Economic Development and the State: Lessons from Singapore

Analysis and case studies have indicated that intervention by the Singapore government in fostering economic development has not always been successful. In particular, past intervention in the labour market like the high wage policy of the early 3980s has proved to be an unmitigated disaster. However, interventions that lead to the direct creation of national competitive advantage, like the information-telecommunications infrastructure, R & D subsidy and manpower development, have proved t o be more successful. A strong, non-corrupt and market-oriented public sector appears to be crucial t o ensure that interventions are market facilitating, correcting and enhancing rather than distorting.     

The Effects of Victim Anonymity on Unethical Behavior

We theorize that victim anonymity is an important factor in ethical decision making, such that actors engage in more self-interested and unethical behaviors toward anonymous victims than they do toward identifiable victims. Three experiments provided empirical support for this argument. In Study 1, participants withheld more life-saving products from anonymous than from identifiable victims. In Study 2, participants allocated a sum of payment more unfairly when interacting with an anonymous than with an identifiable partner. Finally, in Study 3, participants cheated more from an anonymous than from an identifiable person. Anticipated guilt fully mediated these effects in all three studies. Taken together, our research suggests that anonymous victims may be more likely to incur unethical treatment, which could explain many unethical business behaviors.     

Are college students at greater risk of credit card abuse? Age,gender, materialism and parental influence on consumer response to credit cards

Two studies examine age, gender, parental influence and materialism effects on consumers’ credit card attitudes and behavior. Credit card commitment and use are greater among older adults than college students. Women outperform men in managing balances. Materialism heightens commitment, trust and use, but interferes with outstanding balance management. Parental influence can improve students’ commitment, trust, use and balance management while discouraging overuse. Parental influence also mediates materialism's effect on trust and balance management. Overall, findings show college students are not more vulnerable than older adults to credit card abuse, but that students who are female, materialistic and with less parental influence are at more risk.     

Collaboration between industry and research institutes/universities on industrial innovation in Beijing, China

Most R&D resources in China were allocated to public research institutes/universities until the economic transition of the mid 1990s. To maximize the return from these resources, it is important to have a healthy collaboration between industry and research institutes/universities on industrial innovation. This paper examines that relationship and discusses some empirical evidence on its efficiency with particular reference to industry in Beijing. Following a survey of 950 industrial enterprises, the influences of the collaboration relationship on industrial innovation were analyzed. The main findings indicate that the technology novelty of industrial innovation is positively related to that relationship, i.e. the more the collaboration, the higher the technology novelty of the innovation. However, the collaboration relationship is less efficient in terms of economic performance indicators such as innovation sales and profit ratios, to measure innovation. Moreover, the collaboration relationship is still far from efficient in stimulating industrial innovation in China. The major barriers to successful collaboration have also been addressed in this paper with the aim of devising policies and suggesting possible improvements to collaboration efficiency.     

Optimal reinsurance under general law-invariant risk measures

In recent years, general risk measures play an important role in risk management in both finance and insurance industry. As a consequence, there is an increasing number of research on optimal reinsurance decision problems using risk measures beyond the classical expected utility framework. In this paper, we first show that the stop-loss reinsurance is an optimal contract under law-invariant convex risk measures via a new simple geometric argument. A similar approach is then used to tackle the same optimal reinsurance problem under Value at Risk and Conditional Tail Expectation; it is interesting to note that, instead of stop-loss reinsurances, insurance layers serve as the optimal solution. These two results highlight that law-invariant convex risk measure is better and more robust, in the sense that the corresponding optimal reinsurance still provides the protection coverage against extreme loss irrespective to the potential increment of its probability of occurrence, to expected larger claim than Value at Risk and Conditional Tail Expectation which are more commonly used. Several illustrative examples will be provided.     

中国经济政策推动下的脱钩：调高2009年-2010年预测

编者按:摩根士丹利研究部(亚洲/太平洋)于2009年7月1 6日发布了题为<中国经济政策推动下的脱钩:调高2009年-2010年预测>的最新研究报告.征得作者同意,本刊选取了该报告的核心部分予以整理并发表,供读者参考.     

On additivity of tail comonotonic risks

ABSTRACT

As perceived from daily experience together with numerous empirical studies, the multivariate risks demonstrate a strong coherence in the extremal dependence structure especially over the course of financial turmoil or industrial accidents and outbreaks. Under this motivating paradigm, we show the universal asymptotic additivity under upper tail comonotonicity, as the probability level approaching to 1, for Value-at-Risk and Conditional Tail Expectation for a portfolio of fixed number of risks, in which each marginal risk could be any one having a finite endpoint or belonging to one of the three max domains of attraction. Our obtained results do not require the tail equivalence assumption as needed in the existing literature. This resolves a lasting problem in quantitative risk management and covers most distributions commonly encountered in practice.     

Reinsurance contract design with adverse selection

ABSTRACT

In light of the richness of their structures in connection with practical implementation, we follow the seminal works in economics to use the principal–agent (multidimensional screening) models to study a monopolistic reinsurance market with adverse selection; instead of adopting the classical expected utility paradigm, the novelty of our present work is to model the risk assessment of each insurer (agent) by his value-at-risk at his own chosen risk tolerance level consistent with Solvency II. Under information asymmetry, the reinsurer (principal) aims to maximize his average profit by designing an optimal policy provision (menu) of ‘shirt-fit’ reinsurance contracts for every insurer from one of the two groups with hidden characteristics. Our results show that a quota-share component, on the top of simple stop-loss, is very crucial for mitigating asymmetric information from the insurers to the reinsurer.     

GAME CALL OPTIONS REVISITED

In this paper, having been inspired by the work of Kunita and Seko, we study the pricing of δ‐penalty game call options on a stock with a dividend payment. For the perpetual case, our result reveals that the optimal stopping region for the option seller depends crucially on the dividend rate d. More precisely, we show that when the penalty δ is small, there are two critical dividends 0 < d₁ < d₂ < ∞ such that the optimal stopping region for the option seller takes one of the following forms: (1) an interval if d < d₁; (2) a singleton if d∈ [d₁, d₂]; or (3) an empty set if d > d₂. When d∈ [d₁, d₂], the value function is not continuously differentiable at the optimal stopping boundary for the option seller, therefore our result in the perpetual case cannot be established by the free boundary approach with smooth‐fit conditions imposed on both free boundaries. For the finite time horizon case, the dependence of the optimal stopping region for the option seller on the time to maturity is exhibited; more precisely, when both δ and d are small, we show that there are two critical times 0 < T₁ < T₂ < T, such that the optimal stopping region for the option seller takes one of the following forms: (1) an interval if t < T₁; (2) a singleton if t∈ [T₁, T₂]; or (3) an empty set if t > T₂. In summary, for both the perpetual and the finite horizon cases, we characterize in terms of model parameters how the optimal stopping region for the option seller shrinks when the dividend rate d increases and the time to maturity decreases; these results complete the original work of Emmerling for the perpetual case and Kunita and Seko for the finite maturity case. In addition, for the finite time horizon case, we also extend the probabilistic method for the establishment of existence and regularity results of the classical American option pricing problem to the game option setting. Finally, we characterize the pair of optimal stopping boundaries for both the seller and the buyer as the unique pair of solutions to a couple of integral equations and provide numerical illustrations.