A market-consistent framework for the fair evaluation of insurance contracts under Solvency II

Decisions in Economics and Finance - The entry into force of the Solvency II regulatory regime is pushing insurance companies in engaging into market consistence evaluation of their balance sheet,...     

Family firm’s management composition: the role played by family members’ age in TMT and supervisor levels

Quality & Quantity - Family firms (FFs) are the backbone of entrepreneurial fabric in many countries. Management of such businesses is complex because of their features: the overlap between...     

Integrated bio-economic models as tools to support land-use decision making: a review of potential and limitations

Bio-economic modelling has become a useful tool for anticipating the outcomes of policies and technologies before their implementation. Advances in mathematical programming have made it possible to build more comprehensive models. In an overview of recent studies about bio-economic models applied to land-use problems in agriculture and forestry, we evaluated how aspects such as uncertainty, multiple objective functions, system dynamics and time have been incorporated into models. We found that single objective models were more frequently applied at the farm level, while multiple objective modelling has been applied to meet concerns at the landscape level. Among the objectives, social aspects are seldom represented in all models, when being compared to economic and environmental aspects. The integration of uncertainty is occasionally a topic, while stochastic approaches are more frequently applied than non-stochastic robust methods. Most multiple-objective models do not integrate uncertainty or sequential decision making. Static approaches continue to be more recurrent than truly dynamic models. Even though integrating multiple aspects may enhance our understanding of a system; it involves a tradeoff between complexity and robustness of the results obtained. Land-use models have to address this balance between complexity and robustness in order to evolve towards robust multiple-objective spatial optimization as a prerequisite to achieve sustainability goals.     

Social and organisational implications of CAD usage: a grounded theory in a fashion company

This paper focuses on the process of Computer Aided Design (CAD) diffusion into a group engaged in the development of innovative products. Adopting an ethnographic approach, we build a grounded theory for interpreting CAD usage in terms of the interplay between variables such as management orientation, training, actors' specialisation and deskilling, availability of shared archives, technological discontinuities between organisational areas.     

Empirische Analyse des Einflusses der Überschussbeteiligung auf Neugeschäft und Storno

Recently, German insurers are becoming increasingly interested in assessing and modelling risks related to new business and lapses. The final report of a DAV (German actuarial association) working party on stochastic models for German life insurance companies, released end of 2005, includes some basic approaches for this purpose. However, so far no systematic empirical research has been carried out which provides evidence for an appropriate calibration of such models. This article contributes to closing the gap. It presents the main results of an empirical analysis on the influence of policyholders’ profit participation on new business and lapses based on data about 87 German life insurance companies from 1995—2004. Analyses of regression and correlation were performed for various definitions of the explanatory variable ?profit participation“ (more precisely: the spread to some average value) and with diverse reference parameters for new business and lapses, also considering different types of life insurance. Ultimately, the exploration scarcely yielded evidence for a significant general correlation between policyholders’ profit participation and new business or lapses. However, because of the individuality of life insurance business such an evaluation of historical data can certainly only be regarded as a building block for the overall picture, as is also explained in the paper in some more detail.     

Golden cages for showy birds: Optimal switching costs in labor contracts

Under what circumstances do workers sign contracts with high quitting penalties? Our answer points to market transparency. When the worker's performance is privately observed by the incumbent firm, alternative employers face an adverse selection problem. As a result, efficient separations can only take place through involuntary layoffs and there is no role for quitting fees. In contrast, when performance is public, quitting fees are useful devices to appropriate the surplus from workers’ reallocation. Separations are amicable and take the form of quitting after downwardly renegotiating the fees. Qualitative features of contracts are independent of the distribution of ex-post bargaining power. The impact of switching costs on total welfare and its distribution depends on the degree of market transparency and the ex-ante distribution of market power.     

Temporary controls on capital inflows

During the past decade a number of countries imposed capital controls that had two distinguishing features: they were asymmetric, in that they were designed principally to discourage capital inflows, and they were temporary. This paper studies formally the consequences of these policies, calibrates their potential effectiveness, and assesses their welfare implications in an environment in which the level of capital inflows can be sub-optimal. In addition, motivated by the fact that these types of controls have often been left in place after the dissipation of the shock that lead to the controls being implemented, the paper evaluates the welfare cost of procrastination in removing these types of controls.     

Determinants of the Effective Real Exchange Rate of the Synthetic Euro: Alternative Methodological Approaches

On the basis of historical data aggregated over the period 1973 to 2000, we have experimented with four different approaches to estimate the synthetic euro's equilibrium exchange rate. Using a number of competing models with the same data set, variable definitions and sample period offers the possibility to assess the uncertainty surrounding such equilibrium levels, both from an empirical (different estimates) and a theoretical viewpoint (different specifications). In this exercise, the 'Rest of the World' is proxied by the US, the UK, Japan and Switzerland, aggregated on the basis of trade weights.
We employed reduced form co–integration models, a structural VAR, a NATREX model (estimated in structural form) and the ECB's small–sized euro area wide macro–econometric model. In this order the approaches feature an increasing degree of 'structure', in the sense of the constraints based on economic theory embedded in the econometric models that were estimated. The results confirm the high likelihood for the euro having been undervalued in Q4 2000, while stressing the significant empirical and theoretical uncertainty with respect to the equilibrium exchange rate level.