Lundberg parameters for non standard risk processes

We consider risk processes with delayed claims in a Markovian environment, and we study the asymptotic behaviour of finite and infinite horizon ruin probabilities under the small claim assumption. We also consider multivariate risk processes of the same kind, and we give upper and lower bounds for the Lundberg parameters of the corresponding total reserve. Our results have strong analogies with those one in the paper by Juri (Super modular order and Lundberg exponents, 2002).     

Taxing capital and labor when both factors are imperfectly mobile internationally

International Tax and Public Finance - We revisit the standard theoretical model of tax competition to consider imperfect mobility of both capital and labor. We show that the mobility of one factor...     

Presentation of the English translation of Ettore Majorana's paper: The value of statistical laws in physics and social sciences

We consider a consistent pricing model of government bonds, interest-rate swaps and basis swaps in one currency within the no-arbitrage framework. To this end, we propose a three yield-curve model, one for discounting cash flows, one for calculating LIBOR deposit rates and one for calculating coupon rates of government bonds. The derivation of the yield curves from observed data is presented, and the option prices on a swap or a government bond are studied. A one-factor quadratic Gaussian model is proposed as a specific model, and is shown to provide a very good fit to the current Japanese low-interest-rate environment.     

Regularity conditions and scope estimates: The case of large-sized U.S. banks

We consider economies and diseconomies of scope for large U.S. banks by employing ordinary and hybrid translog cost functions. We examine the regularity conditions in output space where scope estimates are calculated and reject all models for which these conditions fail. The translog model always possesses violations. For the hybrid translog, violations occur in every case except one. In this one case, we find economies of scope.     

Optimal pricing barriers in a regulated market using reflected diffusion processes

We consider a class of one-dimensional (1D) reflected stochastic differential equations (SDEs). Such reflected SDE models arise as the key approximating processes in a regulated financial market system, and our main goal is to determine the set of optimal pricing barriers. We consider the running cost associated with the deviation of the process from the desired target level, and also the control cost from the interventions in an effort to keep the process inside the boundaries. Both a long-time average (ergodic) cost criterion and an infinite horizon discount cost criterion, where the discount factor is allowed to vary from one period to another, are studied, with numerical examples illustrating our main results.     

An additional analysis of estimation techniques for the degree of financial leverage

This study compares three different empirical proxies for the financial leverage component of a systematic risk‐composition model employed in prior financial research. We consider one static accounting measure and two elasticity‐based measures. We find that the traditional static accounting measure of financial leverage provides statistically different estimates of financial leverage when compared to estimates from elasticity‐based measures of the degree of financial leverage. The findings are important because the elasticity‐based models for the degree of financial leverage have clear theoretical links to market‐based models of systematic risk, while the static accounting measure of financial leverage does not. Practitioners and researchers should carefully consider why they are estimating financial leverage and choose the appropriate method for doing so given the goals and potential consequences for biased estimation.     

Revenue Recognition and EU Endorsement of IFRS

This paper comments on a previous paper in this journal concerning EU endorsement of IFRS. It is suggested here that the previous authors should consider whether there can be more than one true and fair view even in one country and especially across European countries. It is further suggested that the previous analysis of five accounting standards does not support the claim that the European Commission wrongly endorsed them. It is also argued here that the previous analysis of the nature of most gains under IFRS is faulty.     

Optimal Reciprocal Reinsurance Treaties Under the Joint Survival Probability and the Joint Profitable Probability

A reinsurance treaty involves two parties, an insurer and a reinsurer. The two parties have conflicting interests. Most existing optimal reinsurance treaties only consider the interest of one party. In this article, we consider the interests of both insurers and reinsurers and study the joint survival and profitable probabilities of insurers and reinsurers. We design the optimal reinsurance contracts that maximize the joint survival probability and the joint profitable probability. We first establish sufficient and necessary conditions for the existence of the optimal reinsurance retentions for the quota‐share reinsurance and the stop‐loss reinsurance under expected value reinsurance premium principle. We then derive sufficient conditions for the existence of the optimal reinsurance treaties in a wide class of reinsurance policies and under a general reinsurance premium principle. These conditions enable one to design optimal reinsurance contracts in different forms and under different premium principles. As applications, we design an optimal reinsurance contract in the form of a quota‐share reinsurance under the variance principle and an optimal reinsurance treaty in the form of a limited stop‐loss reinsurance under the expected value principle.     

