Risky Positions Research Articles

Clear Word and Third Sight: Folk Groundings and Diasporic Consciousness in African Caribbean Writing (review)

Reviewed by: Clear Word and Third Sight: Folk Groundings and Diasporic Consciousness in African Caribbean Writing Nancy R. Cirillo Catherine A. John. Clear Word and Third Sight: Folk Groundings and Diasporic Consciousness in African Caribbean Writing. Durham: Duke UP, 2003. xi + 241 pp. Very much in the spirit of her study of African Caribbean writing, Catherine A. John ends her introduction with a section of Bob Marley’s “Rastaman Chant.” Her invocation of Marley as she effectively commences her scholarly work—as does her “Jah bless!” at the conclusion of the acknowledgements—tells us much about where we are. Where we are is, in part, in a critique of the “linearity” of traditional western thought supplanted by Africanist linguistic, historical and critical discourse, but largely in a critical examination of certain African Caribbean writers with respect to one of the major terms in the subtitle: folk groundings. These “groundings” in the “folk” are expressed through culture, through the language, rhythms, dances, shouts and music of the historic Black experience and are the means to the reclamation and reassertion of Black consciousness in the diaspora. For Black consciousness is, as developed here, ontological, immanent in the dances, shouts and language. If this is a risky position, she defends it well. Where we are, then, is with a vigorous, almost always lucid voice and the kind of impeccable scholarship that yields a ten page bibliography for the 209 pages of text. Organized from the theoretical to the textual, the introduction explores the “alternate consciousness” from several theoretical frames, building her case for the ontological in, at times, almost prosecutorial mode by dismantling the critiques of negritude by, for instance, Stuart Hall and Paul Gilroy and countering with Aime Cesaire and Leopold Senghor. Consequently, her introduction is a natural passage indeed to her first chapter and its subject, Paris, 1956, and the groundbreaking First International Conference of Negro Artists and Writers. Her command of the issues that dominated that conference and the debates that would have far reaching ideological effects is, at times, breathtaking. She works handily in French and easily in the literary and theoretical backgrounds, both Caribbean and African, although at moments seemed hasty in her judgments and stingy with contextualizing: Jacques Alexis is dismissed at one point as “employing Western definitions” (36), and she makes no effort here to, however briefly, examine how a Haitian at mid-century might have special concerns. Historians of the Caribbean warn us—wisely—to particularize. To what degree the debates at the 1956 conference were driven by national and, yes, cultural and historical differences, is eclipsed by an undeniably well crafted account of the ideological differences only. Chapter two, as its title “Colonial Legacies, Gender Identity and Black Female Writing in the Diaspora” suggests, connects to certain of the issues of the cultural debates of the 1956 conference. Her examination of the texts of such Black female writers as Zora Neale Hurston, Merle Hodge and Erna Brodber focuses on their often parallel arguments and representations that gender identity must be formed by African rather than European stereotypes, that language, sexual behavior and even dress are markers determining this identity especially in the colonial situation. It is at the end of this chapter that Professor John defines the role of the “diaspora scholar and critic” which is “. . . to build on these implicit conversations across space and time, with an eye to creating an alternate canon of literacy as root and foundation for new and evolving Pan-African [End Page 288] diaspora identities” (73). What is admirable here and invigorating is the articulation of a sense of purpose that is essential to her idea of scholarship and criticism. This is also very much a piece of the earlier theoretical chapters, especially her account of the work of Diop and Ba, and their projects of linguistic and cultural restoration. The daunting phrase, however, is “across space and time” and how to theorize this without blurring it. Chapter three, “Negritude and Negativity: Alienation and ‘Voice’ in Eastern Caribbean Literature,” begins with an epigraph from an interview with the Trinidadian novelist Earl Lovelace. Choosing wisely the definition of negritude as a “concrete coming to consciousness,” Professor John focuses on...

Explicit solutions for shortfall risk minimization in multinomial models

In this paper we show how to obtain explicit solutions for the problem of shortfall risk minimization in significant multinomial models with one or several risky assets. First we solve the problem when the market is complete, finding both the minimall shortfall risk as well as the optimal strategy. Then we indicate how the situation can change in incomplete markets, by solving (under some technical assumptions) the problem in the simplest case of an incomplete market, that is the case of a single risky asset driven by a trinomial model. In incomplete markets there are several possible criteria for hedging a risky position. The safest one is the superhedging criterion, that allows one to eliminate the risk completely, but requires in general too much initial capital. One may then ask by how much is it possible to lower the initial capital if one is willing to accept some risk or,

Convergence trading with wealth effects: an amplification mechanism in financial markets

I study convergence traders with logarithmic utility in a continuous-time equilibrium model. In general, convergence traders reduce asset price volatility and provide liquidity by taking risky positions against noise trading. However, when an unfavorable shock causes them to suffer capital losses, thus eroding their risk-bearing capacity, they liquidate their positions, thereby amplifying the original shock. In extreme circumstances, this wealth effect causes convergence traders to be destabilizing in that they trade in exactly the same direction as noise traders. This situation is consistent with the near-collapse of Long-Term Capital Management in 1998.

