Capital Injections Research Articles

On the Bail-Out Optimal Dividend Problem

This paper studies the optimal dividend problem with capital injection under the constraint that the cumulative dividend strategy is absolutely continuous. We consider an open problem of the general spectrally negative case and derive the optimal solution explicitly using the fluctuation identities of the refracted–reflected Lévy process. The optimal strategy as well as the value function is concisely written in terms of the scale function. Numerical results are also provided to confirm the analytical conclusions.

A plan of capital injections based on the claims frequency

AbstractIn this work, we propose a capital injection strategy which is periodically implemented based on the number of claims in the classical Poisson risk model. Especially, capital injection decisions are made at a predetermined accumulated number of claim instants, if the surplus is lower than a minimum required level. There appears to be a similar problem found in reliability theory such that preventive maintenance policies are performed at certain shock numbers. Assuming a combination of exponentials for the claim severities, we first derive an explicit expression for the discounted density of the surplus level after a certain number of claims if ruin has not yet occurred. Utilising this result, we study the expected total discounted capital injection until the first ruin time. To solve the differential equation associated with this quantity, we analyse an extended Lundberg’s fundamental equation. Similarly, an expression for the Laplace transform of the time to ruin is also explicitly found. Finally, we illustrate the applicability of the present capital injection strategy and methodologies through various numerical examples. In particular, for exponential claim severities, some optimal capital injection strategy which minimises the expected capital spending per unit time is numerically studied.

The impact of negative interest rates on optimal capital injections

In the present paper, we investigate the optimal capital injection behaviour of an insurance company if the interest rate is allowed to become negative. The surplus process of the considered insurance entity is assumed to follow a Brownian motion with drift. The changes in the interest rate are described via a Markov-switching process. It turns out that in times with a positive rate, it is optimal to inject capital only if the company becomes insolvent. However, if the rate is negative it might be optimal to hold a strictly positive reserve. We establish an algorithm for finding the value function and the optimal strategy, which is proved to be of barrier type. Using the iteration argument, we show that the value function solves the Hamilton–Jacobi–Bellman equation, corresponding to the problem.

On fair reinsurance premiums; Capital injections in a perturbed risk model

We consider a risk model where deficits after ruin are covered by a new type of reinsurance contract that provides capital injections. To allow the insurance company’s survival after ruin, the reinsurer injects capital only at ruin times caused by jumps larger than a chosen retention level. Otherwise capital must be raised from the shareholders for small deficits. The problem here is to determine adequate reinsurance premiums. It seems fair to base the net reinsurance premium on the discounted expected value of any future capital injections. Inspired by the results of Huzak et al. (2004) and Ben Salah (2014) on successive ruin events, we show that an explicit formula for these reinsurance premiums exists in a setting where aggregate claims are modeled by a subordinator and a Brownian perturbation. Here ruin events are due either to Brownian oscillations or jumps and reinsurance capital injections only apply in the latter case. The results are illustrated explicitly for two specific risk models and in some numerical examples.

Minimizing capital injections by investment and reinsurance for a piecewise deterministic reserve process model

We consider the possibility for an insurance company to rely on capital injections to bring the reserve back to a given level if it has fallen below it and study the problem of dynamically choosing the reinsurance level and the investment in the financial market in order to minimize the expected discounted total amount of capital injection. The reserve process is described by a piecewise deterministic process, where the random discontinuities are triggered by the arrival of a claim or by a change in the prices of the risky assets in which the company invests. The capital injections, combined with the specific model, make the problem non-linear and difficult to solve via an HJB approach. The emphasis here is on making the actual computation of a solution possible by value iteration combined with an approximation based on discretization. This leads to a nearly optimal solution with an approximation that can be made arbitrarily precise. Numerical results show the feasibility of the proposed approach.

