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Joseph Calandro - One of the best experts on this subject based on the ideXlab platform.

  • Super Cats as Alternative Investments: an Overview
    SSRN Electronic Journal, 2007
    Co-Authors: Joseph Calandro
    Abstract:

    This paper provides an overview of the concept of super catastrophes, or Super Cats, as Alternative Investment opportunities. By way of the recent Pepsi Play For a Billion sweepstakes case we previously published a methodology for valuing Super Cats with a reasonable margin of safety. This overview summarizes that work.

  • Super Cats as Alternative Investments
    2005
    Co-Authors: Joseph Calandro
    Abstract:

    This paper introduces the concept of super catastrophes, or Super Cats, as Alternative Investment opportunities. By way of the recent Pepsi Play For a Billion sweepstakes case we present a methodology for valuing Super Cats with a reasonable margin of safety. The methodology combines insurance and value investing theory in a way that, to the best of our knowledge, has never before been presented. After the case discussion, general guidelines are presented that could prove useful in future Alternative Super Cat Investments.

  • Super Cats as Alternative Investments
    The Journal of Alternative Investments, 2005
    Co-Authors: Joseph Calandro
    Abstract:

    When a catastrophe or Super Cat occurs the costs can be exorbitant as Hurricane Andrew in 1992 dramatically showed. While the probability or odds of a hurricane striking southern Florida are rather high, not all catastrophes or Super Cats occur with such frequency. In fact, the probability of many Super Cats actually occurring is extremely low. Super Cats, which are currently little understood and thus scarcely covered, can present a potentially lucrative Alternative Investment opportunity for financial institutions with the requisite resources and proper valuation methodology. This article introduces the concept of super catastrophes, or Super Cats, as Alternative Investment opportunities. Using the recent Pepsi Play For a Billion sweepstakes case, it presents a methodology for valuing Super Cats with a reasonable margin of safety. The methodology combines insurance and value investing theory. In addition to the case discussion, general guidelines are presented that could prove useful in future Alternative Super Cat Investments.

Hossein Nabilou - One of the best experts on this subject based on the ideXlab platform.

  • a tale of regulatory divergence contrasting transatlantic policy responses to the alleged role of Alternative Investment funds in financial instability
    2016
    Co-Authors: Hossein Nabilou
    Abstract:

    This article analyzes the regulatory measures adopted to address the potential contribution of hedge funds to financial instability in the U.S. and the EU in the wake of the Global Financial Crisis. The relevant provisions of the Dodd-Frank Act include two sets of direct regulatory measures. The first set of these measures addresses information problems, whereas the second set is intended to address potential too-big-to-fail problems by imposing prudential regulation on systemically important nonbank financial companies. The article then studies the Volcker Rule, as an indirect regulatory measure intended to address the potential systemic risk of hedge funds originating from their interconnectedness with Large Complex Financial Institutions (LCFIs). The second part of this article analyzes the European Directive on Alternative Investment Fund Managers and its attempt to address the potential contribution of hedge funds to financial instability.Despite the common driving forces of hedge fund regulation across the Atlantic, ultimate policy outcomes were significantly divergent. Primarily concerned with creating a single market for Alternative Investment Funds, EU regulators prioritized the EU passport mechanism, which engendered demand for investor protection and more stringent and direct regulatory measures. In contrast, the main concern in the U.S. remained to be addressing potential systemic risk of hedge funds. Such differential regulatory objectives gave birth to indirect regulation of hedge funds with a focus on their interconnectedness with LCFIs. This is mainly embedded in the provisions of the Volcker Rule; a rule whose absence is significantly palpable in the EU regime for regulating hedge funds.