THE COST OF RETAINED EARNINGS: A FURTHER NOTE, AN ILLUSTRATION AND A COMPUTER PROGRAM

This paper presents the personal and corporate tax adjusted version of the cost of retained earnings, with particular reference to the problem of computing the effective rate of tax on a unit of pre tax profit when one allows for the delayed incidence of part of the tax impost. The argument is illustrated numerically and supported by a computer program which enables the user to consider and work out the effect of changing one or more variables. A term which appeared in a previous article (Lister 1981) is corrected.     

Extending a Logistic Approach to Risk Modeling through Semiparametric Mixing

The new proposal of the Basel Committee on banking regulation issued in January 2001 allows banks to use internal ratings systems to classify firms. Within this context, the main problem is to find a model that fits the data as well as possible, but one that also provides good prediction and explicative capabilities. In this paper, our aim is to compare two kinds of classification models applied to creditworthiness using weighted classification error as the performance function: the standard logistic model and a mixed logistic model, adopting, respectively, a parametric and a semiparametric approach. The main problem of the former is related to the assumption of an i.i.d. hypothesis, but it is often necessary to consider the possible presence of unobservable heterogeneity that characterizes microeconomic data. To better consider this phenomenon, we defined and applied a random effect logistic model, avoiding parametric assumptions upon the random effect distribution. This leads to a likelihood that is defined as the integral of the kernel density with respect to the mixing density, which has no analytical solution. This problem can be obviated by approximating the integral with a finite sum of kernel densities, each one characterized by a different set of model parameters. This discrete nature helps us in detecting non-overlapping clusters characterized by homogeneous values of insolvency risk, and in classifying firms to one of these clusters by means of estimated posterior probabilities of component membership.     

Price dispersion, information and learning

We consider an economy where trade is decentralized and agents have incomplete information with respect to the value of money. Agents’ learning evolves from private experiences and we explore how the formation of prices interacts with learning. We show that multiple equilibria arise, and equilibria with price dispersion entail more learning than equilibria with one price. Price dispersion increases communication about private histories, which in turn increases the overall amount of information in the economy. We also compare ex ante welfare under price dispersion and one price. Our results show that, despite the existence of some meetings where no trade takes place, ex ante welfare under price dispersion may be higher than under one price.     

Aktuareksamen ved Universitetet i Oslo

Abstract

It is a fact that when one is making a decision concerning the probability distribution of a random variable by means of observing this random variable, one is recommended by the statisticians to consider certain functions of the operating characteristic (O.C.) of the decision function as measures of the reliability of the actual decision made. For instance, the confidence coefficient of an interval estimator will as a rule be regarded as a measure of our confidence in the interval.     

On Complicated Dynamics in Simple Monetary Models

We provide a complete characterization of stationary and nonstationary deterministic equilibria in search models of liquidity with indivisible assets. Two formulations are considered: the usual one with random search and bargaining; and a less common but arguably better one with directed search and posting. Also, we consider general meeting technologies. This is interesting because some results are easy with the particular technologies in previous studies but not in general. As is known, these models have equilibria where endogenous variables change over time as self‐fulfilling prophecies. More surprisingly, we prove there are no equilibria where they cycle in the long run.     

