2016. vol. 20. No. 1

This paper analyzes the basic credit risk parameters in residential mortgage lending and its evaluation with focusing on loss given default. We develop the method for the loss given mortgage default evaluation based on the econometric model for the probability of mortgage default, approximation value of collateral and residual loan amount in analyzing time horizon that is not used previously. Empirical distribution for mortgage loss given default is constructed based on developed approach and information on government-issued residential mortgage loans in Russia during 2008–2012 years and it is asymmetric and bimodal. The ratio of loss given mortgage default to the expected interest income was analyzed for certain pools of mortgage loans such as loans with verified and unverified borrower’s income, with different loan-to-value ratio and loans of primary lenders and regional operator of Agency of Home Mortgage Lending. We found that loans with high share of borrowed assets had high loss given default, exposure at default and creditor expected interest income. We show the usefulness of mortgage insurance for such loans as the way of expected loss compensation and found empirical evidence for that. Credit risk at the portfolio level was calculated and it increased with increase in the total cost related to a judicial settlement of outstanding mortgage debt. It can be used for calculation of loan loss provisions.

The fundamental idea underpinning spatial econometric models of economic growth is as follows: regional growth is determined not only by social, economic, geographic traits of a region but also by spillovers from other regions, most importantly adjacent ones. If one region starts booming, it can left neighbors unaffected (neutral mechanism), spur their growth (cooperation mechanism) or slow their growth by pulling resources over (competition mechanism). What mechanism and to which extent occurs in practice matters for designing balanced economic policy and evaluating efficiency of regional policy investment.

Classic spatial econometric models make strong although simplifying assumption that the same mechanism matters for all regions in the same manner, and there is no variation in spillovers intensity across regions. This assumption seems plausible for relatively small and homogenous regions of European countries, but it looks excessively strong for large and diverse Russian regions.

In this paper we attempt to relax this assumption and propose a new model, fitting better in Russian conditions and bringing only slight sophistication from the estimation point of view. We introduce sensitivity parameter governing regional exposure to externalities. We assume this parameter to be a linear function of region-level observables, like area, population density or urbanization rate.

These hypotheses have been confirmed at least partially. We found that dense and urbanized regions were more sensitive to spillovers. In other words, a region surrounded by the fast-growing areas, will grow the more intense, the more its population density and the higher the level of urbanization.

In this study we investigate reasons for the existence of the stable private sector wage “premium” in the Russian labor market for the period of 1994–2014 using data from the Russian Longitudinal Monitoring Survey. Public sector in our study is subdivided into budget sector and SOE sector. In contrast to the European labor market we do not find evidences of significantly higher job security in the public sector but we do establish that differences in fringe benefits could explain at least 50% of the wage gap. Difference in fringe benefits constitutes of discrepancies in the access to regular paid vacation and payments for tourist camps, full or partial payments for treatments in medical facilities, subsidies for food and transportation, free childcare etc. Lower wages in the public sector can also be explained by shorter workweek and more flexible working conditions, however the contribution of these factors to the private-public wage gap is negligible. We establish that the reasons for the existence of the private sector wage “premium” discussed above are applied to the same extend both to employees in public sector and in the SOE.

In this paper, we study how household’s migration experience affects migrants’ current choice of location within a single receiving country. Unlike most of previous research on migrants’ location choice, we analyze the case of temporary repeated migrations. We focus on two aspects of the effect of migration experience. First, we aim to identify history dependence that might exist in migrants’ destination choices. Second, we show how this history dependence and general migration experience influence the importance of regions’ economic characteristics: average wage and unemployment rate. To do this we employ 2007 and 2009 rounds of Tajikistan Living Standards Survey. Panel structure of the data set allows us to distinguish between new and repeated migrants and to control for households’ migration experience in 2007 while analyzing 2009 migrants’ location choices. We find considerable path dependence in destination choices by Tajik migrants. Previously chosen destination that were associated with higher wages and employment opportunities largely define the current ones. We also find that migration experience, both general and at specific destination, reduces the importance of receiving regions’ economic characteristics on location choice. In particular, after controlling for the migration history, wages and unemployment rate at the destination turn out to have less or no effect on migrants’ location choice. In addition, the effect of regional economic characteristics on the destination choices for new migrants is higher than for repeated.

Recent global financial crisis had significant impact on mutual fund industry both globally and in Russia. Total Net Assets and number of funds under management shrank dramatically. In this paper we analyze delisting of mutual funds in Russia. In contrast to existing studies we employ a matching procedure in order to compare liquidated and survived funds. For each liquidated fund we find all similar survived funds by investment style and Total Net Assets. Liquidated funds are smaller, younger, have poor performance records, and suffer from large asset redemption. Most of the mutual funds in Russia are liquidated along with fund management company. We show that Russian management companies are young, suffer from capital shortage and from lack of economies of scale, which sharply increase a probability for them to be liquidated. Our results stress the need for Russian fund management companies to have sufficient capital in order to be able to survive short-term negative shocks. This may help to increase confidence in Russian mutual fund industry and, consequently, develop Russian financial market. During the period of present economic and financial turmoil Russian management companies experience difficulties, which lead to consolidation of the whole industry. Management company liquidations have negative externalities on mutual funds’ investors. Therefore we suggest mergers of unviable management company with healthy ones as the best way to consolidate the industry.

This paper studies the problem of calculation the dynamic hedge ratio for the portfolio consisted of two assets. Commonly it’s solved assuming that the investor’s risk aversion is infinite. Then the optimal hedge coefficient is equal to ratio of covariance of the hedged and hedging assets to the variance of the latter. It’s natural to assume that the optimal hedge ratio also depends on the investor’s attitude to risk. In this paper this fact is implemented via maximization of the investor’s expected utility, which depends on the portfolio return and variance. Consequently if, for example, prices move upwards, the optimal hedge ratio is less than under the assumption of absolute risk aversion and vice versa. In the paper eight portfolios, consisted of Russian blue-chip stocks and futures, are estimated. Multivariate volatility models GO-GARCH and cop-GARCH are applied to estimate the conditional covariances and variances of hedged portfolio returns. There are additional parameters in the error term distribution, including skewness parameter, due to the existence of asymmetry effects in the financial assets returns’ distribution [Kroner, Ng, 1998]. The hedge effectiveness is estimated on the out-of-sample period using the maximum attainable risk reduction, unconditional variance of hedged portfolio returns and financial result. It’s shown that in six cases cop-GARCH surpasses GO-GARCH in hedge. Including the degree of risk aversion in the investor’s utility function together with above-mentioned volatility models allows to obtain hedge effectiveness from 24 to 65%.

The paper is devoted to the research of Angus Deaton, the winner of the Nobel Prize in economics 2015. It shows Deaton’s contribution to micro-, macro-, and development economics, as well as his philosophical approach to tools for development of economic theory and its links to reality.