Authors’ Reply: On the Time Value of Ruin - Discussion by F. Etienne De Vylder; Marc J. Goovaerts; David C.M. Dickson; Vladimir Kalashnikov; Gérard Pafumi

Abstract

The qualitative behavior of the optimal premium strategy is determined for an insurer in a finite and an infinite market using a deterministic general insurance model. The optimization problem leads to a system of forward-backward differential equations obtained from Pontryagin’s Maximum Principle. The focus of the modelling is on how this optimization problem can be simplified by the choice of demand function and the insurer’s objective. Phase diagrams are used to characterize the optimal control. When the demand is linear in the relative premium, the structure of the phase diagram can be determined analytically. Two types of premium strategy are identified for an insurer in an infinite market, and which is optimal depends on the existence of equilibrium points in the phase diagram. In a finite market there are four more types of premium strategy, and optimality depends on the initial exposure of the insurer and the position of a saddle point in the phase diagram. The effect of a nonlinear demand function is examined by perturbing the linear price function. An analytical optimal premium strategy is also found using inverse methods when the price function is nonlinear.     

Cooperative research and development agreements (CRADAs) as technology transfer mechanisms

Cooperative Research and Development Agreements (CRADAs) between Federal R&D laboratories and private companies in the US are intended, in large part, to transfer technologies developed at Federal R&D laboratories to private companies. We surveyed the Federal laboratory and private CRADA partners involved in CRADAs at Los Alamos National Laboratory in New Mexico in order to identify certain difficulties inherent in CRADAs as mechanisms for technology transfer. Company partners do not share a common organizational culture with their Federal laboratory counterparts, and are critical of the length of time and complexity of government administrative arrangements necessary to form a CRADA.     

QUID PRO QUO FOREIGN INVESTMENT*

The paper analyzes the phenomenon of industry-specific direct foreign investment (DFI) which occurs with the view to defusing the threat of future protection by the host country (quid pro quo), under alternative imperfectly competitive market structures. It is established that, even in the absence of government intervention, firms in imperfectly competitive markets change the level of trade and DFI in response to future protectionist threats.     

The Impact of Professional Commitment and Anticipatory Socialization on Accounting Students’ Ethical Orientation

The accounting profession has emphasized the need for ethics education in the accounting curriculum. The current study examines professional commitment and anticipatory socialization, operationalized by perception of financial reporting, as possible determinants of Accounting students’ ethical perceptions and intentions. Accounting students with higher levels of professional commitment and higher perception of the importance of financial reporting were more likely to perceive questionable actions as unethical and less likely to engage in such actions compared to those students with lower commitment and lower perception of financial reporting. The results have implications for accounting instructors and accounting employers as they socialize students in the accounting profession at this early stage.