Multi-asset class, multimarket central counterparties (CCPs) are becoming less uncommon as a result of merges between specialized (single-asset class, single market) CCPs and market demands for greater capital efficiency. Yet, traditional CCP risk management models often lack the necessary sophistication to estimate potential losses relative to the closeout process of a defaulter’s portfolio in a multi-asset class, multimarket environment. As a result, multi-asset class, multimarket CCPs usually rely on a simplified silo approach for risk calculation which not only fails to deliver efficiency, but may also increase systemic risk. The CORE (Closeout Risk Evaluation) approach, on the other hand, provides conceptual and mathematical tools necessary for robust and efficient central counterparty risk evaluation in multi-asset class and multimarket environments, acknowledging the portfolio dynamics involved in the closeout process as well as important “real life” market frictions.

This paper examines the factors that give rise to intermediaries in exporting and explores the implications for trade volumes. Export intermediaries such as wholesalers serve different markets and export different products than manufacturing exporters do. Wholesalers are more prevalent in markets with higher destination-specific fixed costs and focus on products that are less differentiated, have lower contract intensity, and have large sunk entry costs. Aggregate exports to destinations with high shares of indirect exports are less responsive to changes in the real exchange rate than are exports to markets served primarily by direct exporters.

Prior research suggests that audit seniors' judgments are sometimes biased by their affect toward (i.e., feeling of personally liking or disliking) client personnel. We examine how experienced audit reviewers respond when reviewing an audit preparer's judgment that appears to be biased by the preparer's affect toward a client's controller. In our experiment, reviewers are provided with a preparer's judgment that appears inconsistent with the audit workpapers. We then examine the effect of providing versus not providing reviewers with a cue about the preparer's positive or negative affect toward the controller. We find that despite reviewers' belief that affect biases a preparer's judgment, reviewers who are informed of the preparer's affect do not rely less on the preparer's judgment. Instead, they actually rely more on the preparer's judgment than do those who are not informed about the preparer's affect. This result is consistent with Wegner's (1994) ironic rebound effect, which predicts that sometimes when individuals are trying not to rely on information, they ironically rely on it more. Our findings suggest a potential limitation of the audit review process.

In this study, we examine a setting where principals use past performance to annually revise performance targets, but do not fully incorporate the past performance information in their target revisions. We argue that this situation is driven by some principals and agents having an implicit agreement where the principal “allows” the agent to receive economic rents from positive performance-target deviations that are the result of superior effort or transitory gains by not revising targets upward, while the agent “accepts” target revisions by not restricting output when these revisions are the result of structural changes in the operation's true economic capacity. Although both the principal and the agent can benefit from an implicit agreement, we argue that for the implicit agreement to be maintainable, the principal either needs information on the cause of the performance-target deviation or there needs to be trust between the principal and the agent. Using archival data across multiple years and independent bank units, we find a pattern of ratchet attenuation and output restriction that is consistent with the existence of implicit agreements for those principal-agent dyads where information asymmetry is sufficiently reduced or mutual trust exists. Data Availability: Data used in this study cannot be made public due to a confidentiality agreement with the participating firm.

This paper develops a new methodology for constructing a real estate price index that utilizes all transaction price information, encompassing both single-sales and repeat-sales. The method is less susceptible to specification error than standard hedonic methods and is not subject to the sample selection bias involved in indexes that rely only on repeat sales. The methodology employs a model design that uses a sale pairing process based on the individual building level, rather than the individual house level as is used in the repeat-sales method. The approach extends ideas from repeat-sales methodology in a way that accommodates much wider datasets. In an empirical analysis of the methodology, we fit the model to the private residential property market in Singapore between Q1 1995 and Q2 2014, covering several periods of major price fluctuation and changes in government macroprudential policy. The index is found to perform much better in out-of-sample prediction exercises than either the S&P/Case-Shiller index or the index based on standard hedonic methods. In a further empirical application, the recursive dating method of Phillips et al. (2015a,b) is used to detect explosive behavior in the Singapore real estate market. Explosive behavior in the new index is found to arise two quarters earlier than in the other indices.

This paper explores the impact of the introduction of the widely viewed MTV reality show 16 and Pregnant on teen childbearing. Our main analysis relates geographic variation in changes in teen childbearing rates to viewership of the show. We implement an instrumental variables (IV ) strategy using local area MTV ratings data from a pre-period to predict local area 16 and Pregnant ratings. The results imply that this show led to a 4.3 percent reduction in teen births. An examination of Google Trends and Twitter data suggest that the show led to increased interest in contraceptive use and abortion.

Default contribution rates for 401(k) pension plans powerfully influence choices. Potential causes include opt-out costs, procrastination, inattention, and psychological anchoring. Using realistically parameterized models, we show how the optimal default, the magnitude of the welfare effects, and the degree of normative ambiguity depend on the behavioral model, the scope of the choice domain deemed welfare-relevant, the use of penalties for passive choice, and other 401(k) plan features. While results are theory-specific, our analysis provides reasonably robust justifications for setting the default either at the highest contribution rate matched by the employer or—contrary to common wisdom—at zero.

To identify the causal effect of schooling on cognitive skills, we exploit conditionally random variation in the date Swedish males take a battery of cognitive tests in preparation for military service. We find an extra ten days of school instruction raises scores on crystallized intelligence tests (synonyms and technical comprehension tests) by approximately 1% of a standard deviation, whereas extra nonschool days have almost no effect. In contrast, test scores on fluid intelligence tests (spatial and logic tests) do not increase with additional days of schooling but do increase modestly with age.

Quantitative estimates of the impacts of climate change on economic outcomes are important for public policy. We show that the vast majority of estimates fail to account for well-established uncertainty in future temperature and rainfall changes, leading to potentially misleading projections. We reexamine seven well-cited studies and show that accounting for climate uncertainty leads to a much larger range of projected climate impacts and a greater likelihood of worst-case outcomes, an important policy parameter. Incorporating climate uncertainty into future economic impact assessments will be critical for providing the best possible information on potential impacts.

We develop a model of selection that incorporates a key element of recent health reforms: an individual mandate. Using data from Massachusetts, we estimate the parameters of the model. In the individual market for health insurance, we find that premiums and average costs decreased significantly in response to the individual mandate. We find an annual welfare gain of 4.1% per person or $51.1 million annually in Massachusetts as a result of the reduction in adverse selection. We also find smaller post-reform markups.