Contributions published at Quantitative Finance (Marc Chesney)

Reducing Emissions from Deforestation and forest Degradation (REDD) projects are being designed and implemented across tropical countries, intending to curb the contribution of deforestation to greenhouse gas emissions. An important aspect of REDD implementation is the baseline against which reductions are measured. The baseline estimates the business-as-usual emissions from deforestation and forest degradation. We solve a dynamic model of land conversion from forest to agriculture in the presence of REDD, and assess the performance of four baselines. We show that none of the analysed baselines dominates in all performance aspects, and that the final baseline choice needs to maximise the trade-off between the effectiveness to reduce deforestation, cost-efficiency, and changes in income. The frequently used historical average baseline could be improved by using a forward-looking one, which is shown to better account for the opportunity costs faced by landowners. This result hinges on the ability of the baseline to predict deforestation rates without significant underestimations. We advocate the switch from a single-threshold baseline to a corridor methodology, which would provide continued incentives to reduce deforestation, even during periods of high opportunity costs. We finally show how the selection of certain baseline attributes, such as corridor bandwidth and symmetry, can enhance performance.

null

null

null

Grossbanken-Vertreter wiederholen es ständig: Mehr Eigenmittel verteuerten Firmenkredite – ergo leide die Volkswirtschaft, wenn Banken mehr Eigenmittel aufbauen müssten. Doch die Kantonalbanken beweisen das Gegenteil: In den letzten Jahren haben sie die Grossbanken bei der Vergabe von Firmenkrediten an KMU überholt. Und das bei deutlich höheren Eigenmittelquoten

null

Purpose – Investment advisors play a significant role in financial markets, yet the determinants of their behavior have not been explored in detail. The purpose of this paper is to explore the determinants of how actively advisors communicate about sustainable investing with their clients, and differences in the preferences of advisors compared to investors. Design/methodology/approach – Based on a survey with 296 retail and private banking investment advisors, this study employs an ordinary least squares regression model to explore the determinants of advisors activity in communicating about sustainable investing (SI) with their clients, differences in the aspects that matter to advisors and investors, and the role of the complexity of sustainability. Findings – Advisors activity in communicating about SI relates to their expectation of SI regarding financial return, real-world impact, and the fuzziness and trustworthiness of SI. Advisors appear not to be influenced by expected risk and their personal values, which runs against prior research findings and the interest of investors. Research limitations/implications – Future research should assess cultural differences and explore asymmetries between advisors and investors in regard to the role of volatility, values, impact measurement, and complexity. Practical implications – Investment advisors underweighting aspects related to risk and selftranscendent values relative to their clients might limit the suitability of clients' portfolios, skew capital allocation, and depress the role of SI in financial markets. Generalized to salespeople this behavior might depress the market success of products related to sustainability at large. Social implications – The findings and their generalization indicate that salespeople might systematically deviate from their clients’ interests in regard to social responsibility. Advisors and salespeople in their mediating role might be an important barrier to sustainable development. Originality/value – This is the first quantitative study that explores the decision-making by investment advisors in the context of SI, and as such answers to specific calls in literature to explore the micro-foundations of decision making in regard to SI and social responsibility, and on the relationship between private investors and investment advisors. This study is based on unique and original empirical data on advisors that work with retail and wealthy private investors.

null

null

null

null

We develop an econometric method to detect "abnormal trades" in option markets, i.e., trades which are not driven by liquidity motives. Abnormal trades are characterized by unusually large increments in open interest, trading volume, and option returns, and are not used for option hedging purposes. We use a multiple hypothesis testing technique to control for false discoveries in abnormal trades. We apply the method to 9.6 million of daily option prices

null

null

null

null

null

null