Economic Value of the Carbon Sink Services of Tropical Secondary Forests and Its Management Implications

This paper explores the economic feasibility of secondary forest regeneration and conservation as an alternative in the campaign addressing the problem of global warming. Detailed measurements of tropical secondary forests over time, in different ecological zones of Costa Rica, are used to evaluate carbon storage models. The paper addresses key issues in the international discussion about cross- and within-country compensation for carbon storage services and illustrates a method to compute/predict their economic value over time under a variety of scenarios. The procedure is applicable to other developing countries where secondary forest growth is increasingly important.     

Optimal investment under multi-factor stochastic volatility

We consider a model for multivariate intertemporal portfolio choice in complete and incomplete markets with a multi-factor stochastic covariance matrix of asset returns. The optimal investment strategies are derived in closed form. We estimate the model parameters and illustrate the optimal investment based on two stock indices: S&P500 and DAX. It is also shown that the model satisfies several stylized facts well known in the literature. We analyse the welfare losses due to suboptimal investment strategies and we find that investors who invest myopically, ignore derivative assets, model volatility by one factor and ignore stochastic covariance between asset returns can incur significant welfare losses.     

Fiscal Cyclicality in the Brazilian Economy: Something Is Changing

This article provides empirical evidence of the degree of fiscal cyclicality in the Brazilian economy from 2000 to 2010. The degree of fiscal cyclicality is estimated through OLS and GMM models for three different time samples with the objective of observing a change in the stance in the conduct of fiscal policy. The fiscal policy from January 2000 to December 2010 was countercyclical. However from 2000 to 2007 the search for credibility implied a cyclical fiscal policy. In contrast, after 2007, the possibility of using a countercyclical fiscal policy became feasible.     

The Voluntary Continuation in the Obligatory System of the Social Security Law

The system of obligatory insurance, regulated by the Social Security Law, includes the design of a mixed system, which allows workers to continue contributing to the social security. This mixed system, called voluntary continuation in the obligatory system, contemplates the option for workers who have concluded a work relationship and who wish to continue accumulating weekly contributions necessary to obtain the disability and life insurance rights, such as those of dismissal in old age, and are considered in the Social Security Act of 1973.     

PUBLIC SERVICES IN THE AREA OF THE SOCIAL ECONOMY IN ARGENTINA

ABSTRACT*: The author describes the development of the public sector of the social economy in the last few years. The state-owned companies with significant participation in the economic activity of the country were privatized within the so-called State Reform Scheme (Law 23696), beginning in 1990. Privatizations are still being carried out, but the main activities that were formerly in the hands of the state (electricity, transport, public service) are now in the hands of the lucrative private sector (corporations, mainly of foreign origin). The policy regarding the transfer of these companies has not favoured the social economy sector.     

Foreign direct investment (FDI) determinants and spatial spillovers across Mexico's states

This article studies the location pattern of foreign direct investment (FDI) in Mexico for the period 1994–2004. An empirical model is specified based on recent FDI theories. This model is estimated using state-level data and employing spatial econometric techniques. Results suggest that higher education levels and lower delinquency rates are important determinants to attract FDI. Results also suggest a relationship of complementarity between inbound FDI to the host state and inward FDI to its neighboring states.     

An analytical framework for retailer price and advertising decisions for products with temperature-sensitive demand

The demand for weather-sensitive products, such as beverages, ice creams, or chocolate varies with changes in temperature. Yet, retailers lack a framework to adapt the marketing mix elements, such as price and advertising, in line with such changes. We provide a theoretical framework to fill this gap by developing an analytical model to derive the optimal marketing mix when product demand depends on temperature. The model prescribes how price and advertising for different demand characteristics should be set following a temperature change. Integrating the temperature element in the marketing mix offers an original profit-enhancing strategy.     

Efficiently pricing double barrier derivatives in stochastic volatility models

Imposing a symmetry condition on returns, Carr and Lee (Math Financ 19(4):523–560, 2009) show that (double) barrier derivatives can be replicated by a portfolio of European options and can thus be priced using fast Fourier techniques (FFT). We show that prices of barrier derivatives in stochastic volatility models can alternatively be represented by rapidly converging series, putting forward an idea by Hieber and Scherer (Stat Probab Lett 82(1):165–172, 2012). This representation turns out to be faster and more accurate than FFT. Numerical examples and a toolbox of a large variety of stochastic volatility models illustrate the practical relevance of the results.     

“Author’s Reply: Critique of Mexico’s New Social Security Act”, Octavio Maupomé-Carvantes,July, 1999

Abstract

This paper considers the pension plan as part of the capital structure of the sponsoring employer. This enables lessons from financial theory concerning capital structure to be used to answer the question, “What assets should a pension fund hold?” The standard Modigliani-Miller framework is expanded on to consider the implications of corporate tax. This leads to the conclusion that bond investment for pension plans has tangible advantages over holding risky assets (e.g., equities). The paper considers a case study of the pension plan of the Boots Company, a U.K. pharmacy retailer with a pension fund of around £2.3 billion ($3.5 billion), where these ideas were put into practice. Finally, the paper discusses the value released to shareholders and the extra security members of the pension fund have derived from putting theory into practice.