On the joint distribution of tax payments and capital injections for a Lévy risk model

ON THE JOINT DISTRIBUTION OF TAX PAYMENTS AND CAPITAL INJECTIONS FOR A LÉVY RISK MODEL We study the joint distribution of tax payments according toa loss-carry-forward scheme and capital injections in a Lévy risk model, andprovide a transparent expression for the corresponding transform in terms ofthe scale function. This allows us to identify the net present value of capitalinjections in such a model, complementing the one for tax found in ourpaper [3]. We also apply the result to the situation when injections may be stopped at a constant rate, and in this case an explicit formula for the netpresent value of taxes and injections is given.

LUGARES DE RESISTÊNCIA: O PROCESSO DE REPRODUÇÃO DO ESPAÇO URBANO NO CONTEXTO DOS MEGAEVENTOS ESPORTIVOS NO BRASIL – SÃO PAULO E RIO DE JANEIRO

Em todas as grandes cidades do mundo, fragmentos do espaço são escolhidos para receber aportes de capital sobre o interesse de alguns grupos em detrimento de outros, usando os megaeventos esportivos como justificativa e sinalizando um novo processo de reprodução do capitalismo nos tempos contemporâneos, que traz à tona o conflito pelo espaço – como lugar de apropriação e uso em contraposição ao espaço como reprodução de valor e de valor de troca.Objetiva-se analisar o conflito pelo espaço urbano em relação à habitação e as formas de resistência dos moradores que foram diretamente afetados por obras de infraestrutura e construção de equipamentos para os megaeventos esportivos brasileiros – Copa do Mundo 2014 e Jogos Olímpicos Rio 2016 –, tendo o poder público como intermediador dos processos de remoção e as empresas privadas como responsáveis pela execução das obras públicas.A metodologia teórica proposta se baseia na análise dos níveis e dimensões propostos por Lefebvre (2001, 2002), representados pelo embate constante entre a ordem próxima ou nível imediato (o vivido), e a ordem distante (as instituições), mediada pelo nível intermediário (a cidade). A metodologia prática que se coloca é a aplicação de entrevistas dirigidas à moradores das comunidades que foram ameaçadas de remoção, tanto com os que conseguiram permanecer quanto com os que aceitaram as negociações com o poder público.Almeja-se discutir as resistências por habitação dentro de um contexto historicamente produzido e tendo por premissa que o próprio processo de resistência é a forma possível encontrada por muitos moradores das metrópoles, na busca por uma utopia de transformação da própria relação social e do modo como se produzem os espaços.

Optimal threshold strategies with capital injections in a spectrally negative Lévy risk model

<p style='text-indent:20px;'>This paper focuses on optimal threshold strategies for a spectrally negative Lévy (SNL) risk process with capital injections and proportional transaction costs. Restricted to solvency constraint, our model requires the shareholders of dividends prevent ruin by injecting capitals. Value function of the firm is assumed to be an expected discounted total [dividends less discounted capital injection]. Under such a setup, we derive certain key identities in connection with value function of the firm of a maximum dividend rate. Under restricted dividend rates and capital injection, we give analytical description of the maximum value function of the firm and the optimal threshold strategy explicitly.

Analisis Dampak Pendanaan Konstruksi Proyek Pembangunan PrasaranaLight Rail Transit Jabodebek (Studi Kasus: PT Adhi Karya (Persero) Tbk.)

Based on Presidential Decree no. 98 Year 2015 and its amendments, PT Adhi Karya (Persero) Tbk. was assigned to build the Jabodebek LRT which includes: lanes (including elevated construction), stations, and operating facilities. The purposes of this study are to understand the analysis of project’s funding evaluation, to find the best funding scheme which options consist of Availibility Payment, Deferred Payment and Corporate Financing through Government Capital Injection (PMN) and to understand the impact of these funding schemes toward ADHI’s performance. Based on the analysis of existing data, it can be concluded by using Availability Payment and Deferred Payment schemes there will be significant increases in debt interest compared to Corporate Financing through PMN. Therefore, the best financing alternative is Corporate Finance through PMN.

