Dynamic Fund Protection

Abstract

Dynamic fund protection provides an investor with a floor level of protection during the investment period. This feature generalizes the concept of a put option, which provides only a floor value at a particular time. The dynamic protection feature ensures that the fund value is upgraded if it ever falls below a certain threshold level. Gerber and Pafumi (2000) have recently derived a closed-form expression for the price of this protection when the basic portfolio follows geometric Brownian motion. In this paper we examine the pricing of this feature under the constant elasticity of variance process. Two approaches are used to obtain numerical results. First, we show how to extend the basic Monte Carlo approach to handle the particular features of dynamic protection. When a discrete-time simulation approach is used to value a derivative that is subject to continuous monitoring, there is a bias. We show how to remove this bias. Second, a partial differential equation approach is used to price dynamic protection. We demonstrate that the price of the dynamic protection is sensitive to the investment assumptions. We also discuss a discrete time modification of the dynamic protection feature that is suitable for practical implementation. The paper deals just with pricing and does not consider the important question of reserving for these contracts.     

Theory and Empirics of Democracy and Crime Revisited: How Much Further Can We Go with Existing Data and Methodologies?

The vast empirical work on the criminogenic nature of democracies has produced strong—albeit suspiciously wide‐ranging—claims. This article reviews existing evidence and methodologies that link crime and democracies. It asks three questions: Do theories generate separable and exclusionary predictions enabling their identification and testing? Could results be more conclusive given existing data limitations and the current methodological state of the art? How far are we from obtaining such results? We conclude that there are far too many arguments with blurry lines predicting just about any result. Data are more likely to constitute the binding constraint rather than methodology issues, despite the fact that the estimation of causality between democracy and crime can still be improved. Finally, the priority should be the harmonization of existing information sources, which will require overcoming externalities associated with the public good nature of global information generation.     

Russia’s public catering: Characteristics,profitability, and dynamics

Public catering in the Soviet period is compared to that at present. Official statistics and alternative assessments of the industry’s financial results in 2001 and its dynamics over the period 2000–2005 are presented. The gross value added of public catering is updated on the basis of the revealed turnover underestimation. The industry’s shadow incomes are shown; a case for raising tax payments is made; and the possible size of increased tax payments is shown.     

EQUILIBRIA EXISTENCE AND CHARACTERIZATION IN AUCTIONS: ACHIEVEMENTS AND OPEN QUESTIONS

Abstract Establishing existence and characterizing equilibria are both important achievements in the study of auctions. However, we recognize that equilibria existence results form the basis for well accepted characterizations. In this survey, we review the landmark results and highlight open questions regarding equilibria existence and characterizations in auctions. In addition, we review the standard assumptions underlying these results, and discuss the suitability of the Nash equilibrium solution concept. We focus our review on single‐object auctions, but also review results in multi‐unit, divisible, combinatorial and double auctions.     

Is it punishment? Sovereign defaults and the decline in trade

Sovereign defaults are associated with declines in defaulting countries trade. Are these declines the result of trade sanctions as the trade sanctions argument of sovereign borrowing would suggest? We devise an empirical strategy to evaluate this issue based on the idea that if trade sanctions are causing the declines, bilateral trade with creditor countries should fall more than trade with other countries. We find that this is not the case. The analysis does not yield much evidence of broader punishment strategies including a league of major creditors either. These results contradict the predictions of the trade sanctions theory of sovereign borrowing.     

Productivity and efficiency with discrete variables and quadratic cost function

We propose an index of productivity based on a quadratic cost function and developed for discrete data including technical and allocative inefficiency, jointly with technical change and returns to scale, as determinants of Total Factor Productivity. This new index is applied to Spanish stevedoring industry so as to identify the sources of change in the productivity of a multiproductive activity, where some companies do not produce some of the outputs. In this context, the functional quadratic form and the productivity index proposed prove particularly useful.     

Cournot, Bertrand, and game theory: A further note

This note synthesizes the discussion on the role of Cournot and Bertrand in the analysis of duopoly by drawing on the history of the debate. We conclude that while Bertrand presented a critique of the mathematical economics of Cournot and stimulated the analysis of strategic choice in game theory, he did not present a duopoly model with price as a strategic variable, as opposed to Cournot's model with quantity. In fact, Cournot has both types of models. We show that Irving Fisher contributed to the myth about Bertrand's duopoly theory.     

Mobility and its alternatives in a national R & D system

Abstract . A framework is presented for understanding the relationship between the mobility of researchers and the effectiveness of an R & D system. Alternative structural factors that can provide similar results are described. Data taken from a study of Israel illustrate the extent to which mobility and its alternatives are found in this country, which has a particularly effective national R & D system.