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dc.contributor.advisorWhitney Newey and Jerry Hausman.en_US
dc.contributor.authorHajYehia, Sameren_US
dc.contributor.otherMassachusetts Institute of Technology. Dept. of Economics.en_US
dc.date.accessioned2005-10-14T20:31:14Z
dc.date.available2005-10-14T20:31:14Z
dc.date.copyright2004en_US
dc.date.issued2004en_US
dc.identifier.urihttp://hdl.handle.net/1721.1/29432
dc.descriptionThesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2004.en_US
dc.descriptionIncludes bibliographical references.en_US
dc.description.abstractThis thesis is composed of three chapters, each includes one paper. The first chapter includes a paper that analyses the impact of terror on consumption and investment. This paper provides evidence on how consumers and investors react to terror attacks based on a new database from the Israeli-Palestinian conflict. An increase in terror casualties triggers households to alter their perceived personal security and expected future income. Only ex-post do households distinguish a temporary from a permanent increase in terror casualties. A temporary increase in the number of terror casualties causes a bust-boom cycle of durables consumption and irreversible investment; nondurables are affected less. A permanent increase in the number of terror casualties causes a one-time drop in consumption. This is in line with the theory on irreversible investment and durables consumption: terror generates temporary uncertainty about personal security and future income, which in turn causes a bust-boom cycle of durables due to bunching of purchases in later periods. A permanent increase in terror causes neither bunching nor boom. Similar results are obtained for the effect of terror casualties on fixed capital. The second chapter includes a paper titled: "Arbitrage Tests of Israel's Currency Options Markets." The aims of this study are threefold. First, we test the validity of the Black and Scholes (B-S) model as a naive option-pricing model for the case of an exchange-rate target zone. We find that although we cannot reject the weakly efficient market hypothesis (except for very-near-maturity deep-ITM options), we can reject the strongly efficient market and/or the B-S model validity hypotheses.en_US
dc.description.abstract(cont.) The banking sector could have utilized arbitrage opportunities, notably for out-of-the-money, at-the-money, and far-from-maturity options, especially when employing inter-temporal weighted-average implied standard deviation. Second, we estimate the liquidity premium for currency options by using a unique data set that allows us to comparing tradable and non-tradable options. The liquidity premium, though positive in average, is found to be negative for some options. This is an indication that there could have been arbitrage opportunities, especially for the banking sector. Third, we examine the null hypothesis that the Israeli currency options market is efficient, an issue that has not been investigated. Ex-post tests of arbitrage and dominance conditions do not permit rejection of the null hypothesis, except for very-near maturity, deep-in-the-money (ITM) options. The paper enhances the literature by using a unique database from the Israeli currency options market, which includes currency options traded on the Tel Aviv Stock Exchange and (non-tradable) Bank of Israel currency options. In addition, this paper examines B-S when the exchange rate is confined to a target zone. The third chapter includes a paper that analyses the robustness of exchange rate models, unit roots and cointegration. Three basic models have been proposed to explain the exchange rate: Purchasing Power Parity (PPP), the Balassa-Samuelson model and the random walk model. The robustness of these models is not merely a statistical curiosity but has important implications in many economic and financial models. During the last two decades ...en_US
dc.description.statementofresponsibilityby Samer Haj-Yehia.en_US
dc.format.extent160 p.en_US
dc.format.extent5703478 bytes
dc.format.extent5703285 bytes
dc.format.mimetypeapplication/pdf
dc.format.mimetypeapplication/pdf
dc.language.isoengen_US
dc.publisherMassachusetts Institute of Technologyen_US
dc.rightsM.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.en_US
dc.rights.urihttp://dspace.mit.edu/handle/1721.1/7582
dc.subjectEconomics.en_US
dc.titleEssays in financial economics : terror, consumption, and investment, currency options and liquidity premium, and purchasing power parityen_US
dc.typeThesisen_US
dc.description.degreePh.D.en_US
dc.contributor.departmentMassachusetts Institute of Technology. Dept. of Economics.en_US
dc.identifier.oclc56191036en_US


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