Interbank Runs: A Network Model of Systemic Liquidity Crunches

I study how interbank lending network structures affect financial fragility. Interbank lending is beneficial but subject to coordination failure. With interbank wholesale funding, banks' balance sheets become inflated, and give the senior retail depositors a sense of safety to allow more illiquid assets. In interbank runs, banks run on banks as they mutually reinforce each other to withdraw interbank lending. Banks' individually precautionary liquidity hoarding strategies are connected by the pairwise lending relationships. Mean-field analysis extracts the systemic behavior from the network of strategic interactions. I show such dispersed and indirectly linked interactions also lead to discontinuous and system-wide liquidity crunches, as if the interactions are centralized. Local insolvency shocks trigger the interbank run if the network is unraveled beyond a critical point. The model is applied to identify the optimal capital injection targets of government bailouts, and study the systemic effects of the proposed regulations on restraining the highly connected banks.

PERUBAHAN KEBIJAKAN DI SEKTOR MIGAS PASCA REZIM ORDE BARU

Monetary crisis that later developed wide become economic crisis at the end of 1997 had cripled the government capacity in providing material resources for the people. Politically, the crisis had made people’s support decline and created low trust over the government. In order to protect the existence, the government demanded support of the international finance institution especially IMF. Consequently, weak bargaining position of the government made the government could’nt avoid political intervention of IMF and other international finance institution which were so dominant in forcing the government to change economy policy radically. One of policy change was done through liberalization of petroleum sector as a sector which had been regulated strickly by the government for a long time. Lesson learn that could be taken were: firstly, situation of crisis created pressure to change policy radically; secondly, need of capital injection in large number from abroad had made policy change be domined by international capitalist.

FAKTOR DETERMINASI FUNGSI INTERMEDIASI PERBANKAN SYARIAH DI INDONESIA

The condition of national economic growth has not had a significant impact on improving the community economy. One of the indications can be seen from the high level of open unemployment in 2009. This happened because of complaints from businessmen who felt the difficulty to obtain capital injection from the bank as an important source for increasing their production capacity. So, the intermediation function of Indonesian banking still needs to be questioned. Especially in Syariah banking, the role of intermediation function can be seen from the Financing to Deposit Ratio (FDR) indicator. FDR of Syariah banking in 2009 showed a degradation from previous years. It indicates a further gap between collected and channeled funds through financing in Syariah banking. So it is possible to make a study about the analysis of factors that can affect the banking intermediation function, especially Syariah banking. This study aims to identify the factors that influence the intermediation function of Syariah banking in Indonesia. The analytical tool used in this study is the "distributed-lag model" model. In this model, the analysis carried out multiple linear regression analysis, multiple correlations, calculation of determination coefficient value, and hypothesis check with T-test and F-test. The conclusion is about the existence of a significant relationship between NPF, SBIS, GDP, and CSPI in cooperation with FDR. Partially, NPF has a significantly positive relationship with FDR, meanwhile, SBIS and IHSG have a significantly negative relationship with FDR, and for GDP there is no significant relationship with FDR. Keywords: FDR, NPF, SBIS, GDP, and CSPI

Influence of External Forces on Bank Recapitalization

Purpose: This paper provides evidence of the influence of selected external forces during the banking crises on the recapitalized performance of banks in Indonesia, Malaysia and Thailand in the IMT-GT economic region. &#x0D; Methodology: The study covers a period of 19 years from 1997 to 2015 across 45 commercial banks. The data was collected from the World Bank database and the global economy website.&#x0D; Results: Although the strategy of capital injection used to strengthen the capital position of the banks proved positively significant, the results showed GDP, Inflation and Political Stability Index had different impact on the recapitalized banks' performance in these three countries. The overall results appears to indicate that external forces have higher impact on Indonesia banks compared to Thailand and Malaysian banks over the study period.&#x0D; Implications: This study recommend recapitalize banks to efficiently utilize their enlarged capital base to expand their lending activities and investment to real sectors in order to generate higher economic growth for the IMT-GT region.

