Coefficients of Asymptotic Expansions of SDE with Jumps

A new methodology for the problem of contingent claim valuation is proposed by Yoshida (Journal of Japanese Statistical Society, 22(2): 139–159, 1992, Stochastic Processes Application, 107(1): 53–81, 2003), and Takahashi and Kunitomo (2003). They used the asymptotic expansion theorem of Watanabe. Their method is applicable to various problems of contingent claim valuation. The author has obtained the asymptotic expansion formula for European call option of pure jump models (2008). In this paper, we determine the coefficients of the asymptotic expansion formula in order to test this formula numerically.     

Can everyone benefit from economic integration?

There is no Pareto efficient allocation rule which always encourages economic integration. Further, for any efficient rule treating indistinguishable agents identically in welfare terms, there is an economy in which a third of the agents are hurt upon integration.     

What Should Society Maximise Under Uncertainty?

This paper overviews the research on social decision criteria under uncertainty and attempts to provide insights for future directions.     

Can IT be Japan's savior?

This paper constructs a multi-sector model to take explicit account of the very sharp change in the relative price between non-IT and IT goods. The model is calibrated to the Japanese economy, and its solution path from 1990 on is compared to Japan's macroeconomic performance in the 1990s. Compared to the one-sector analysis of Japan in the 1990s [Hayashi, F., Prescott, E.C., 2002. The 1990s in Japan: A lost decade. Rev. Econ. Dynam. 5, 206–235], our model does slightly better or just as well in accounting for Japan's output slump and does worse in accounting for the capital–output ratio. We also show that, to revive a 2% long-term growth in per capita GDP, Japan needs to direct 10% of private total hours to the IT sector. J. Japanese Int. Economies 19 (4) (2005) 543–567.     

Identifying a Liquidity Effect in the Japanese Interbank Market

This article examines whether there was a liquidity effect in the Japanese interbank market for reserves during the period from January 4, 1996, to February 12, 1999. According to the standard martingale model, the only determinant of the overnight rate during the reserve maintenance period is the rate that is expected to prevail on the settlement day (the last day of the period), but this model ignores the fact that reserves are used for interbank payments. If overdraft costs are introduced into banks' reserve management problem, the overnight rate will also depend on what this paper calls the reserve surplus, which captures the liquidity effect of reserves. We identify the liquidity effect by exploiting two institutional features. First, the overnight rates observed in the morning are forward rates for a contract to be settled later in the day. Second, changes in reserves that are due to factors other than open market operations are rendered temporary through defensive operations by the Open Market Desk. We show that the liquidity effect can be identified from the regression of the spot-forward differential on these temporary liquidity shocks. Our estimates indicate that there was a liquidity effect, at least before the Yamaichi debacle of November 1997.     

Stopping with anticipated regret

This paper analyzes a stopping problem where the decision maker is driven by anticipated ex-post regret. There are two sources of potential dynamic inconsistency, one is arrival of information and the other is changing choice opportunities over time—discarding the current stopping option may change how she stops the game in the future.First we consider a naive planner who prescribes a commitment solution, and illustrate the nature of the inconsistency problem. Then we consider a sophisticated planner who plays backward induction against her ‘successive selves’. The resolution of dynamic inconsistency does not in general allow the use of standard dynamic programming technique. We provide, however, a simple characterization of the backward induction strategy, which is given in a recursive formula.We also provide a behavioral implication, that larger indeterminacy of belief may lead to a more aggressive behavior, that is, continuing the gamble longer, which contrasts to the implication of ambiguity aversion.     

亚股反弹难掩美经济衰退阴云

在美国联邦储备委员会（Fed）22日出人意料地宣布大幅减息的决定后，亚洲股市23日展开反弹。不过，股市的强劲表现并未给大型机构投资者带来多少喜悦，他们担心经济萧条的阴云会令美国消费者捂紧钱袋，不再踊跃购买亚洲出口商品。     

Preference aggregation under uncertainty: Savage vs. Pareto

Following Mongin [J. Econ. Theory 66 (1995) 313; J. Math. Econ. 29 (1998) 331], we study social aggregation of subjective expected utility preferences in a Savage framework. We argue that each of Savage's P3 and P4 are incompatible with the strong Pareto property. A representation theorem for social preferences satisfying Pareto indifference and conforming to the state-dependent expected utility model is provided.     

A note on small income effects

This note provides an alternative sufficient condition for the small income effect result that is first shown by Vives [Small income effects: a Marshallian theory of consumer surplus and downward sloping demand, Rev. Econ. Stud. 54(1) (1987) 87-103]. The condition is stated by ordinal terms only, whereas Vives assumes cardinal properties of utility representation. Second, as its application, we provide a sufficient condition for the preference being asymptotically quasi-linear, in a two good economy where the second good is a composition of a large number of goods.