Validation of Corporate Probability of Default Models Considering Alternative Use Cases

In this study, we consider the construction of through-the-cycle (“TTC”) PD models designed for credit underwriting uses and point-in-time (“PIT”) PD models suitable for early warning uses, considering which validation elements should be emphasized in each case. We build PD models using a long history of large corporate firms sourced from Moody’s, with a large number of financial, equity market and macroeconomic variables as candidate explanatory variables. We construct a Merton model-style distance-to-default (“DTD”) measure and build hybrid structural reduced-form models to compare with the financial ratio and macroeconomic variable-only models. In the hybrid models, the financial and macroeconomic explanatory variables still enter significantly and improve the predictive accuracy of the TTC models, which generally lag behind the PIT models in that performance measure. We conclude that care must be taken to judiciously choose the manner in which we validate TTC vs. PIT models, as criteria may be rather different and be apart from standards such as discriminatory power. This study contributes to the literature by providing expert guidance to credit risk modeling, model validation and supervisory practitioners in controlling the model risk associated with such modeling efforts.

Why do state-owned utilities become subject to financial logics? The case of energy distribution in Flanders

According to political economists, the state’s governance of infrastructure is becoming prone to processes of financialization. To date, however, research on how state owners of infrastructure enable and react to the entry of financial logics into such domains remains limited. This paper mobilizes the case of Eandis, a Flemish energy grid company, as a typical case to examine the causal mechanisms involved when state-owned utilities become subject to financial logics. During the 2000s, Flemish municipalities increased their ownership of Eandis, while the company deepened its debt exposure to optimize return on capital. In 2016, Eandis aimed to attract private financial equity and selected a Chinese investment fund as a potential co-shareholder. Although this buy-in was blocked, the conditions under which the state-owned company became increasingly entangled with financial markets remain unchanged and warrant a deeper examination. To explain this trajectory, we identify two causal mechanisms in the fields of market-making and ownership strategies by the multiscalar state. First, we show how regulatory models caused Eandis to focus on financial metrics such as credit ratings, subjecting management to financial market disciplines. Second, we find that budgetary constraints, combined with top-down utility governance, have made municipalities dependent on financial returns on utilities. The interaction between market-making and financial ownership strategies institutionalizes a financialized gridlock, in which municipal shareholders’ interests conflict with the need for low consumer fees and green grid investment. We argue that reforming the regulatory framework and strengthening fiscal solidarity across state layers would allow states to develop non-financialized strategies.

Violence in health care settings during the COVID-19 pandemic; the case of Algerian hospitals

The violence in health care settings is, at the moment, a subject of research which often concerns all the countries of the world, since this phenomenon is increasing in times of turbulence that can shake up the organization of the health system, as well as periods of crisis which can hamper the normal course of healthcare facilities. At the time of the COVID-19 pandemic, violence in healthcare settings in Algeria took a rather worrying turn. So we have confined ourselves to looking for the parties responsible for this violence, without venturing to follow the classic path which sheds light exclusively on the emerging part of the iceberg; in this case the care seeker. Among the solutions proposed to alleviate the scourge of violence during this critical period: enhance interactivity within hospitals in order to dismantle relationship barriers; preventive and repressive measures can be combined in order to regulate the behaviour of the care seeker; establish financial equity, which better serves the good citizen and which gives more responsibility to those who work in the informal sector.

Rural Development Theorising: Reinventing a Model of Financing Basic Rural Infrastructure in Nigeria

The burden of rural development has remained recurrent in the development planning of Nigeria from independence to date. Despite these concerns, the condition of the rural areas in terms of development infrastructure remains precarious. The development of rural infrastructure is highly central to the transformation of rural areas of Nigeria yet attention in that direction seems unproductive. Several methods of effecting rural development have been applied in the Nigerian context with little or no major inroad into addressing rural infrastructure and reversing the rural squalor common in the country. This paper argues that the pool method (central determination) of financing basic rural infrastructure is prone to excluding so many communities from accessing basic facilities and falls short of the practice of accountability. On the basis of this, the paper recommends a model of financing basic rural infrastructure known as FINANCIAL EQUITY MODEL. It is the thesis of this paper that further financial administration restructuring at the Local Government system will provide a plausible vent for a quick and even development of rural areas in Nigeria.

Extracting S&P500 and NASDAQ Volatility: The Credit Crisis of 2007–2008

This article demonstrates the utility of Bayesian modelling and inference in financial market volatility analysis, using the 2007-2008 credit crisis as a case study. It first describes the applied problem and goal of the Bayesian analysis before introducing the sequential estimation models. It then discusses the simulation-based methodology for inference, including Markov chain Monte Carlo (MCMC) and particle filtering methods for filtering and parameter learning. In the study, Bayesian sequential model choice techniques are used to estimate volatility and volatility dynamics for daily data for the year 2007 for three market indices: the Standard and Poor’s S&P500, the NASDAQ NDX100 and the financial equity index called XLF. Three models of financial time series are estimated: a model with stochastic volatility, a model with stochastic volatility that also incorporates jumps in volatility, and a Garch model.

Social Equity in the Trump Era

While not yet certain, Trump administration proposals to cut federal programs, including support for low-income housing, economic development in distressed rural communities, and workforce training programs, significantly threatens resources that local administrators have depended on to pursue greater social equity. As with the “new normal” following the Great Recession, administrators will be asked to innovate complex structural changes, including searching for new ways to generate needed revenues. These areas have both profound social equity implications and yet have received less attention from public administration researchers concerned with social equity. By necessity, if not by choice, local public administrators will be at the leading edge of innovation in these areas. By sharing ideas and innovations, administrators can support each other and advance our collective understanding of best practices in guiding structural change and financial equity administration. Most importantly, administrators can partner with their communities to defend, maintain, and expand social equity and social justice gains.

Insurance and Banking Interconnectedness in Europe: The Opinion of Equity Markets

Conditional expected shortfalls calculated for European insurance companies and banks under stressed market conditions are shown to be of similar magnitudes. Measured at 95% and 99% stress levels, on data covering the period from 1995 to 2011, the equity-return tail losses of insurance undertakings and banks are indistinguishable. Granger causality analysis, on all pairs of banks and insurance companies included in the sample, shows that banks and insurance companies have equal propensity to cause each others price movements. Even though the business model of insurance undertakings is different from the business model typically applied by banks, and even though insurance companies are not depending to a similar degree on short term funding as banks, the empirical results indicate that the financial equity markets in Europe do not differentiate their trading of banks and insurance companies in periods of stress.

An Empirical Test of a Resources Deployment Portfolio (RDP) Approach to Business Group ROE Decomposition

This study proposes a resources deployment portfolio (RDP) approach to decomposing return on equity (ROE) for business analysis. The five components are return on operating equity (RoOE), return on financial equity (RoFE), return on other equity (RoXE), return on influencing equity (RoIE), and R&D intensiveness (R&DI). Empirical results demonstrate that RDP decomposition offers substantial improvement over DuPont decomposition in explaining market valuation. Confirming the perceived sustainability, RoOE is the most consistently significant component for both long-term and short-term value creation. In line with prior research findings, R&DI is generally significant in contributing to long-term value creation but is not significant for short-term value creation.