This paper deals with the pricing differences between a mutual co-operative underwriting system and a fixed-premium underwriting system in providing coverage for marine liability. There has been much debate in recent years within the marine liability underwriting industry over which method fosters more competition, and hence, lower premiums for shipowners who are required to carry such coverage in order to operate. This paper will look at the current mutual marine insurance industry (Protection & Indemnity Associations or P&I Clubs) to compare its pricing both before and after the entry into the market of the fixed-premium underwriters, using data from 1985-2000 that encompasses both a major loss cycle and normal cyclical pricing variations. This analysis will hopefully provide information on whether mutual premium levels for the P&I Clubs differed substantially with the entry of the fixed-price competitors. This is important for the individual shipowners belonging to these mutual underwriting associations, because any variation in premium pricing could mean the potential for either great savings or tremendous losses. / Master of Arts

The most important aspect in the financial decsion making in buying the property is the financing method, price of the property and how much you need to borrow. The goal of this thesis is to show to the reader at least a basics theories of entering and process of the public procurement and formulate complex process from the assign of procurement through the realization to methods of financing. The goal is the utilization of the methods of multicriterial variants evaluation when evaluating particular products, financing options for the specific property won in the public procurement and researching suitability of individual multicriterial methods. The goal is theoretical description and practical analysis of fundamental mortgage loans with fixed rate and also description of today's mortgage market. The core of this thesis is the chapter with results of the multicriterial optimalization used to the organization and evaluation of individual variants for selected type of loan. In the onclusion is chosen generally the best product.

This dissertation treats two different themes. The first, addressed in Chapter 1, regards the pricing of interest rate swaps. The second, studied in the remaining two chapters, regards the implications of monetary policy for the term structure of interest rates.The pricing of interest rate swaps An interest rate swap is an agreement between two parties to exchange fix for floating interest rate payments for a certain period of time. Floating rate payments are made at a floating-rate index, e.g. the three-month interbank rate, while the fixed rate payment, the swap rate, is determined on the market. The swap rate may include a compensation for credit risk depending on the counterparty's credit quality, but in the standard agreement there is no exchange of principal, only interest is transacted, and this effectively reduces concerns about credit risk. The swap spread for a given maturity is the difference between the swap rate and the risk-free rate, measured as the yield on a government bond with similar cash flows. If the standard swap agreement entails negligible credit risk one might expect swap spreads to be low and stable, but market swap spreads vary over time. There are periods when swap spreads are low in accordance with the general theory, but there are also periods when swap spreads reach levels that seem high.The first chapter of this dissertation examines a setting where a positive swap spread arises as part of an equilibrium in a perfectly competitive capital market. The model is one of insurance under adverse selection. A firm that seeks debt financing can insure itself against interest rate risk either by borrowing long-term or by borrowing short-term and entering a pay fix - receive float interest rate swap. The latter alternative allows for a partial hedge as the firm can choose to swap only a fraction of the nominal amount. In this setting, if firms' credit quality and interest rate risk tolerance are correlated creditors can use the pricing of interest rate swaps as a screening device. A low-risk firm, being a firm with favorable private information, selects short-term borrowing and partial insurance. A high-risk firm, being a firm with less favorable prospects, is by assumption also less risk tolerant. It therefore has a higher demand for insurance and the equilibrium swap spread is set such that the high-risk firm finds it more beneficial to borrow long-term at a cost that exceeds the expected cost from short-term financing, but that provides a full insurance to interest rate risk. Monetary policy and the term structure of interest rates Taken separately monetary policy and term structure modeling are two well-established research areas each comprising a substantial amount of research. But relatively few attempts have been made to integrate the two. The last two chapters of this dissertation take the view that the conduct of monetary policy is an essential element in the determination of the term structure of interest rates, and that explicitly considering the role of amonetary authority in the analysis has a potential of enhancing our understanding of term structure dynamics, and its relation to macro-economic fundamentals in particular. This approach to the term structure is supported by the fact that the analytical framework developed in the literature on optimal monetary policy translates conveniently into a setting well suited for term structure analysis. Chapter 2 makes the point in the simplest setting. A standard model of optimal monetary policy is reformulated in continuous time. Combined with a parameterized form for the market price of risk this produces a standard term structure model with well-known characteristics. This model is estimated on US data for the period 1987 - 2002, treating state variables as latent factors of the term structure. The parameters that are estimated comprise parameters describing the monetary transmission mechanism, parameters describing the monetary authority's preferences and parameters describing the market price of risk. Our estimation technique differs from comparable estimations in the monetary policy literature as these typically take state variables to be directly observable measures of macro-economic aggregates. The results using term structure data are both similar and different to previous findings. The main difference when using term structure data is that the central bank's estimated policy is more aggressive, i.e. more responsive to changes in the underlying state variables.Chapter 3 is devoted to the zero bound on nominal interest rates. While the zero bound is well recognized in the literature on term structure modeling, not much has been said about term structure dynamics under the special circumstance that the short rate is close to zero. I find the optimal monetary policy approach to be particularly well suited for this analysis. The chapter studies a continuous time reduced form version of the monetary transmission mechanism. The monetary authority's optimization problem is formed according to two specifications, interest rate stabilization and interest rate smoothing. For the former the optimization problem is solved analytically, while numerical procedures are adopted forthe latter. The chapter then turns to study implications for the term structure under risk-neutrality. Term structure equations are solved numerically and implications for the term structure are discussed. Data for a low-interest rate country like Japan for 1996 - 2003 exhibits s-shaped yield curves and yield volatility curves. This shape is found to be consistent with a smoothing objective for the short rate. / <p>Diss. Stockholm : Handelshögskolan, 2004</p>