  • the Alternative Investment fund managers directive and hedge funds systemic risk regulation in the eu
    2013
    Co-Authors: Hossein Nabilou
    Abstract:

    In the aftermath of the financial crisis, hedge fund regulation was put at the top of the European regulators’ agenda for their alleged contribution to financial instability. This paper studies the recently enacted Alternative Investment Fund Managers Directive (AIFMD) in the EU and its attempt to address potential systemic externalities of hedge funds. To include all relevant pan-European regulations addressing the sources of potential systemic risks of hedge funds, a systematic review of the recently enacted laws, regulations and implementing measures has been conducted. The analysis is predicated upon the methodology of law and economics with a consequentialist approach according to which the merits of the AIFMD and relevant regulations will be evaluated in terms of the achievement of the intended goals. The legislative process of the AIFMD suggests that hedge fund regulation in the EU was a politically motivated overreaction to their perceived contribution to financial instability. The aim of the AIFMD is mostly achieving the single market objectives, rather than addressing systemic risks. The EU regulators’ emphasis on investor protection can also be understood in light of the aim of creating a single European market for financial services. However, since the investors in hedge funds are professional investors, the AIFMD’s focus on investor protection in hedge fund regulation seems to be a misallocation of limited regulatory resources. Despite the fact that the impetus for the enactment of the AIFMD mostly involved the concerns about their systemic aspects and their contribution to the financial instability, hedge fund regulation in the EU only marginally addresses systemic risks that hedge funds can potentially pose to the financial system. In addition, the AIFMD's focus on capital requirements, leverage limits, and remuneration policies and practices, and requirements for AIFM's depositaries does not address the real concerns about hedge funds which are their interconnectedness with Large Complex Financial Institutions (LCFIs), and their potential herd behavior. Rather, imposing such limits is likely to undermine the benefits of hedge funds to European financial markets. Moreover, since the business model of a hedge fund can substantially differ from that of private equity, real estate funds, infrastructure funds or commodity funds, the one-size-fits-all regulatory approach adopted in the AIFMD will likely have adverse effects on hedge funds and undermine their benefits to the financial markets. Furthermore, hedge fund regulation is likely to put EU hedge funds in competitive disadvantage compared with their global competitors by overburdening EU hedge funds. Overall, it is primarily estimated that such direct and heavy-handed regulation of hedge funds imposing substantial costs to the industry can encourage regulatory arbitrage resulting in the ineffectiveness of the EU hedge fund regulation in the long run. This paper also sheds light on potential future regulations supplementing the AIFMD and possible future amendments thereto. It suggests that the EU’s regulatory policy towards hedge funds particularly in areas involving direct regulation of hedge funds arising from investor protection concerns should be revised. Instead, the regulatory focus should be shifted towards indirect regulation of hedge funds targeting their interconnectedness with LCFIs and their potential herd behavior. Otherwise, it is suggested that with the level of protection offered to investors of the AIFs, the AIFMD or the competent authorities of the Member States can loosen the statutory limits for investing in hedge funds.

Stephane Villeneuve - One of the best experts on this subject based on the ideXlab platform.

  • irreversible Investment in Alternative projects
    Economic Theory, 2006
    Co-Authors: Jeanpaul Decamps, Thomas Mariotti, Stephane Villeneuve
    Abstract:

    We study the problem of a risk-neutral decision-maker who has to choose among two Alternative Investment projects of different scales under output price uncertainty. We provide parameter restrictions under which the optimal Investment strategy is not a trigger strategy and the optimal Investment region is dichotomous. Whenever the decision-maker has the opportunity to switch from the smaller scale to the larger scale project, the dichotomy of the Investment region can persist even when the volatility of the output price process becomes large.

Mark G Maffett - One of the best experts on this subject based on the ideXlab platform.

  • post listing performance and private sector regulation the experience of london s Alternative Investment market
    Journal of Accounting and Economics, 2013
    Co-Authors: Joseph J Gerakos, Mark H Lang, Mark G Maffett
    Abstract:

    Abstract We investigate the experience of companies listing and raising capital on the AIM, which is privately regulated and relies on Nominated Advisors who compete for listings and provide regulatory oversight. AIM firms underperform newly listed firms on traditionally regulated exchanges based on post-listing returns and failure rates, comparable to firms listing on the unregulated US Pink Sheets, and exhibit abnormally high pre-listing accruals and post-listing reversals. “High quality” auditors and Nomads partially mitigate underperformance, suggesting that AIM firms have limited ability to bond through more stringent oversight. Underperformance is particularly pronounced for firms with higher proportions of retail investors.

Jose Miguel Mendoza - One of the best experts on this subject based on the ideXlab platform.