Optimal Portfolio Choice and the Valuation of Illiquid Securities

Traditional models of portfolio choice assume that investors can continuously trade unlimited amounts of securities. In reality, investors face liquidity constraints. I analyze a model where investors are restricted to trading strategies that are of bounded variation. An investor facing this type of illiquidity behaves very differently from an unconstrained investor. A liquidity-constrained investor endogenously acts as if facing borrowing and short-selling constraints, and one may take riskier positions than in liquid markets. I solve for the shadow cost of illiquidity and show that large price discounts can be sustained in a rational model. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

Resisting from the Margins: The Coping Strategies of Black Women and Other Women of Color Faculty Members at a Research University

This article argues that women of color, despite their marginalized position in the academy, need not consider their place as one of deprivation solely. In light of their considerable successes, a study was conducted to address two questions: How have academic women of color managed to cope, professionally and personally, given their marginalized position; and how have they used their position as a point and place of to racism, sexism, and classism? Secondary analyses of survey and interview data from faculty women of color at a major U.S. research university revealed that these women's strategies addressed five major areas: organizational barriers, institutional climate, lack of respect from one's colleagues, unwritten rules governing university life, and mentoring. I am located in the margin. I make a definite distinction between that marginality which is imposed by oppressive structures and that marginality one chooses as site of resistance-as location of radical openness and possibility. (hooks, 1990, p. 153) Numerous academic women of color have documented their individual experiences of living and working on the margins in their professional careers. hooks describes this marginalization experience as being part of the whole but outside the main body (hooks, 1990, p. 149). Other researchers have documented the finding that women of color encounter more barriers to professional socialization and success in the academic workplace than do their White female counterparts (Aguirre, 2000). Aguirre cited, for example, National Center for Education Statistics data which showed that African, Latina, Native, and Asian American women together comprised only 4% of the full-time instructional faculty at colleges and universities in the United States in 1993, with Black women constituting 2.2% of this group. White women, by contrast, comprised 29% of full-time faculty. Furthermore, women of color comprised 7% of all tenured associate and full professors in the 1993 U.S. professorate, with Black women again constituting more than half or 3.7% of this tenured group compared to White women, who constituted 32% of the nation's tenured associate and full professors. In terms of personal and professional fit into the culture of the academy, the experiences of many Black women, especially those employed at predominantly White institutions, are characterized by alienation, isolation, and social marginalization (Aguirre, 2000; Alfred, 2001). For Black women and other women of color in the academic workplace, marginalization often translates into a feeling of invisibleness. Because their research is frequently viewed as insignificant, these women often receive little or no support for their intellectual pursuits, especially when their work centers on racial, ethnic, and/or gender issues (Cox & Nkomo, 1990; Park, 1996; Reyes & Halcon, 1988). Such experiences may also result in their being disproportionately assigned to teach classes or perform duties that fulfill a service component as opposed to their being asked to teach courses required for the major or serve on committees that are critical to the functioning of the institution (Aguirre, 2000). Marginalization is further evidenced when Black faculty women are forced, either covertly or overtly, to compromise their gender and/or racial/ethnic identities and when their White colleagues hold unrealistic expectations, insisting that they be shining examples of their group and somehow different from other Blacks and other women (Aguirre, 2000). Despite being located on the margins-an unsafe and risky position for any member of an oppressed group-Black women and other women of color need not consider their place in the academy as one of deprivation solely. hooks (1990) has maintained that it should instead be viewed and used as a site for developing a community of resistance (p. 149). As she explained, [M]arginality [is] much more than a site of deprivation; in fact . …

Imperfect Arbitrage with Wealth Effects

This paper presents a continuous-time equilibrium model of arbitrage, based on risk aversion of perfectly competitive arbitrageurs and imperfect capital flows to arbitrage activity. Arbitrageurs make profits from trading against noise trading. Under the assumption of logarithmic utility, arbitrageurs' degree of absolute risk aversion changes with their wealth. When arbitrageurs suffer capital losses due to unfavorable shocks, their willingness to bear risks decreases, and they liquidate some of their risky positions. The liquidation of arbitrageurs' positions tends to amplify the original shocks, and thus generates a wealth effect. The wealth effect can cause arbitrage to be destabilizing in the sense that price volatility can be larger when arbitrageurs are present than when no arbitrageurs exist. The wealth effect offers a mechanism to explain the financial crisis of Long Term Capital Management in 1998. It also produces a motivation for risk managers to take into account the risks created by the trading of other market participants. The model shows that arbitrageurs reduce volatility and provide liquidity on average, but only in extreme circumstances does arbitrage become destabilizing. The wealth effect also provides an explanation for excess volatility and stochastic volatility. In equilibrium, markets are inefficient in the sense that the Sharpe ratio is not driven to zero by arbitrage activity. The long-run mean of the squared Sharpe ratio is primarily determined by the impatience level of arbitrageurs. The equilibrium wealth process for arbitrageurs is endogenously determined. Larger fundamental volatility deters wealth accumulation in arbitrage activity, while larger noise trading volatility induces more.