Go for broke or play it safe? Dynamic competition with choice of variance

We consider a differential game in which the joint choices of the two players influence the variance, but not the mean, of the one‐dimensional state variable. We show that a pure strategy perfect equilibrium in stationary Markov strategies (ME) exists and has the property that patient players choose to play it safe when sufficiently ahead and to take risks when sufficiently behind. We also provide a simple condition that implies both players choose risky strategies when neither one is too far ahead, a situation that ensures a dominant player emerges “quickly.”     

Bootstrapping the chain-ladder method for several correlated run-off portfolios

The prediction of the outstanding loss liabilities for a non-life run-off portfolio as well as the quantification of the prediction error is one of the most important actuarial tasks in non-life insurance. In this paper we consider this prediction problem in a multivariate context. More precisely, we derive the predictive distribution of the claims reserves simultaneously for several correlated run-off portfolios in the framework of the Chain-ladder claims reserving method for several correlated run-off portfolios.     

银行信息披露制度与银行系统稳定性研究

建立商业银行信息披露制度是我国金融改革中较重要的一环,一般的认识是信息制度的建立将使金融机构运作更审慎,有利于提高整个金融系统的稳定性;但本文通过博弈模型证明:赋予我国商业银行国家信用与进行信息披露制度之间存在着一定的冲突,目前我国对金融体系的过度保护反而会降低商业银行信息披露的对银行体系稳定性的改进,合适的改革次序应是国家信用在金融机构中的先行退出也即建立一个合适的存款保险制度,其次才是规范的信息披露制度的建立.     

预算控制与企业内部会计控制

预算控制是企业内部会计控制的重要方法之一,我国企业在从粗放管理走向精细化管理的过程中,也正在积极推广全面预算管理.在大量调查的基础上,本文认为,预算控制拓广了传统企业内部会计控制的范围,为会计控制与管理控制的有机结合提供了一个桥梁,其对保证财务报告的可靠性、企业经营活动的合法合规性及提高企业经营的效果和效率既产生了积极的作用,同时,在一定情况下,它又对上述内部控制目标产生消极作用.因此,本文在对预算控制进行正反两方面的分析后,提出了企业在实施预算控制时应注意的问题及应采取的一些措施.     

Comparing the top and the bottom income earners: Distribution of income and taxes in the United States

Tax reform is again at the center stage as Congress grapples with ideas to reduce the US budget deficit and the country readies itself for another election year. Given this unusually charged tax reform season, populist and party rhetoric appears to the general population to have largely replaced reasoned debate as politicians, economists and pundits “cherry pick” facts to justify their claims. Our contribution to the current debate on tax equity is that this is one of the very few studies that jointly consider the impact of payroll and income taxes. Most tax equity studies focus only on the federal income tax and as such issue misleading implications. It is important to jointly consider payroll and income taxes because (a) for taxpayers in lower income ranges, the payroll tax burden outweighs the income tax burden, while (b) for higher income taxpayers income from wages above $106,800 ($110,000 in 2012) are payroll-tax free, and (c) other sources of income, namely dividends and capital gains, are not subject to payroll taxes at all. Thus, we provide a more comprehensive picture of the overall progressivity (or lack thereof) exhibited by the current tax laws. In addition, we also consider how some often-raised tax proposals would prospectively affect income inequality and tax progressivity.     

基于税收影响的产品营销定价策略

产品定价策略是企业市场营销组合策略中一个极其重要的组成部分,其影响因素是多方面的。税收起征点、税率临界点和增值税纳税人身份等税收因素对企业产品定价策略的选择也具有重要影响。对此进行深入研究并加以巧妙利用,将有助于企业更加全面的考虑各方面的影响,以作出适当的市场营销定价决策。     

Classifying returns as extreme: European stock and bond markets

I consider extreme returns for the stock and bond markets of 14 EU countries using two classification schemes: One, the univariate classification scheme from the previous literature that classifies extreme returns for each market separately, and two, a novel multivariate classification scheme that classifies extreme returns for several markets jointly. The new classification scheme holds about the same information as the old one, while demanding a shorter sample period. The new classification scheme is useful.