  • securities regulation in low tier listing venues the rise of the Alternative Investment market
    Fordham Journal of Corporate & Financial Law, 2011
    Co-Authors: Jose Miguel Mendoza
    Abstract:

    As stock exchanges faced intense competition over the past few years, the success of a London-based junior listing venue - the Alternative Investment Market (AIM) - drew the collective attention of international market participants. Despite AIM's success, the causes underlying its growth have not been the object of extensive academic analysis. This paper will focus on the recent outbreak of low-cost listing venues in international financial centers and AIM's dominance in this particular niche. It will be contended here that AIM covered a funding gap for companies whose specific characteristics preclude them from listing in senior markets such as NASDAQ, the New York Exchange or the London Stock Exchange. This paper also suggests that AIM's regulatory model is optimal for the UK market - imposing low compliance costs on firms, but ensuring adequate disclosure and transparency levels - given the type of companies that seek an AIM listing and the sophisticated nature of its investors.

  • securities regulation in low tier listing venues the rise of the Alternative Investment market
    Fordham Journal of Corporate & Financial Law, 2008
    Co-Authors: Jose Miguel Mendoza
    Abstract:

    I. INTRODUCTION In recent years, participants in the world's capital markets witnessed a shift in the tide of international listings. As the U.S. financial market rapidly loses its standing as the center of the global economy, other countries eagerly rise to challenge its dominance. In the aftermath of the Enron collapse and the "dot com" bubble burst, investors and other market participants are turning away from the regulatory burden imposed by the rigorous U.S. securities framework. While some favor delisting,1 others seek jurisdictions with less stringent regulation in which the costs of being a public company are comparatively lower.2 By reducing the cost of listing and remaining listed, this trend allows systems that feature lighter levels of regulation and specialized market segments to thrive. These events might well be considered symptoms of global regulatory competition among securities regulators and stock exchanges.3 The worldwide growth of competing trading fora and a stirring movement for reform in the U.S. have given new life to an old debate concerning the proper degree of regulatory stringency for financial markets. Ascertaining the level of securities regulation that will prove most effective in increasing overall social welfare is not an easy task. A straightforward cost-benefit examination might be insufficient to solve this problem, since it is difficult to quantify the economic effects of securities regulation.4 In any case, an optimal securities framework should strike a balance between investor protection and compliance costs for listed companies.5 The tension lies in introducing proper measures to attain such a balance, while still allowing for the development of a deep and liquid capital market. For instance, even if prophylactic regulation boosts investor confidence in the market, thereby enhancing liquidity, such rules can increase the costs of equity issuances beyond reasonable boundaries.6 This situation could induce public companies to de-list or to seek Alternative listing venues.7 Yet, lighter levels of regulation could lead to market failures, eroding investor confidence to a point in which liquidity is constrained and a crash ensues.8 Two moments in U.S. capital market history provide further insight. The 2002 Sarbanes-Oxley Act9 ("SOX") is often criticized for increasing listing costs in the U.S.10 SOX was merely the product of a legislative reaction following a market crash, however, which brings to mind the response to the 1929 collapse that prompted the U.S. Congress to pass the Securities Act of 1933(11) and the Securities Exchange Act of 1934.12 Although the 1930's measures and minor subsequent amendments significantly raised listing costs, they created a framework in which the U.S. market flourished for several decades.13 Scholars argue that despite its higher costs, SOX's dissuasive effect on fraudulent behavior will generate net long-term benefits.14 Moreover, well-known regulatory figures, like former Securities and Exchange Commission ("SEC") chairman Arthur Levitt, call for the implementation of still stronger measures in the United States.15 Nevertheless, proponents of a lighter approach to securities regulation abound in the U.S. and abroad.16 As companies flee from the burden of U.S. regulation, policy-makers and scholars argue for an alleviation of local regulatory requirements for listed companies. The Report of the Committee on Capital Market Regulation (informally dubbed the "Paulson Report," after U.S. Treasury Secretary Henry Paulson) set the tone for reform by pointing out the erosive effect of regulatory intensity on U.S. dominance and competitiveness.17 The publication of the Paulson Report was followed by a study conducted by the Commission on the Regulation of U.S. Capital Markets in the 21st Century.18 The argument of this more recent report hinges on a comprehensive overhaul of the U.S. securities framework, focusing on the federal government's regulatory approach to financial markets and the SEC's powers regarding SOX. …