Subprime mortgage funding and liquidity risk

In this article, we use actuarial methods to solve a nonlinear stochastic optimal liquidity risk management problem for subprime originators with deposit inflow rates and marketable securities allocation as controls. The main objective is to minimize liquidity risk in the form of funding and credit crunch risk in an incomplete market. In order to accomplish this, we construct a stochastic model that incorporates originator mortgage and deposit reference processes. Finally, numerical examples that illustrate the main modeling and optimization features of the article are provided.     

Performance measurement of pension strategies: a case study of Danish life cycle products

The Danish pension markets of life cycle products have expanded considerably since its introduction in the beginning of the millennium. The market is maturing and pensioners have the choice between a wide area of different products. It is therefore about time that financial insurance technology is developed to guide the performance measurement of available products. In this paper we develop a simple first version of such a method and we investigate life cycle products recommended on the web of the four biggest commercial Danish pension companies on one day in February 2007. All considered products are outperformed by trivial benchmark products with constant stock proportion over time. Our approach is the following: for each life cycle product we first find a trivial benchmark product with the same long-term risk and then we compare the long-term return of the two equivalent products. We primarily consider value at risk and tail value at risk as risk measures, but we also include a study where the fair value of an interest guarantee is used as risk measure. We consider both long-term mean returns and long-term median returns. We hope that our new method will be regarded as a first step towards a scientifically based ranking of the quality of pension products.     

Marginal tax burden

Zusammenfassung Bei der Beurteilung etwaiger leistungshemmender Wirkungen der Steuer- und Abgabensysteme muß insbesondere die Grenzabgabenbelastung analysiert werden; sie ist sowohl in Österreich als auch in der Bundesrepublik Deutschland in der jüngeren Vergangenheit stark angestiegen. Mit diesem Beitrag wird versucht, die gesamte Grenzabgabenbelastung (aus direkten und indirekten Steuern sowie Sozialabgaben) für beide Länder approximativ zu bestimmen. Dabei scheint der Vergleich zwischen Österreich und Deutschland besonders interessant zu sein, da es im Steuer- und Sozialrecht einerseits weitgehende Gemeinsamkeiten in der historischen Entwicklung gibt, andererseits aber auch grundlegende Divergenzen bestehen, so beispielsweise im unterschiedlichen Gewicht von direkter und indirekter Besteuerung. Über etwaige Wirkungszusammenhänge werden abschließend einige spekulative Überlegungen angestellt.     

HMTS: Improving the quality of public service announcements through standardized pretesting

Traditionally, health message producers have relied on their own creative communication skills to reach and affect the public with health information. The Health Message Testing Service provides additional input regarding target audience response to health messages. Paired with creative PSA production, these data can more reliaby ensure audience receptivity and response. By testing messages in a pre-finished form, the producer can identify and correct potential weaknesses while corrections are still timeand-budget affordable. National Cancer Institute Porter, Novelli & Associates     

Gloomy prospects for social retirement insurance

Recently, important experts have presented two studies concerning the current situation and future prospects of social retirement insurance in the Federal Republic of Germany.¹ Now there is also an Internationally comparative study on the same subject available.² The German co-authors summarize the results of that study and add some proposals for further discussion.     

Rezensionen

Ohne Zusammenfassung     

Does Distance Still Matter? The Information Revolution in Small Business Lending

The distance between small firms and their lenders is increasing, and they are communicating in more impersonal ways. After documenting these systematic changes, we demonstrate they do not arise from small firms locating differently, consolidation in the banking industry, or biases in the sample. Instead, improvements in lender productivity appear to explain our findings. We also find distant firms no longer have to be the highest quality credits, indicating they have greater access to credit. The evidence indicates there has been substantial development of the financial sector, even in areas such as small business lending.     

SIZE OF THE PUBLIC SECTOR,ECONOMIC GROWTH AND THE INFORMAL ECONOMY: DEVELOPMENT TRENDS IN THE FEDERAL REPUBLIC OF GERMANY*

The growth of the public sector in the post-war period and the consequences of this development for economic growth is a strongly disputed subject of economic theory and policy. In this paper the development trends of state activities in the case of the Federal Republic of Germany are presented. The structure of public expenditures as well as the tax structure are taken into consideration and possible impacts on real economic growth are analysed. The negative correlations between some kinds of public expenditures (or taxes) and the growth rate of real GNP should not be taken in proof of the growth-retarding effects which might ensue from increasing state activities. It seems to be more likely that state activities have induced shifts of resources from the formal into the informal economy. Politicians should be aware that some measures of economic policy conventionally proposed will strengthen the movement into the informal economy, thus intensifying the current problems within the public budgets as well as in the social security system.     

Introduction

Journal of Productivity Analysis -