Constant Proportion Portfolio Insurance Strategies in Hybrid Markets
Frank Ranganai Matenda
Abstract: Financial decisions are made under the state of indeterminacy. Randomness and fuzziness are two basic forms of indeterminacy. Probability theory (Kolmogorov, 1933) models randomness and fuzzy set theory (Zadeh, 1965) deals with fuzziness. However, in some cases, randomness and fuzziness appear simultaneously in a mathematical system. In order to deal with mathematical systems that contain both fuzziness and randomness, chance theory has been developed. Portfolio insurance refers to investment strategies which guarantee that the portfolio value at maturity or at any time before maturity will not go below a stated lower bound (also known as the floor), usually fixed as a fraction of the initial principal investment (Cont and Tankov, 2007). Constant proportion portfolio insurance (CPPI) is a popular example of portfolio insurance techniques. Various research papers have examined CPPI strategies based on probability theory (for example, Neftci, 2008 and Cont and Tankov, 2007) and credibility theory (see, for instance, Matenda, 2016). This study aims to analyse the mechanics of CPPI strategies in hybrid markets. Hybrid markets are markets in which asset prices are driven by hybrid processes. Basically, hybrid processes model both randomness and fuzziness. Assuming diffusion models with continuous trading, CPPI strategies are not exposed to gap risk. However, in reality, CPPI techniques are exposed to gap risk which needs to be analytically quantified. The multiplier value, m, and the CPPI-insured portfolio value, Vt, are positively correlated. A direct relationship between the CPPI-insured portfolio risk of loss and the multiplier value has been substantiated. The research paper constructs a strong foundation for the calculation of the multiplier value in accordance with the risk tolerance of the investors. This peace of research work also unfolds the basis for the analytical quantification of gap risk for CPPI strategies when asset price processes evolve as hybrid processes with jumps. The study is the first peace of research work to analyse CPPI strategies in hybrid markets.
Keywords: Portfolio insurance, indeterminacy, randomness, fuzziness, chance theory, hybrid processes, hybrid markets, gap risk, multiplier value.
Pages: 189 – 207 | Full PDF Paper
Frames and Populations in a Register-based National Statistical System
Anders Wallgren and Britt Wallgren
Abstract: In this paper we discuss how coverage errors in statistical registers can be measured and how estimates can be corrected for coverage errors by a dual frame approach and calibration of weights.
Keywords: Coverage errors, dual frames, calibration, administrative registers, register surveys.
Pages: 208 – 216 | Full PDF Paper
Structural Vector Autoregressive (SVAR) Analysis on Malaria Incidence in Gombe, Nigeria
M. B. Mohammed, A. U. Kinafa and B. Nata’ala
Vector autoregressive (VAR) models are capable of capturing the dynamic structure of many time series variables. Granger causality test, Impulse response functions and variance decomposition are typically used to investigate the relationships between the variables included in such models. In this context the relevant impulses or innovations or shocks to be traced out in an impulse response analysis have to be specified by imposing appropriate identifying restrictions. Taking into account the cointegration structure of the variables offers interesting possibilities for imposing identifying restrictions. Therefore VAR models which explicitly take into account the cointegration structure of the variables, so-called vector error correction models were considered in the previous work.
Granger causality test showed that Female group Granger cause Pregnant group (i.e Female group is helpful in predicting the future Pregnant malaria cases) while all other pairs were not significant. The results of impulse response functions revealed that almost all the groups had positiveand/or negative effects on othergroups. Finally variance decomposition analysis conducted indicatesthat all the groups were largely explained by their own innovations and slightly by the shocks of other groups.
Keywords: Vector Error-correction Model; Granger Causality Test; Impulse Response Function; Variance decomposition.
Pages: 217 – 233 | Full PDF Paper
Climate Change and Variability in Designing Stable Markets of Agricultural Products
Vladimir N. Afanasiev
Abstract: We propose a methodology of statistical analysis of food security as stability of national food supply system in a framework of extended reproduction. We suggest to ensure stability of production of main agricultural products based on synchronism and asynchronism of production fluctuations in the world, accounting for climate variability in space and time. We develop a system of statistical parameters for estimating stability of production levels and trends of different forms. We show that the parameters of trend stability may serve as characteristics of cycles’ presence and stability.
Keywords: food security, production stability, asynchronism of production fluctuations, cycles.
Pages: 234 – 239 | Full PDF Paper
Swapan Kumar Das, Subrata Majumdar and Nasima Akhter
Abstract: This is the second paper on I-spaces. Here anti-Hausdorffness has been introduced for I-spaces and many topological theorems related to anti-Hausdorffness have been generalized to I-spaces, as an extension of study of infratopological spaces.
Keywords: I-space, Trivial anti-Hausdorff I-space, Non-trivial anti-Hausdorff I-space, I-Continuous image, Quotient I-space, Irreducible spaces, Infratopological spaces.
Pages: 240 – 248 | Full PDF Paper