Ruin probability via Quantum Mechanics Approach

The finite time ruin probability in the classical surplus process setup with additional capital injections and withdrawals is investigated via the Quantum Mechanics Approach. The results are compared with the Picard–Lefevre Appell Polynomial approach and the traditional Markov Chain approach. In addition, several optimization problems in the insurance market are numerically solved by applying the Quantum Mechanics Approach.

Risk Measures Based on Benchmark Loss Distributions

We introduce a class of quantile-based risk measures that generalize Value at Risk (VaR) and, likewise Expected Shortfall (ES), take into account both the frequency and the severity of losses. Under VaR a single confidence level is assigned regardless of the size of potential losses. We allow for a range of confidence levels that depend on the loss magnitude. The key ingredient is a benchmark loss distribution (BLD), i.e.~a function that associates to each potential loss a maximal acceptable probability of occurrence. The corresponding risk measure, called Loss VaR (LVaR), determines the minimal capital injection that is required to align the loss distribution of a risky position to the target BLD. By design, one has full flexibility in the choice of the BLD profile and, therefore, in the range of relevant quantiles. Special attention is given to piecewise constant functions and to tail distributions of benchmark random losses, in which case the acceptability condition imposed by the BLD boils down to first-order stochastic dominance. We provide a comprehensive study of the main finance theoretical and statistical properties of LVaR with a focus on their comparison with VaR and ES. Merits and drawbacks are discussed and applications to capital adequacy, portfolio risk management and catastrophic risk are presented.

Implicações da recepção do aporte de capital nas empresas estatais independentes: o caso do SERPRO

No estudo, avaliou-se a autossuficiência das atividades operacionais do Serviço Federal de Processamento de Dados (Serpro) na geração de caixa, de modo a permitir sua continuidade como empresa estatal independente ante o controlador. Para tanto, por meio de pesquisa de natureza qualitativa, do tipo descritiva e documental, analisou-se o comportamento dos fluxos de caixa das atividades operacionais, de investimento e de financiamento, em conjunto com as demonstrações contábeis, de 2005 a 2016. Observaram-se: decréscimo no saldo de caixa a partir de 2005, com recorrente insuficiência das atividades operacionais face ao consumo de caixa; recomposição do caixa mediante atividade de financiamento com constantes aportes de capital do ente controlador; indícios de pagamento de despesas correntes e dividendos com aporte de capital; recebimento financeiro em 2012 e 2014, sem perda da condição de independente, descumprindo normativos legais. A partir dos procedimentos adotados, constatou-se que, no período analisado, o Serpro encontrou-se em condições de não aderência às características e aos requisitos de estatal independente. Os resultados do estudo apresentam implicações práticas à medida que discute e propõe aspectos quanto ao planejamento e à execução das auditorias públicas voltadas à análise das condições de dependência das empresas estatais independentes sustentadas a partir das informações contábeis.

Optimal stochastic impulse and regular control for capital injections: A hybrid strategy

This paper investigates an optimal capital injection problem for a large company whose cash flow is described by a drifted Brownian motion. We firstly bring forward the fact that the decision maker can choose the types of capital injection including regular or/and impulse injections in practice. The decision maker has the option to decide the capital injection rate (with a maximum restriction) of regular injection and the capital injection time and the amount of impulse injection as well. We assume that both types of capital injections have proportional costs, and an additional fixed cost occurs associated with each impulse capital injection. From the point of view of cost control, the purpose of the decision maker is to find a strategy to minimize the cost of capital injections, with the minimal requirement that the firm has a positive cash flow. It leads to a mixed stochastic impulse and regular control problem. Under this criterion, we obtain the value function and the optimal control strategy which is a hybrid type of impulse and regular capital injections. At last, we also show the sensibilities of model parameters to the optimal strategy and the value function.