Contagion as a Wealth Effect of Financial Intermediaries

This paper models financial contagion as a wealth effect of financial intermediaries in a market with two risky assets and three types of traders: noise traders who trade in one market, financial intermediaries who partially arbitrage away noise trading, and long-term investors who provide liquidity. Contagion is characterized as decreased liquidity, increased volatility in both markets, and increased correlation between returns on the two assets occurring simultaneously with financial intermediaries suffering losses on positions. When financial intermediaries have reduced capital as a result of trading losses, they have a reduced capacity for bearing risks. This motivates them to liquidate positions in both markets, resulting in reduced market liquidity, increased price volatility in both markets, and increased correlation. Through this mechanism, the wealth effect leads to contagion. Financial intermediaries are assumed to follow consumption and portfolio rules which make them look like a log-utility investor: the volatility of their portfolio equals the Sharpe ratio available in the market and the dividend rate (i.e., consumption rate) equals the rate of time preference. They trade in two markets with independent fundamentals and constant dollar total risk. As the financial intermediaries partially arbitrage away the effects of noise trading in one market, they take large risky arbitrage positions. Long-term investors provide some liquidity, which makes it possible for financial intermediaries to liquidate positions when they suffer losses. The equilibrium has two state variables, the wealth of financial intermediaries and noise trading. A system of two simultaneous partial differential equations is solved numerically using a projection method. This model cautions risk managers to evaluate risks using information about the capitalization and positions of other market participants.

Risks in Derivatives Markets: Implications for the Insurance Industry

We model default risk in derivative contracts. Firms are less likely to default on derivatives than on corporate bonds because bonds are always liabilities, while derivatives can be assets. We provide an upper bound for default risk in derivatives-one substantially lower than appears to be implied by public debate over derivatives. Systemic risk is the aggregation of default risks; since default risk has been exaggerated, so has systemic Finally, public debate over derivative risks seems to ignore what we call agency risk. Without careful monitoring, standard compensation plans for derivatives traders can induce traders to take inappropriately risky positions.

Using Market Prices to Regulate the Costs of a Utility‘s Inputs

This paper analyzes the problem of determining allowable cost of a utility‘s inputs when the price of these inputs may be highly volatile and when hedging and long-term contracting are the norm in the supply of these inputs. In such an environment, benchmarks based upon the observable market price of an input are natural regulatory mechanisms to consider. This paper studies such incentive-based regulation. The first section uses contingent claims analysis to investigate a representative contract currently in place. The analysis indicates that this regulation may impose an important monitoring role on the regulator in order to prevent the utility from taking extremely risky positions in fuel markets. Further investigation of benchmark-based regulation is undertaken in a principal-agent framework in which the utility has the dual role of choosing a fuel portfolio and undertaking expenditures to reduce fuel costs. In this setting, it is shown that benchmark-based compensation is, at best, ineffective. Within the same setting, contracts based upon cost sharing are studied and found to be superior at obtaining a tradeoff between risks and cost reduction.

A model of comparative statics for changes in stochastic returns with dependent risky assets

In this article, we show how the order of Linear Stochastic Dominance proposed by Gollier (1995) can be applied to situations with dependent risky assets. This order was shown to be the least constrained necessary and sufficient condition to guarantee that all risk-averse agents reduce their risky position when an increase in risk is imposed. This was done in a model with only one source of risk, as in the standard portfolio problem with one safe asset and one risky asset. We obtain the necessary and sufficient condition for a change in the joint distribution of returns to yield an unambiguous comparative statics result when the two assets are risky. We show in particular that the concept of Linear Stochastic Dominance is sufficient to generate the desired result. These results are linked to existing sufficient conditions in the one-safe-one-risky-asset model, as the condition of strong increase in risk or the monotone likelihood ratio order. They are also compared to those in models where restrictions are on the set of concave utility functions.

How well have major Australian trading banks managed their foreign currency exposures?

