CAPITAL ALLOCATION AND RISK CONTRIBUTION WITH DISCRETE-TIME COHERENT RISK

We define the capital allocation and the risk contribution for discrete-time coherent risk measures and provide several equivalent representations of these objects. The formulations and the proofs are based on two instruments introduced in the paper: a probabilistic notion of the extreme system and a geometric notion of the generator . These notions are also of interest on their own and are important for other applications of coherent risk measures. All the concepts and results are illustrated by JP Morgan's Risk Metrics model.     

Anforderungen an die Abbildung von Versicherungsunternehmen im Rahmen mathematisch-ökonomischer Modelle in der Unternehmenspraxis

The article analyses the requirements which are to be fulfilled when modelling the insurance business from an economic perspective by means of mathematical models. The goal of the discussion is to define what the management needs to draw meaningful conclusions for steering of an insurance company. The authors emphasise the importance of the objective of the analysis, the different views which are important when analysing an insurer (book value versus market value perspective) as well as the importance of the timeline in models. The inclusion of time and the resulting options serve as a reference for the classification of models as being dynamic or static. A discussion of the validity of the model results, in the context of the basic assumptions of the model used, is given at the end of the article.     

Structural properties of the price-to-earnings and price-to-book ratios

We examine the structural properties of a firm’s price-to-earnings (P/E) and price-to-book (P/B) ratios and the relation between these two ratios. A benchmark result is obtained under the hypothesis that firms use replacement cost accounting to value their operating assets, so that the P/B ratio coincides with Tobin’s q. The firm’s P/E ratio can then be expressed as a convex combination of the P/E ratios suggested respectively by the permanent earnings model and the Gordon growth model, with the relative weight to be placed on these two endpoints determined entirely by Tobin’s q. Under current financial reporting rules, the accounting for operating assets is likely to be more conservative than replacement cost accounting. Our findings characterize how the magnitude and behavior of the P/E and P/B ratios are jointly shaped by several key variables, including both past and anticipated future growth, economic profitability, and accounting conservatism     

Causes,benefits, and risks of business tax incentives

This paper provides an updated overview of tax incentives for business investment. It argues that tax competition is likely to be a major force driving countries’ tax reforms, and discusses tax incentives as a possible response to this. This is complemented by more detailed arguments for and against tax incentives, and by an illustrative analysis of different incentives using effective tax rates. Findings from the empirical literature on tax incentives are also presented. Based on the overview of theoretical and empirical findings, the paper then suggests a matrix of criteria to determine the usefulness of different tax incentives depending on a country’s circumstances.     

Governments,Exports and Growth: Responding to the Challenges and Opportunities of Globalisation

We live in an increasingly globalised world. Trade has consistently grown faster than GDP and has been an important driver of world growth. What role should government play in this process? This paper considers the rationale for government action and the merits of various policies focusing on the UKs experience: the benefits of openness to trade and overseas investment and the merits of tackling barriers that discourage greater participation by firms in international markets. It also considers whether this approach needs to be adapted given current trends in globalisation, concluding that a continued emphasis on openness and addressing market failures will be welfare enhancing.     

Transformation of Local Power Elites: the Institutionalization of Social Movements in St Petersburg

Starting from the elections of 1990, the renewal of St Petersburg's political elite has developed in two stages. During the first stage, activists of social movement organizations were established in the city representative body (institutionalization of social movements). In the second stage, authoritative bodies within the city Soviet were formed from the deputy corps (whose members we have identified as the elite). Having progressed from their role of challenging the institutionalized political process to participating in it, the new city political leadership at first followed the patterns of social movement behaviour. There has been, however, a shift in activity patterns and an estrangement from challenging groups. There is also evidence of a change in the concept of city authorities' functioning. The desire for a union of representative and executive power, typical of an initial introduction to politics, is giving way to recognition of the need for a division of power. But the admission of leaders of challenging social movements to city power structures has not entailed their conversion to the new city elite. Depuis les élections de 1990, le renouvellement des élites de Saint Pétersbourg s'est produit en deux étapes. Durant la première phase, les activistes des organisations de mouvements sociaux s'établirent dans le corps représentatif de la ville (l'institutionalisation des mouvements sociaux). Durant la deuxième phase, les organisations autoritaires de la ville furent formées par le corps des fondés de pouvoir (dont nous avons identifiés les membres comme étant l'élite). Ayant progressé de leur position de contestation du processus politique institutionaliséà celle de participant dans ce processus, les nouveaux dirigeants politiques de la ville suivirent, au début, le modèle de comportement du mouvement social. Il y a cependant eu un changement dans les types d'activités et un retrait des groupes contestataires. Il y a aussi des indications de changement dans les concepts de fonctionnement des autorités de la ville. Le désir d'unir les pouvoirs représentatifs et exécutifs, caractéristique d'une introduction initiale à la politique, cède la place à une reconnaissance qu'une division du pouvoir est nécessaire. Mais l'entrée des dirigeants des mouvements sociaux contestataires dans les structures du pouvoir de la ville n'a pas été suivie par leur transformation en nouvelles élites.     

Thousands of models,one story: Current account imbalances in the global economy

The global financial crisis has led to a revival of the empirical literature on current account imbalances. This paper contributes to that literature by investigating the importance of evaluating model and parameter uncertainty prior to reaching any firm conclusion. We explore three alternative econometric strategies: examining all models, selecting a few, and combining them all. Out of thousands (or indeed millions) of models a story emerges. The chance that current accounts were aligned with fundamentals prior to the financial crisis appears to be minimal.