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Register a new userA novel algorithm for clearing financial obligations between companies -- an application within the Romanian Ministry of Economy
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The concept of clearing or netting, as defined in the glossaries of European Central Bank, has a great impact on the economy of a country influencing the exchanges and the interactions between companies. On short, netting refers to an alternative to the usual way in which the companies make the payments to each other: it is an agreement in which each party sets off amounts it owes against amounts owed to it. Based on the amounts two or more parties owe between them, the payment is substituted by a direct settlement. In this paper we introduce a set of graph algorithms which provide optimal netting solutions for the scale of a country economy. The set of algorithms computes results in an efficient time and is tested on invoice data provided by the Romanian Ministry of Economy. Our results show that classical graph algorithms are still capable of solving very important modern problems.
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Many still rightly wonder whether accounting numbers affect business value. Basic questions are why? and how? I aim at promoting an objective choice on how optimizing the most suitable valuation methods under a value-based management framework through some performance measurement systems. First, I present a comprehensive review of valuation methods. Three valuations methods, (i) Free Cash Flow Valuation Model (FCFVM), (ii) Residual Earning Valuation Model (REVM) and (iii) Abnormal Earning Growth Model (AEGM), are presented. I point out to advantages and limitations. As applications, the proofs of the findings are illustrated on three study cases: Marks & Spencers business pattern (size and growth prospect), which had a recently advertised valuation problem, and two comparable companies, Tesco and Sainsburys, all three chosen for multiple-based valuation. For the purpose, two value drivers are chosen, EnV/EBIT (entity value/earnings before interests and taxes) and the corresponding EnV/Sales. Thus, the question whether accounting numbers through models based on mathematical economics truly affect business value has an answer: Maybe, yes.
In this paper, we construct a decentralized clearing mechanism which endogenously and automatically provides a claims resolution procedure. This mechanism can be used to clear a network of obligations through blockchain. In particular, we investigate default contagion in a network of smart contracts cleared through blockchain. In so doing, we provide an algorithm which constructs the blockchain so as to guarantee the payments can be verified and the miners earn a fee. We, additionally, consider the special case in which the blocks have unbounded capacity to provide a simple equilibrium clearing condition for the terminal net worths; existence and uniqueness are proven for this system. Finally, we consider the optimal bidding strategies for each firm in the network so that all firms are utility maximizers with respect to their terminal wealths. We first look for a mixed Nash equilibrium bidding strategies, and then also consider Pareto optimal bidding strategies. The implications of these strategies, and more broadly blockchain, on systemic risk are considered.
Family history is usually seen as a significant factor insurance companies look at when applying for a life insurance policy. Where it is used, family history of cardiovascular diseases, death by cancer, or family history of high blood pressure and diabetes could result in higher premiums or no coverage at all. In this article, we use massive (historical) data to study dependencies between life length within families. If joint life contracts (between a husband and a wife) have been long studied in actuarial literature, little is known about child and parents dependencies. We illustrate those dependencies using 19th century family trees in France, and quantify implications in annuities computations. For parents and children, we observe a modest but significant positive association between life lengths. It yields different estimates for remaining life expectancy, present values of annuities, or whole life insurance guarantee, given information about the parents (such as the number of parents alive). A similar but weaker pattern is observed when using information on grandparents.
After the 2007/2008 financial crisis, the UK government decided that a change in regulation was required to amend the poor control of financial markets. The Financial Services Act 2012 was developed as a result in order to give more control and authority to the regulators of financial markets. Thus, the Financial Conduct Authority (FCA) succeeded the Financial Services Authority (FSA). An area requiring an improvement in regulation was insider trading. Our study examines the effectiveness of the FCA in its duty of regulating insider trading through utilising the event study methodology to assess abnormal returns in the run-up to the first announcement of mergers. Samples of abnormal returns are examined on periods, under regulation either by the FSA or by the FCA. Practically, stock price data on the London Stock Exchange from 2008-2012 and 2015-2019 is investigated. The results from this study determine that abnormal returns are reduced after the implementation of the Financial Services Act 2012; prices are also found to be noisier in the period before the 2012 Act. Insignificant abnormal returns are found in the run-up to the first announcement of mergers in the 2015-2019 period. This concludes that the FCA is efficient in regulating insider trading.
Based on some analytic structural properties of the Gini and Kolkata indices for social inequality, as obtained from a generic form of the Lorenz function, we make a conjecture that the limiting (effective saturation) value of the above-mentioned indices is about 0.865. This, together with some more new observations on the citation statistics of individual authors (including Nobel laureates), suggests that about $14%$ of people or papers or social conflicts tend to earn or attract or cause about $86%$ of wealth or citations or deaths respectively in very competitive situations in markets, universities or wars. This is a modified form of the (more than a) century old $80-20$ law of Pareto in economy (not visible today because of various welfare and other strategies) and gives an universal value ($0.86$) of social (inequality) constant or number.
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