals to move their funds. By using wire transfers it is more difficult for those tasked with prevention and investigation to track the money. </p><p> Wire transfers have become the preferred method for criminals to launder money. This is because they are fast, secure and very hard to trace. It is electronically sending cash to another individual or account. It is also easy to initiate a wire transfer. It can be done from a personal computer in a residence or from a public computer. It can be done through an established relationship with a financial institution or by using a wire transfer service such as Western Union or MoneyGram. It can be sent to another account or sent to an individual for immediate pick-up depending upon the type of service a person chooses to use. </p><p> This paper researches the argument that there is complicity within the wire transfer system that has supported this method for illegal activity and money laundering. The research argues that given the lack of effort by financial institutions and Federal regulations and enforcement efforts this activity will continue to increase. There have been successful efforts employed to reduce money laundering through wire transfers. These methods have not been embraced by the larger community of enforcement officials nor the Federal Government. </p><p> By using proven methods and analyzing trends and data within the wire transfer process an effective set of tools can be deployed by regulators, investigators and financial institutions to mitigate money laundering.</p>

<p> The financial economics profession has determined that identical agents in a dynamic, stochastic, general equilibrium (DSGE) model does not provide price and trading dynamics realized in financial markets. There has been quite a bit of research over the last three decades extending heterogeneity to the Lucas asset pricing framework, to address this issue. Once the assumption of homogeneous agents is relaxed, the problem becomes increasingly complex due to a state space including the wealth distribution, continuation utilities, and wealth distribution dynamics. To establish a more computationally feasible model, specical modifications have been made such as heterogeneity in idiosyncratic shocks and not risk aversion, including aggregate or idiosyncratic risk (but not both), or assuming no growth in the economy (steady state). </p><p> In this research, I will define a DSGE model with heterogeneous agents. This heterogeneity will refer to differing CRRA utilities through risk aversion. The economy will have growth due to the assumed dividend process. Agents will face idiosyncratic and aggregate shocks in a complete markets setting. The framework of the provided algorithm will enable issues to be addressed beyond homogeneous agent models. </p><p> The numerical simulation results of this model provide considerable asset price volatility and high trading volume. These results occur even in the complete markets setting, where investors are expected to fully insure. Given these dynamics from the simulations of the algorithm, I demonstrate the ability to calibrate this model to address specific financial economic issues, such as the equity premium puzzle. More importantly this exercise will assume realistic agent parameters of risk aversion and discount factors, relative to economic theory.</p>

Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 2006. / Source: Dissertation Abstracts International, Volume: 67-11, Section: A, page: 4276. Adviser: Anil K. Bera. Includes bibliographical references. Available on microfilm from Pro Quest Information and Learning.

<p> In the financial turmoil of 2008, U.S. firms reported debt-ratios that differed from the debt-ratios calculated from balance sheets. The problem is that investors bought common stock expecting initial investment return and lost money when companies delisted. The purpose of this quantitative study was to determine sample securities pricing with the application of synthetic assets and debt accrued. Addressed in the research questions was whether those securities were (a) underpriced compared with return-on-assets (ROA), (b) overpriced compared with ROA, (c) a debt-ratio higher than 60% and also overpriced, (d) underpriced with a synthetic asset added, or (e) related by relative pricing to variant pricing and market capitalization. The study's base theory was Pan's efficient market hypothesis (EMH) of security price prediction of market prices versus model prices. The data from the financial statements of 16 publicly traded U.S. electric utility companies were analyzed via correlations and multiple regression analyses to determine securities pricing and suitability. The findings from the analyses of the sample's variables of market price, book value, market-to-book, and study constructed variables from those variable data were statistically significant. The alternate hypotheses were accepted for all 5 research questions since the analytical operationalization of the hypothetical constructs led to significant relationships. Results suggest that the use of more pricing determinants in securities evaluation may lead to investors losing less money and earning the expected returns for a more efficient capital market, leading to a stronger economy and macroeconomic stability.</p>

Thesis (Ph.D.)--Indiana University, Dept. of Economics, 2009. / Title from PDF t.p. (viewed on Jul 6, 2010). Source: Dissertation Abstracts International, Volume: 70-10, Section: A, page: 3955. Adviser: Michael Alexeev.

<p> The thesis takes as its point of departure the "long-run monetary union" between France and fifteen French-speaking African countries to provide insights into how the rules, mechanisms and practices underlying the monetary dependence of these African states operate. The main objective of the study is to contribute towards a better understanding of the institutions and principles governing the CFA franc zone with the intention of helping policy-makers to take optimal decisions.</p><p> A well-designed monetary policy could generate employment and pro-poor growth. But designing and administering a good policy will depend on the objective of policy designers. In principle, monetary authorities could choose between a fixed exchange regime and a flexible exchange regime. Of this, the above African countries adopted a managed regime with France since 1945. In this study, I examine the relationship between monetary autonomy and poverty reduction in the Franc Zone. The discussion focused on the impact of monetary independence on poverty incidence and poverty gap in the fifteen African nations.</p><p> I utilized two OLS model equations. The functions were estimated using data from a panel of 14 countries (the exception being Equatorial Guinea because insufficient data were available) in the CFA franc zone and covering the 1984-2011 period. Seven predictor variables were forced into the models. With regard to the findings, only four of them such as inflation and, more importantly, credit to private sector, centralization rate, exchange rate and gross national savings are important to headcount index and the depth of poverty reduction in the CFA franc zone.The results therefore suggest that monetary sovereignty measured by the specified variables is a driving force for poverty reduction in the CFA franc zone.</p>