Insuring against the shortfall risk associated with real options

We would like to insure against the risk that a geometric Brownian motion, correlated with the price process of a certain traded asset, is in a set E at time T. In this paper it is shown that the best action one can take to insure against this risk is to buy a binary option on the traded asset. We give explicit formulas in the case that E is an infinite interval. The setting of all our investigations is the Black-Scholes model. Mathematics Subject Classification (2000): 91B28, 60J65, 62P05, 91B30, 62F03 Journal of Economic Literature Classification: G31     

Corporate Governance and Expected Stock Returns: Evidence from Germany

Recent empirical work shows evidence for higher valuation of firms in countries with a better legal environment. We investigate whether differences in the quality of firm‐level corporate governance also help to explain firm performance in a cross‐section of companies within a single jurisdiction. Constructing a broad corporate governance rating (CGR) for German public firms, we document a positive relationship between governance practices and firm valuation. There is also evidence that expected stock returns are negatively correlated with firm‐level corporate governance, if dividend yields are used as proxies for the cost of capital. An investment strategy that bought high‐CGR firms and shorted low‐CGR firms earned abnormal returns of around 12% on an annual basis during the sample period.     

Daniel Süss

Ohne Zusammenfassung     

Anstieg der Staatsverschuldung stellt Finanzpolitik vor große Herausforderungen

Zusammenfassung  Aufgrund der derzeitigen Finanz- und Wirtschaftskrise wird die Verschuldung der ?ffentlichen Haushalte in diesem und dem kommenden Jahr so erheblich steigen, dass es selbst unter günstigen gesamt- und finanzwirtschaftlichen Rahmenbedingungen mindestens ein Jahrzehnt dauern k?nnte, bis Deutschland wieder beide Verschuldungsgrenzen des Maastricht-Vertrages einhalten wird. Wie rasch kann die hohe Staatsschuldenquote zurückgeführt werden? Welchen Beitrag kann die Finanzpolitik für ein angemessenes Wirtschaftswachstum leisten? Wie sollte die Konsolidierungsstrategie ausgerichtet sein? Heinz Gebhardt, 56, Dipl.-Volkswirt, arbeitet in den Kompetenzbereichen „?ffentliche Finanzen“ und „Wachstum und Konjunktur“ des RWI Essen; Dr. Rainer Kambeck, 47, ist Leiter des Kompetenzbereichs „?ffentliche Finanzen“. Die Autoren danken Christoph M. Schmidt für kritische Anmerkungen und hilfreiche Kommentare.     

Steuermehreinnahmen er?ffnen budget?re Spielr?ume zum Abbau der kalten Progression

In May 2012 the Working Party on Tax Revenue Forecasting released a tax revenue estimate for the current year and the following four years based on key macroeconomic data supplied by the German Federal Government. The new official tax estimate forecasts additional revenues for central, state and local government. Tax revenues are expected to bring additional €24.9bn between 2012 and 2016. With the budgetary leeway, the fiscal drag, which has occurred since 2010, could be eliminated in 2013 and 2014. The Act to reduce fiscal drag would result in a revenue loss of €6bn a year.     

Der Flexibilitätsbeitrag in der Arbeitslosenversicherung

The controversy around fixed-term contracts centres around the conflict between the employer’s need for flexibility and the employee’s need for security. The authors propose flexible contributions for employers to the public unemployment insurance system to balance both interests. The employers’ contributions for their temporary staff would increase while the contributions for their permanent staff would in turn decrease slightly. The authors calculate four versions. With regards to the total sum of contributions, the first version holds the contributions received constant while the second version leads to a reduction. They then repeat these two calculations for fixed-term contracts without substantive grounds. The flexibility premium takes into account the higher unemployment risk of employees with fixed-term contracts and establishes monetary incentives for employers to hire employees with permanent contracts.