Do women lag behind men? A matched-sample analysis of the dynamics of gender gaps

Existing research suggests that female-owned firms are not as successful as those owned by men. However, there is a distinct possibility that the performance measures employed in these studies have failed to control for the level of heterogeneity that may be inherent in the firms that were assessed during these studies. This study employed a matched sample approach to determine whether gaps in success, such as survival rate, outcomes, growth, and financial capital injection, between male- and female-owned businesses are eradicated when heterogeneity is controlled for within the models employed. We matched 430 female-owned business with male-owned equivalents that had the same human capital profile in terms of age, level of education, experience, and race; the same working preferences in terms of factors such as number of hours worked per week and whether the business was run from home or an office; and the same industry in terms of high-tech, medium-tech and non-tech. We found that female-owned firms have the same rate of survival as their male-owned counterparts and that the growth rate exhibited by female-owned businesses in terms of factors such as total assets, employment, profit, and sales, is the equivalent of male-owned firms. We did not detect any gender gaps in terms of business performance. Furthermore, the results indicated that, while the firms that are started by women start smaller and stay smaller, they do not lag behind those started by males in terms of business performance. The findings of this research hold particular interest for scholars, researchers, policy makers, investors, and financiers. Above all else, they should offer women who are considering commencing their own venture some confidence that they have the same chance of succeeding as their male counterparts.

Production, Capacity, and Liquidity of a Financially Constrained Firm

This paper studies the optimal coordination of operational and financial decisions of a firm with restricted and costly access to capital markets. The firm dynamically manages its production capacity and cash reserve by making production, divestment, investment, dividend, and capital injection decisions each period. The paper characterizes the optimal policy and shows that it corresponds to the optimal exercising of the real options embedded in the capacity and cash. A distinguishing feature of these real options is that they are embedded in each other, reflecting the fact that in a dynamic setting, exercising a real option in capacity or cash generates additional capacity or cash, thus additional real options. As the capital market becomes less frictional, the values of the real options in capacity and cash increase, and the firm is more likely to raise capital but less likely to issue dividends to exploit the higher values of the real options. As the firm places more emphasis on maximizing the operating profit rather than the shareholder's value, the values of the real options in capacity increase, and the firm exhibits a more aggressive investment attitude.

ON THE COMPOUND POISSON RISK MODEL WITH PERIODIC CAPITAL INJECTIONS

AbstractThe analysis of capital injection strategy in the literature of insurance risk models (e.g. Pafumi, 1998; Dickson and Waters, 2004) typically assumes that whenever the surplus becomes negative, the amount of shortfall is injected so that the company can continue its business forever. Recently, Nie et al. (2011) has proposed an alternative model in which capital is immediately injected to restore the surplus level to a positive level b when the surplus falls between zero and b, and the insurer is still subject to a positive ruin probability. Inspired by the idea of randomized observations in Albrecher et al. (2011b), in this paper, we further generalize Nie et al. (2011)'s model by assuming that capital injections are only allowed at a sequence of time points with inter-capital-injection times being Erlang distributed (so that deterministic time intervals can be approximated using the Erlangization technique in Asmussen et al. (2002)). When the claim amount is distributed as a combination of exponentials, explicit formulas for the Gerber–Shiu expected discounted penalty function (Gerber and Shiu, 1998) and the expected total discounted cost of capital injections before ruin are obtained. The derivations rely on a resolvent density associated with an Erlang random variable, which is shown to admit an explicit expression that is of independent interest as well. We shall provide numerical examples, including an application in pricing a perpetual reinsurance contract that makes the capital injections and demonstration of how to minimize the ruin probability via reinsurance. Minimization of the expected discounted capital injections plus a penalty applied at ruin with respect to the frequency of injections and the critical level b will also be illustrated numerically.