Estimation of the Option Prime: Microsimulation of Backward Stochastic Differential Equations

A mathematical statistical model is needed to obtain an option prime and create a hedging strategy. With formulas derived from stochastic differential equations, the primes for US Dollar/Chilean Pesos currency options using a prime calculator are obtained. Furthermore, a backward simulation of the option prime trajectory is used with a numerical method created for backward stochastic differential equations. The use of statistics in finance is highly important in order to develop complex products.     

Recovering Hidden Indirect Tax Rates for Improved Calibration in Multisectoral Modelling

We explain in this work why a straight calibration to published input-output or SAM data in multisectoral modelling may lead to the use of an incorrect representation of the productive technology, hence casting doubts on the value of the empirical results. The culprit is the possible presence of indirect taxation in the form of, for instance, a value-added tax. We show how to unveil the hidden tax rates so as to clean up published data of this possibly distorting presence and therefore calibrate the correct production technology. This technology can then be used for multisectoral (i.e. CGE, input-output) analysis and simulations.     

The game-theoretic approach to international policy coordination: Assessing the role of targets

Zusammenfassung Der spieltheoretische Ansatz zur internationalen Koordination der Konjunkturpolitik: Die Rolle der Ziele. - In spieltheoretischen Modellen zur internationalen Koordination der Konjunkturpolitik wird die Rolle der von den Politikern verfolgten Ziele oft nur unzul?nglich berücksichtigt. Der vorliegende Artikel behebt den Mangel, indem er die Ziele der Politiker in die modelltheoretische Analyse explizit einbezieht. Der Spielraum für Wohlfahrtsverbesserungen durch Koordination erweist sich als direkt proportional zur Abweichung des angestrebten Wertes vom tats?chlichen Wert der Zielvariablen. Es zeigt sich, da? nach einem externen Schock die Anpassung der Ziele an die neue Situation eine Koordination der Konjunkturpolitik überflüssig macht. Darüber hinaus ergeben sich erhebliche Zweifel, ob das bisherige Vorgehen zur Quantifizierung m?glicher Wohlfahrtsgewinne durch Koordination logisch zul?ssig ist.

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Résumé L’approche jeu-théorique à la coordination internationale de la politique de conjoncture: Evaluation du r?le des buts. - Le r?le des buts poursuivis par les politiciens n’est considéré que insuffisamment dans les modèles jeu-théoriques de la coordination internationale de la politique de conjoncture. Cet article remédie ce problème en incluant expressément les buts des politiciens dans l’analyse modèle-théorique. La marge pour des améliorations de bien-être par la coordination est trouvée comme être directement proportioneile à la déviation de la valeur actuelle de la valeur aspirée du but. Les auteurs démontrent que l’ajustement des buts à la nouvelle situation après un choc externe rend superflu la coordination de la politique de conjoncture. De plus, il y a des doutes considérables si la procédure actuelle pour quantifier des gains de bien-être possibles par la coordination soit logiquement correcte.

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Resumen Aplicación de la teoría de juegos a la coordinación internacional de políticas económicas: el rol de las metas. - En los modelos de teoría de juegos aplicados a la coordinación internacional de la política económica las metas perseguidas por los políticos solo son tomadas en cuenta de manera inadecuada. En este trabajo se corrige esta desventaja, al incorporarse las metas de los políticos al análisis teórico. Las posibilidades de lograr niveles m’as altos de bienestar através de la coordinación resultan directamente proporcionales a la distancia entre el valor deseado y el valor realizado. Se demuestra que después de un shock externo la adecuación de las metas a la nueva situación hace redundante la coordinación de la política económica. Además résulta dudosa la coherencia del procedimiento tradicional para cuantificar ganancias de bienestar potenciales derivadas de la coordinación.

     

Deadlines and software: disentangling local government accounting reforms in Brazil

ABSTRACT

This paper shows how ongoing accounting reforms in Brazilian local governments were affected by a shift from a universal to a gradual implementation approach. Deadlines being postponed led to a decrease in local governments’ willingness to reform. This effect varied according whether the accountants involved depended on commercial software to operate a particular accounting policy. An important finding from this research was that software providers are to some extent setting the IPSAS implementation agenda in Brazil.     

Effective Enforcement of a Transferable Emissions Permit System with a Self-Reporting Requirement

We propose an enforcement strategy to achieve complete compliance in a transferable emissions permit system when firms are required to provide reports of their own emissions. Like the literature on self-reporting in the enforcement of standards, we find that self-reporting can conserve monitoring costs, but for a different reason. In addition, we show that targeted monitoring—the practice of monitoring some firms more closely than others—is not necessary in a competitive permit system. Furthermore, tying penalties to the equilibrium permit price can stabilize the monitoring effort necessary to maintain full compliance in the face of permit price fluctuations.     

Monetary and real shocks in a monetary Union: The Swiss case

We analyze to what extent real and monetary shocks affect price levels and real exchange rates in seven Swiss regions. A structural time series model is set up and estimated using the Kalman filter under two assumptions on the persistence of monetary shocks. We find that the variability of changes in price levels is mainly due to real shocks. The variance of monetary shocks is small but the monetary component of inflation differences across regions differs from zero with some persistence. As the Swiss case shows this does not seem to be a major obstacle to forming a monetary union.We thank Ernst Baltensperger, Tobias Rötheli, and participants at the Econometric Society European Meeting 1994 for stimulating discussions. The paper has also benefitted from constructive comments of two anonymous referees. Both authors gratefully acknowledge financial support provided by the Swiss National Foundation through Grants no: 8210-040206 (T.J.) and 12-40498.94 (C.L.).     

Multi-horizon inflation forecasts using disaggregated data

In this paper we use multi-horizon evaluation techniques to produce monthly inflation forecasts for up to twelve months ahead. The forecasts are based on individual seasonal time series models that consider both, deterministic and stochastic seasonality, and on disaggregated Consumer Price Index (CPI) data. After selecting the best forecasting model for each index, we compare the individual forecasts to forecasts produced using two methods that aggregate hierarchical time series, the bottom-up method and an optimal combination approach. Applying these techniques to 16 indices of the Mexican CPI, we find that the best forecasts for headline inflation are able to compete with those taken from surveys of experts.