The curse of low-valued recycling

Journal of Regulatory Economics - This paper discusses how to deal with low-valued recyclable wastes whose reprocessing itself does not pay financially. While such a recycling activity can...     

A new impetus for endogenous growth: R&D offshoring via virtual labor mobility

We develop a simple North–South model of quality ladders to show that the virtual mobility of labor across time zones, facilitated by the advance in communication technology, can raise the endogenous growth rate of the world economy. The unique balanced growth rate is increasing in the endowments of skilled labor in both countries and decreasing in the rate of impatience. Moreover, we find that partial R&D offshoring to the South has initially a negative effect on the level of skilled wages in the North, but this is compensated for by its positive effect on the growth rate in both North and South.     

A market model with medium/long-term effects due to an insider

In this article, we consider a modification of the Karatzas–Pikovsky model of insider trading. Specifically, we suppose that the insider agent influences the long/medium-term evolution of Black–Scholes type model through the drift of the stochastic differential equation. We say that the insider agent is using a portfolio leading to a partial equilibrium if the following three properties are satisfied: (a) the portfolio used by the insider leads to a stock price which is a semimartingale under his/her own filtration and his/her own filtration enlarged with the final price; (b) the portfolio used by the insider is optimal in the sense that it maximises the logarithmic utility for the insider when his/her filtration is fixed; and (c) the optimal logarithmic utility in (b) is finite. We give sufficient conditions for the existence of a partial equilibrium and show in some explicit models how to apply these general results.     

Tariffs and non-tariff barriers to trade in Hungary: The impact of the Uruguay Round and EU accession

International trade has featured prominently in Hungary's rapid transition to a market economy. This paper reports some relatively simple summary and complementary indicators for tariffs and non-tariff barriers (NTBs) to trade, which are designed to reflect the level and structure of tariffs and the scope of NTBs in Hungary. The existence of tariff 'spikes' and highly pervasive NTBs in certain sectors constitutes prima facie evidence that the domestic dead-weight efficiency and net welfare losses caused by tariff and non-tariff protection as well as the costs to consumers could be high. The indicators are used to highlight several key developments associated with Hungary's transition to a market economy, implementation of the Uruguay Round (UR) agreements and possible accession to the EU.     

A risk-sensitive stochastic control approach to an optimal investment problem with partial information

We consider an infinite time horizon optimal investment problem where an investor tries to maximize the probability of beating a given index. From a mathematical viewpoint, this is a large deviation probability control problem. As shown by Pham (in Syst. Control Lett. 49: 295–309, 2003; Financ. Stoch. 7: 169–195, 2003), its dual problem can be regarded as an ergodic risk-sensitive stochastic control problem. We discuss the partial information counterpart of Pham (in Syst. Control Lett. 49: 295–309, 2003; Financ. Stoch. 7: 169–195, 2003). The optimal strategy and the value function for the dual problem are constructed by using the solution of an algebraic Riccati equation. This equation is the limit equation of a time inhomogeneous Riccati equation derived from a finite time horizon problem with partial information. As a result, we obtain explicit representations of the value function and the optimal strategy for the problem. Furthermore we compare the optimal strategies and the value functions in both full and partial information cases.

---

Electronic Supplementary Material Supplementary material is available for this article at      

The Pricing Formula for Commodity-Linked Bonds with Stochastic Convenience Yields and Default Risk

At the maturity, the owner of a commodity-linked bond has the right to receive the face value of the bond and the excess amount of spot market value of the reference commodity bundle over the prespecified exercise price. This payoff structure is an important characteristic of the commodity-linked bonds. In this paper, we derive closed pricing formulae for the commodity-linked bonds. We assume that the reference commodity price and the value of the firm (bonds' issuer) follow geometric Brownian motions and that the net marginal convenience yield and interest rate follow Ornstein–Uhlenbech processes. In the appendix, we derive pricing formulae for bonds which are the same as the above commodity-linked bonds, except that the reference commodity price in the definition of the payoff at the maturity is replaced by the value of a special asset which depends on the convenience yield. This revised version was published online in August 2006 with corrections to the Cover Date.     

Volatility dynamics of NYMEX natural gas futures prices

We examine the volatility dynamics of NYMEX natural gas futures prices via the partially overlapping time‐series model of Smith (2005. Journal of Applied Econometrics, 20, 405–422). We show that volatility exhibits two important features: (1) volatility is greater in the winter than in the summer, and (2) the persistence of price shocks and, hence, the correlations among concurrently traded contracts, displays substantial seasonal and cross‐sectional variation in a way consistent with the theory of storage. We demonstrate that, by ignoring the seasonality in the volatility dynamics of natural gas futures prices, previous studies have suggested sub‐optimal hedging strategies. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:438–463, 2008