Europe — A pioneer in greenhouse gas emissions trading

The decision on the EU directive for emissions trading in June 2003 makes Europe a pioneer in the large-scale application of market instruments to climate policy. This development would have been unthinkable five years ago. The negotiations provide a textbook example of public choice theory in practice. We describe the crucial points of the recent and upcoming legislation process at the levels of the EU and the Member States, the latter with a focus on Germany. The timetable for the enforcement of the emissions trading directive at the national level seems very tight—especially when considering the likely manoeuvres by several stakeholder groups.     

Risk management with options and futures under liquidity risk

Futures hedging creates liquidity risk through marking to market. Liquidity risk matters if interim losses on a futures position have to be financed at a markup over the risk‐free rate. This study analyzes the optimal risk management and production decisions of a firm facing joint price and liquidity risk. It provides a rationale for the use of options on futures in imperfect capital markets. If liquidity risk materializes, the firm sells options on futures in order to partly cover this liquidity need. It is shown that liquidity risk reduces the optimal hedge ratio and that options are not normally used before a liquidity need actually arises. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:297–318, 2009     

Intellectual Property-Management und Marketing

Die Bedeutung des geistigen Eigentums für das Unternehmensverm?gen nimmt stetig zu. Marken, Patente oder Urheberrechte entfalten ihre Wirkung jedoch nicht nur durch den Schutz des Staates, sondern insbesondere durch ihre Wahrnehmung seitens der Bezugsgruppen des Unternehmens. Dieser Beitrag zeigt Zusammenh?nge zwischen Intellectual Property (IP), Unternehmenskommunikation und Marketing auf und zeigt, wie diese Vernetzung in Wettbewerbsvorteile umgemünzt werden kann.     

Go for broke or play it safe? Dynamic competition with choice of variance

We consider a differential game in which the joint choices of the two players influence the variance, but not the mean, of the one‐dimensional state variable. We show that a pure strategy perfect equilibrium in stationary Markov strategies (ME) exists and has the property that patient players choose to play it safe when sufficiently ahead and to take risks when sufficiently behind. We also provide a simple condition that implies both players choose risky strategies when neither one is too far ahead, a situation that ensures a dominant player emerges “quickly.”     

Does Transparency of Central Banks Produce Multiple Equilibria on Currency Markets?

A recent strand of literature shows that multiple equilibria in models of markets for pegged currencies vanish if there is slightly diverse information among traders; see Morris and Shin (2001). It is known that this approach works only if the common knowledge in the market is not too precise. This has led to the conclusion that central banks should try to avoid making their information common knowledge. We develop a model in which more transparency of the central bank implies better private information, because each trader utilises public information according to her own private information. Thus, transparency makes multiple equilibria less likely.     

Evaluating development co-operation

Successful development co-operation largely depends on the willingness and capacity of both the donor and the recipient countries to subject joint projects and programmes to periodic and systematic evaluation, and to initiate learning processes. This article examines the current position of evaluation systems in German development co-operation.     

Currency board and crawling peg

The Russian financial system is caught up in a vicious circle of lack of credibility, inflationary expectations and non-sustainability of the exchange rate, which is driving the country to the brink of disaster. This has revived the debate as to what would constitute an adequate exchange rate system. The following article examines the arguments for and against a currency board and a crawling peg, and concludes that a combination of the two would be the best strategy. The author is indebted to Friedrich L. Sell and the participants of the 45th International Atlantic Economic Conference in Rome, March 14–21, 1998, for valuable comments.     

THE EFFECT OF ESTIMATION IN HIGH‐DIMENSIONAL PORTFOLIOS

We study the effect of estimated model parameters in investment strategies on expected log‐utility of terminal wealth. The market consists of a riskless bond and a potentially vast number of risky stocks modeled as geometric Brownian motions. The well‐known optimal Merton strategy depends on unknown parameters and thus cannot be used in practice. We consider the expected utility of several estimated strategies when the number of risky assets gets large. We suggest strategies which are less affected by estimation errors and demonstrate their performance in a real data example. Strategies in which the investment proportions satisfy an L₁ ‐constraint are less affected by estimation effects.     

The impact of boundaryless careers on organizational decision making: an analysis from the perspective of Luhmann's theory of social systems

Research on careers has recently discovered the growing relevance of inter-organizational, boundaryless careers. The new paradigm of career studies that goes hand in hand with the concept of boundaryless careers, though, has not yet paid very much attention to the impact of new career patterns on how organizations function. To fill this gap, the paper analyses the effects of boundaryless careers on organizational decision making. Drawing on Niklas Luhmann's theory of social systems, we elaborate how observing a (potential) employee's life in terms of career generally facilitates organizational decision making by what we call the evaluative capacity of career. Further, the paper shows in what respect employing this mode of observation is rendered more difficult by the emergence of boundaryless careers. Based on the theoretical framework developed, we finally deduce and apply a scheme of classification of possible reactions to the organizational problems caused by boundaryless careers. In sum, the paper provides a new theoretical approach to analysing different ways of how organizations can cope with the challenges of new career patterns.