This paper examines the individual performance of three major Australian trading banks in managing their foreign currency exposures. It finds that: (i) on average, the banks could have reduced ex ante foreign currency portfolio risk by over 80 per cent by selecting mean-variance efficient portfolios; (ii) the returns on foreign currency positions were small relative to the underlying risks; (iii) ex ante risk increased over the sample period from October 1984 to April 1987 but this was due largely to an increase in the size of foreign currency portfolios rather than to any shift towards relatively more risky positions; and (iv) the banks improved their risk performance over the sample period.

A Study of Risk-exposed Cotton Trading

The international spot-market, risk-exposed, trading of a cotton merchant was studied. A price model for estimating a market price for cotton with varying characteristics was constructed. This formed the input for a trading decision model which predicted the outcome of the merchant taking risky positions.

A Study of Risk-exposed Cotton Trading

The international spot-market, risk-exposed, trading of a cotton merchant was studied. A price model for estimating a market price for cotton with varying characteristics was constructed. This formed the input for a trading decision model which predicted the outcome of the merchant taking risky positions.

Majority/minority size and the evaluations of persuasive arguments

The present study examines the influence of relative minority size on perceptions of argument quality and attitude change. Strong and weak arguments for both cautious and risky positions were presented in conjunction with information describing the size of minority factions as either small or large. Results demonstrated that cautious argument quality influenced perceptions of argument quality only when the majority advocated a cautious position or when the minority faction was large. Results are discussed in light of their implications for normative and informational influences in group polarization.

Optimal Loss Reduction and Increases in Risk Aversion

Optimal Loss Reduction and Increases in Risk Aversion ABSTRACT The impact of increases in risk aversion on the optimal level of loss reduction is analyzed in models in which the magnitude of the prospective loss is uncertain. The results are sensitive to the specification of the source of the uncertainty. Introduction Dionne and Eeckhoudt (1985) show that a more risk averse individual will always choose a higher level of loss reduction (activity which reduces the magnitude of a potential loss) but may not always choose a higher level of loss prevention (activity which reduces the probability of loss).(1) However, following Ehrlich and Becker (1972), they consider only a simple two state model in which the severity of the possible loss is fixed. A crucial property of a two state model is that the productivity of loss reduction is not subject to uncertainty. This article extends the previous analysis by examining the impact of increases in risk aversion on optimal loss reduction within a more general model which allows the productivity of loss reduction to be uncertain. It is shown that the results for the simple model used by Dionne and Eeckhoudt do not carry over to more general models. It is assumed that uncertainly surrounding the loss reduction decision can arise form either of two distinct sources. In the first case, the severity of the potential loss is random, but there is no uncertainty about the effectiveness of loss reduction measures in reducing this loss. In the second case, the size of the potential loss is nonrandom, but the effectiveness of any loss reduction measure depends on conditions which happen to prevail at the time a loss actually occurs. In both cases the productivity of loss reduction is uncertain since the actual size of the loss avoided is unknown when the level of loss reduction is chosen. It is shown that an increase in risk aversion unambiguously increases the optimal level of loss reduction in the first case but not in the second case. Hence the results are critically dependent on the specification of the source of the uncertainty.(2) This contrast in the results for the two alternative specifications has a simple explanation. If uncertainty arises because the potential loss is random, then an increase in loss reduction activity also reduces the variance of the (conditional) loss. Hence, a more risk averse individual chooses a less risky position by selecting a higher level of loss reduction.(3) On the other hand, if the effectiveness of loss reduction measures is uncertain, then an increase in loss reduction activity increases the variance of the (conditional) loss. Consequently, a more risk averse individual may actually prefer a lower level of loss reduction because the risk increasing character of this activity lowers its value to the individual. Uncertainty about the Potential Loss Consider an individual with an initial wealth, W, which is subject to the risk of partial loss. The individual can undertake loss reduction, activity which reduces the size of the actual loss but which leaves the probability of a loss unchanged. In this section it is assumed that the effectiveness of this loss reduction is nonrandom. The magnitude of the loss is written as L(1 - h(x)), where L is a positive random variable representing the size of the potential loss and represents the proportion of the loss avoided by the loss reducing activity, x. It is assumed that there are diminishing returns to loss reduction (h'(x) > 0, h(x) The objective is to maximize (1 - p)U(W - C(x)) + pE[U(W - L(1 - h(x)) - C(x))] (1) where U is a strictly concave utility function and p is the probability that a loss occurs. …

A pure foreign exchange asset pricing model

If consumption tastes differ among countries, a position in foreign-denominated nominally riskless bonds is risky in real terms. Risk averse and rational consumer-investors facing such a situation would generally seek a diversified portfolio of foreign bonds. They would demand risk premia in accordance with portfolio (covariance) risk. A model is specified to portray this behavior and it is tested with data from eight countries. The results indicate that the actual premia earned in foreign risky positions are positively related on average to portfolio risk measures; but the premia deviate significantly from those predicted by the model.