Global Equity Correlation in International Markets

We present empirical evidence that the innovation in global equity correlation is a viable pricing factor in international markets. We develop a stylized model to motivate why this is a reasonable candidate factor and propose a simple way to measure it. We find that our factor has a robust negative price of risk and significantly improves the joint cross-sectional fits across various asset classes, including global equities, commodities, sovereign bonds, foreign exchange rates, and options. In exploring the pricing ability of our factor on the FX market, we also shed light on the link between international equity and currency markets through global equity correlations as an instrument for aggregate risks. This paper was accepted by Karl Diether, finance.

Risk-Sharing and the Creation of Systemic Risk

We address the paradox that financial innovations aimed at risk-sharing appear to have made the world riskier. Financial innovations facilitate hedging idiosyncratic risks among agents; however, aggregate risks can be hedged only with liquid assets. When risk-sharing is primitive, agents self-hedge and hold more liquid assets; this buffers aggregate risks, resulting in few correlated failures compared to when there is greater risk sharing. We apply this insight to build a model of a clearinghouse to show that as risk-sharing improves, aggregate liquidity falls but correlated failures rise. Public liquidity injections, for example, in the form of a lender-of-last-resort can reduce this systemic risk ex post, but induce lower ex-ante levels of private liquidity, which can in turn aggravate welfare costs from such injections.

Heavy Metal Concentration of Wheat Cultured in Golestan Province, Iran and Its Health Risk Assessment

Introduction: Exposure of grain products in polluted soil lead to adverse effects on human health. In this study, concentrations of HM (As-Cr-Hg) were analyzed in wheat grain cultured in Gonbad-e-Kavus City, Golestan province, Iran. Furthermore, its potential health risk was evaluated among residents. Materials and Methods: The sampling sites were located in arable lands. After separating the wheat grains and cleaning them, the seeds were collected in plastic bags for analysis by ICP/MS method. Digestion of samples was performed with Multi wave PRO microwave apparatus. Results: The mean concentrations of Arsenic (As), Chromium (Cr), Mercury (Hg), and Nickel in wheat seeds were 0.186 ± 0.08, 0.9 ± 0.07, 0.021 ± 0.019, and 0.5 ± 0.17, respectively. The results showed that concentrations of HM in wheat were as follow: Cr > Ni > As > Hg. The Hazard Quotient (HQ) was significantly different among various HMs. The largest HQ was related to As ranging from 0.33 to 13.3. The lowest HQ was attributed to Cr, which may be related to its high RfD = 1.5 mg kg−1. Conclusion: Different HMs varied largely in terms of their HQ. Regarding the exposed people, As and Hg had the highest contributions to the aggregate risks of HMs, while Cr had the lowest contribution. Although the findings showed low environmental concentrations of the studied elements and implied no danger to human health, it should be considered that many non-cancerous conditions weaken the immune system and prone the human beings to cancerous diseases.

Does insurance hedge macro volatility? Global evidence

Insurance is known in the literature as a contribution to economic growth. In our cross-country analysis, we found out that insurance density also appears to subdue macro volatility. In other words, an overall expansion of insurance coverage in an economy cushions aggregate risks. This empirical inference remains robust to controlling for other covariates known to co-move with economic activities. Given that the contribution of insurance to economic growth is more impactful in developing countries than in industrialized economies, not only this result is appealing to economic intuition, but also extends the claims in the existing researches.

Quantifying Vulnerability to Poverty in a Developing Economy

The concept of vulnerability extends the idea of poverty to include idiosyncratic as well as aggregate risks which can be defined as the probability of being in poverty or to fall deeper into poverty in the future. It can be categorised on the micro-and macro level where macro vulnerability refers to worldwide threats to social welfare, e.g. globalisation and recent international financial crises. Conversely, micro vulnerability refers to the household level risks including health risks, economic shocks, social shocks, natural disasters, and demographic shocks [Tesliuc and Lindert (2004)]. To assess and estimate vulnerability to poverty, various approaches had been proposed. First, vulnerability can be seen as a probability of falling into poverty in near future [Chaudhuri (2003); Christaensen and Subbarao (2005)]. The other ways of measuring vulnerability consider it as low expected utility [Ligon and Schechter (2003)] and vulnerability as uninsured expose to risk, i.e., measures of cost, in terms of consumption [Tesliuc and Lindert (2004)]. The basic idea is that the state of poverty at a given point actually is not sufficient for assessing poverty and for drawing results to design poverty reduction programs. Households face various risks and do not know whether any possible shock will hit them in future. So the assessment of poverty at a given point in time is a static approach, not considering possible changes in the future. By assessing vulnerability it refers to the dynamic perspective, it is explicitly forward looking and tries to include the risks that may push people into poverty in future