Contributions in Merlin

This thesis is about the pricing performance and strategy development based on pricing deviation of the machine learning algorithms of European options and convertible bonds. The classical models such as the Black-Scholes model and the Heston model usually make some unrealistic economical and statistical assumptions, and suffer from huge computational power required for parametric calibration. Regarding the inevitable flaws of traditional models, this article attempts to break out of the constraints of formula models and explore the issue of derivative pricing from the perspective of non-parametric models. The empirical analysis is based on data sets of China's 50ETF options and convertible bonds. A least squared error fitness function is used to calibrate the parameters for the Heston model. It shows that machine learning algorithms, especially the XGBoost method, not only has higher pricing accuracy and less calibration time, but also has some pricing power for abnormal prices in the market. In order to prove that the results obtained are not just products of over-fitting, this thesis back-tests the corresponding arbitrage strategy based on pricing deviation. The result shows that the XGBoost method has better annualized returns and risk control.

Investors and researchers use various performance tests to compare the performance of different portfolio strategies. Many apply the tests directly without checking the properties of them. Here, we aim to investigate the properties of Ledoit-Wolf test based on multiple settings and come up with an alternative performance test based on the abnormal rate of return. We find that Ledoit-Wolf test is more sensitive to the change of Sharpe ratio that comes from change of mean but not volatility, but has low power in both case. Besides, the test results in a less power along with a higher Sharpe ratio out-performance in the strategy of minimum-variance with constraints. The alternative test is built up on simple linear regression and HAC covariance estimators, which has a higher power than Ledoit-Wolf test in different designs and for different observation periods. Keywords: Ledoit-Wolf test, Sharpe ratios

In dieser Arbeit wird anhand einer empirischen Datenanalyse untersucht, wie verschiedene Anlagestile in Krisenzeiten performen. Dazu wurde eine Drawdown-Analyse ähnlich der von Stovall (2017) durchgeführt und die Renditen verschiedener Anlagestile über den Zeitraum von 1926 bis 2020 untersucht. Die einzelnen Drawdowns werden zusätzlich noch auf ihre Dauer und Stärke untersucht. Ausserdem werden die Dot.com-Krise und die Finanzkrise noch genauer betrachtet. Das Phänomen des Reversals, d.h. die Kurse des Aktienmarktes steigen nach starken Drawdowns stärker als im langfristigen Mittel, konnte aufgezeigt werden.

The presentthesisgives the reader an overview ofthe developments of living situation in the pastas well as over the recent situation. Additionally, the reader gets an outlook on the possible future evolution based on historical data ofreal estate transactions collected by Wuest and Part-nerand the Swiss FederalStatistical Officeover the last 20 years. Recent numbers as unem-ployment ratio, raise in population and life expectation will support to illustrate hypothesis about the future.Furthermore, the financial point of view of the investor as well as theone of the banksand therewith connected investmentdecisions into real estate are taken into consid-eration as well.This topic is especially relevant for research since it could influence the plan-ning of future infrastructure and furthermore the mortgage lending business what is one of the main fields of Swiss banks. The thesis will be based on literature, historical data stemming from historical real estate transactions as well as recent statistics.

null

In our study we conduct an experiment with the aim of testing if risk perception is domain dependent, namely if the declared level of risk attributed to a lottery significantly depends on the fact whether we deal with a winning lottery (probability of loss: 0%) or a losing lottery (probability of gain: 0%). To do so the participants are presented with a series of four 50:50 lotteries and the levels of perceived risk are collected. We find that risk perception exhibits domain dependence. It is furthermore influenced by the probability of loss as well as by the volatility of the lottery, which, how-ever, cannot be considered the leading factor.

Over recent years stricter EU capital requirements have resulted in constraining bank lending to SMEs. Alternative finance is expected to ease such constraints, but what would it be its impact on bank fragility? This paper examines whether alternative finance for Small and Medium Enterprises (SMEs) in the euro area would moderate bank fragility. We employ a bank profit model from which we derive a novel measure of bank fragility that is based on micro-foundations and is estimated in a single stage with Bayesian techniques. Controlling for many bank and firm specific variables, including bank capital adequacy ratios and volatility, we find that alternative finance overall strengthens bank stability, but that there is some variability in this impact over time and across countries. Interestingly, while higher bank capital adequacy ratios at times may even increase fragility, their interactions with alternative finance could help reduce it.

Convertible bonds have shown an incredible growth over the recent years and have become an important source of financing for companies. Their announcements are considered to induce stock price movements. This thesis aims to captures the announcement effects on stock prices of convertible bond offerings for US and Japanese companies for the last twenty years with the help of a standard event study. Cross-sectional regressions are run to find potential determinants of cumulative abnormal returns. Evidence is found that US convertible bond issues are accompanied with negative stock movements. The cumulative average abnormal returns range from -3.44% to -2.95%. There is mixed evidence for Japanese firms with cumulative average abnormal returns ranging from -1.05% to 2.31%.

Digital platforms have enabled huge efficiency in coordinating sharing practices among a large number of users. The proliferation of sharing platforms has formed a phenomenon often referred to – albeit not unanimously – as ‘the sharing economy’ or, more precisely, ‘the Digital Sharing Economy (DSE)’1. What makes the DSE special is its ability to enhance access to a wide variety of material and immaterial resources within large and spatially distributed communities of consumers; a feature that could not exist in traditional, small-scale sharing. This characteristic has been known as the enabling role of digital Information and Communication Technology (ICT) in transforming sharing practices and scaling up sharing networks. Such extensive changes brought by digital advancements can raise a number of important questions concerning sustainability (Salomon and Mokhtarian, 2008), as changes often come along with both opportunities and risks. From a sustainability perspective, an evident impact of sharing resources is improved efficiency in consumption. Through sharing, the utilization of a resource increases to serve more demand, which translates to an optimization effect. Nevertheless, it is possible that increased efficiency is followed by unwanted impacts such as rebound effects. Therefore, to develop a critical perspective, efforts should be directed towards understanding and analyzing both the potential positive and negative impacts of the shared consumption promoted by digital platforms. Such analysis can be based on two major parts: First, identifying the type of the resource that is shared; second, investigating how sharing that resource can affect the sustainability of its consumption and other consumption patterns that it may promote.

Research Summary Good corporate social responsibility (CSR) ratings can increase a firm's legitimacy and reduce its default risk. Yet, the interpretation of CSR varies between different countries. We investigate whether CSR ratings have a risk‐mitigating effect across different institutional contexts. We find that good CSR ratings have a general risk‐mitigating effect. Yet, we also find that the effect decreases when the rating agency is embedded in the institutional context of its home country and the rated firm operates in a country with a different culture or regulatory system. This suggests that a rating agency's country of origin and its embeddedness in that country's context play an important role in the relationship between CSR ratings and default risk. Managerial Summary In this article, we investigate to what extent CSR rating agencies signal organizational legitimacy across institutional contexts. Specifically, we evaluate how institutional distance between the rating agency and the rated firm moderates the negative effect of the CSR rating on the firm's default risk. We compare two CSR rating agencies, OEKOM, which is strongly embedded in its institutional context, and ASSET4, which operates across diverse institutional contexts. Based on a panel of 604 firms in 13 countries from 2011 to 2016, we show that CSR ratings from both rating agencies have a risk‐mitigating main effect. Yet, only in the case of OEKOM is the effect negatively moderated by regulatory and cultural distance. Thus, the legitimating effect of institutionally embedded CSR rating agencies decreases with institutional distance.