A unified approach to ruin probabilities with delays for spectrally negative Lévy processes

ABSTRACT

In this paper, we unify two popular approaches for the definition of actuarial ruin with implementation delays, also known as Parisian ruin. Our new definition of ruin includes both deterministic delays and exponentially distributed delays: ruin is declared the first time an excursion in the red zone lasts longer than an implementation delay with a deterministic and a stochastic component. For this Parisian ruin with mixed delays, we identify the joint distribution of the time of ruin and the deficit at ruin, therefore providing generalizations of many results previously obtained, such as in Baurdoux et al. (2016) and Loeffen et al. (in press) for the case of an exponential delay and that of a deterministic delay, respectively.     

Private investment in small public entities

Private placements provided by institutional or individual accredited investors are becoming an important financing tool for small public firms worldwide. However, private placement issuers offer poor average returns. We explain this puzzle using 2,987 traditional private placements by Canadian small public firms over a decade. We observe significant long-run post-issue underperformance using a classic factor pricing model. This underperformance is partially erased when the returns are adjusted to consider the issuers’ high level of investment, and to include the discount granted to private investors. We split the sample by the glamour/value dimension and by the firms’ investment activity. Only glamour firms with high investment activity underperform in the long run. Private investors obtain positive returns on placements in value and high investment firms. However, they overestimate investment projects of glamour firms.     

A live experiment on approval voting

This paper presents a large-scale experiment on the Approval Voting rule that took place during the 2002 French presidential election. We describe the experiment and its main results. The findings are as follows: (i) Such an experiment is feasible, and very well accepted by voters. (ii) The principle of approval voting is easily understood and accepted. (iii) Within the observed political context, compared to the official first-round vote, approval voting modifies the overall ranking of candidates. (iv) The candidates Le Pen and Chirac, more than the others, were able to convert approval votes into official first-round votes. JEL Classification C93, D70, D72     

An actuarial analysis of the French bonus-malus system

The bonus-malus system in force in France differs from most of those used in industrialized countries around the world. Policyholders do not move inside a scale but their premium is obtained with the help of multiplicative CRM coefficients (CRM stands for the acronym of the French coefficient de réduction-majoration). The French bonus-malus system has been the topic of very few scientific investigations in the actuarial literature. This paper purposes to analyze this bonus-malus system in details. Despite its apparent simplicity, it will be seen that it leads to nontrivial mathematical problems. The financial equilibrium of the bonus-malus system is also investigated thanks to the multivariate De?Pril's algorithm for the convolution of independent and identically distributed random vectors.     

Instrumental variable estimation of a nonlinear Taylor rule

This article studies nonlinear, threshold, models in which some of the regressors can be endogenous. An estimation strategy based on instrumental variables was originally developed for dynamic panel models and we extend it to time series models. We apply this methodology to a forward-looking Taylor rule, where nonlinearity is introduced via inflation thresholds.     

Opportunities and risks of combining shopping experience and artistic elements in the same store: a contribution to the magical functions of the point of sale

ABSTRACT

This article draws on the construct of store atmospherics to address one of the latest developments in that field, i.e. the strategy of incorporating artistic elements into the store. On the one side, incorporating artistic elements in store atmospherics constitutes an innovative way for retailers to differentiate their shopping experience. Such a hybrid retail strategy seeks to offer maximised hedonic gratification to store visitors, while adding symbolic value to the commercial offering. Store traffic and sales are thus stimulated. Incorporating artistic elements is also a magic way to conceal the store’s transactional purpose; through this association with the art world, the store is viewed as less mercantile. However, there is a risk that consumers will view the store as a ‘museum’ and visit without purchasing. Therefore we conduce a conceptual investigation of that experiential strategy in order to assess its effects on retailer’s commercial and marketing performance.     

Ambiguity in Electoral Competition

The paper proposes an explanation to why electoral competition induces parties to state ambiguous platforms even if voters dislike ambiguity. A platform is ambiguous if different voters may interpret it as different policy proposals. An ambiguous platform puts more or less emphasis on alternative policies so that it is more or less easily interpreted as one policy or the other. I suppose that a party can monitor exactly this platform design but cannot target its communications to individuals one by one. Each individual votes according to her understanding of the parties’ platforms but dislikes ambiguity. It is shown that this electoral competition has no Nash equilibrium. Nevertheless its max–min strategies are the optimal strategies of the Downsian game in mixed strategies. Furthermore, if parties behave prudently enough and if the voters aversion to ambiguity is small enough, these strategies do form an equilibrium.     

Simultaneous Public and Private Provision of Services, Asymmetric Information and Innovation

Public and private provision of a service coexist. There is asymmetric information between the government and the agency providing the public service with respect to the costs, the quality of the service and the innovation effort of the agency. We examine the optimal government design of the funding contracts to induce the agency to reveal its costs and exert high innovation effort. The optimizing behaviour of consumers and private firms generates observable information, which can be used by the government to reduce its information problem. In the optimal contracts, the informational rents of the agency increase with the level of innovation effort that the government induces from the agency. Correlation between public and the private sector costs results in a trade-off in the government's policy between inducing innovation and extracting the informational rent of the agency. To increase the redistribution inherent in the public provision of the service, the government will manipulate the expected profits of the private firms to induce higher innovation effort.     

A better way to deliver bad news

In an ideal world, a subordinate would accept critical feedback from a manager with an open mind. He or she would ask a few clarifying questions, promise to work on certain performance areas, and show signs of improvement over time. But things don't always turn out that way. Such conversations can be unpleasant. Emotions can run high; tempers can flare. Fearing that the employee will become angry and defensive, the boss all too often inadvertently sabotages the meeting by preparing for it in a way that stifles honest discussion. This unintentional--indeed, unconscious--stress-induced habit makes it difficult to deliver corrective feedback effectively. Insead professor Jean-Fran?ois Manzoni says that by changing the mind-set with which they develop and deliver negative feedback, managers can increase their odds of having productive conversations without damaging relationships. Manzoni describes two behavioral phenomena that color the feedback process--the fundamental attribution error and the false consensus effect--and uses real-world examples to demonstrate how bosses' critiques can go astray. Managers tend to frame difficult situations and decisions in a way that is narrow (alternatives aren't considered) and binary (there are only two possible outcomes--win or lose). And during the feedback discussion, managers' framing of the issues often remains frozen, regardless of the direction the conversation takes. Manzoni advises managers not to just settle on the first acceptable explanation for a behavior or situation they've witnessed. Bosses also need to consider an employee's circumstances rather than just attributing weak performance to a person's disposition. In short, delivering more effective feedback requires an open-minded approach, one that will convince employees that the process is fair and that the boss is ready for an honest conversation.