Why Do Borrowers Choose Arms Over FRMS? : A Behavioral Investigation in the U.S. and Japan by Masaki Mori In the U.S., a considerable number of borrowers still choose adjustable rate mortgages (ARMs) over fixed rate mortgages (FRMs), even with historically low interest rates. During 2004-2005, when interest rates remained at 30-year lows, ARMs accounted for approximately one-third of all mortgage originations. Kahneman and Tversky's Prospect Theory’s reflection hypothesis suggested that people tend to be more risk-averse in positive decision situations, while they tend to be more risk-seeking when making negative choices. The first purpose of this study is to examine descriptive reasons for the popularity of ARMs in the U.S. People of different cultures often evaluate uncertain events in different ways. Hofstede developed a cultural dimension, uncertainty avoidance (UA), where UA is defined as the extent to which people feel threatened by uncertain situations. The second purpose of this study is to test the role of UA on the choice of mortgage products using data from two cultures (U.S. and Japan), potentially differing in attitude toward uncertain situations. Controlled experiments were conducted using 92 U.S. participants and 49 Japanese participants. Results of analysis supported Prospect Theory’s reflection hypothesis, suggesting that risk-averse people tend to become more risk-seeking when choosing a mortgage type, leaning more toward ARMs when people frame the mortgage choice problem as part of a loss situation. The results of the intercultural comparison portion of the study supported the research hypothesis that UA works as a moderating variable for Prospect Theory’s reflection hypothesis, suggesting that risk-averse people with lower UA scores more dramatically change from a risk-averse preference for a fixed-rate bond to a more risk-seeking preference for an adjustable-rate mortgage, than risk-averse people with higher UA scores do. Overall, results of this study suggested that borrowers behave differently depending on their propensity for current consumption, the level of UA, and how they frame the mortgage choice decision. This study contributes to existing mortgage choice literature by incorporating psychological and cultural traits to examine borrowers’ attitudes towards interest rate risk with regard to residential mortgages. The findings are of great importance globally for governments and lenders in creating and introducing new mortgage products in countries with diverse cultures.

Thèse numérisée par la Division de la gestion de documents et des archives de l'Université de Montréal.

Thèse numérisée par la Division de la gestion de documents et des archives de l'Université de Montréal

The importance of cooperative relaying communication in substituting for, or complementing, multiantenna systems is described, and a brief literature review is presented. Amplify-and-forward (AF) and decode-and-forward (DF) relaying are investigated and compared for a dual-hop relay channel. The optimal strategy, source and relay optimal power allocation, and maximum cooperative gain are determined for the relay channel. It is shown that while DF relaying is preferable to AF relaying for strong source-relay links, AF relaying leads to more gain for strong source-destination or relay-destination links. Superimposed and selection AF relaying are investigated for multirelay, dual-hop relaying. Selection AF relaying is shown to be globally strictly outage suboptimal. A necessary condition for the selection AF outage optimality, and an upper bound on the probability of this optimality are obtained. A near-optimal power allocation scheme is derived for superimposed AF relaying. The maximum instantaneous rates, outage probabilities, and average capacities of multirelay, dual-hop relaying schemes are obtained for superimposed, selection, and orthogonal DF relaying, each with parallel channel cooperation (PCC) or repetition-based cooperation (RC). It is observed that the PCC over RC gain can be as much as 4 dB for the outage probabilities and 8.5 dB for the average capacities. Increasing the number of relays deteriorates the capacity performance of orthogonal relaying, but improves the performances of the other schemes. The application of rateless codes to DF relaying networks is studied by investigating three single-relay protocols, one of which is new, and three novel, low complexity multirelay protocols for dual-hop networks. The maximum rate and minimum energy per bit and per symbol are derived for the single-relay protocols under a peak power and an average power constraint. The long-term average rate and energy per bit, and relay-to-source usage ratio (RSUR), a new performance measure, are evaluated for the single-relay and multirelay protocols. The new single-relay protocol is the most energy efficient single-relay scheme in most cases. All the multirelay protocols exhibit near-optimal rate performances, but are vastly different in the RSUR. Several future research directions for fixed-rate and rateless coded cooperative systems, and frameworks for comparing these systems, are suggested. / Communications

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