We address the issue of hedging in in nite horizon markets under cone constraints on the number of shares of assets. We show that the minimum cost of hedging a liability stream is equal to its largest present value with respect to admissible stochastic discount factors, thus can be determined without nding an optimal hedging strategy. We develop an algorithm by which an optimal portfolio in one...

This work presents a new technique for temporally benchmarking a time series according to the growth rates preservation principle (GRP) by Causey and Trager (1981). A procedure is developed which (i) transforms the original constrained problem into an unconstrained one, and (ii) applies a Newton’s method exploiting the analytic Hessian of the GRP objective function. We show that the proposed te...

This paper develops a framework for the design of optimal structured products (equityor index-linked notes) allowing us to analyze the maximal utility gain for an investor that can be achieved by introducing structured products. We demonstrate with data from three of the largest markets for structured products (USA, Germany and Switzerland) that most of the successful structured products are no...

We generalize the classic dynamic single-item search model to multiple items and vector offers for subsets. We first show a computationally feasible way to solve the dynamic optimization problem, and then prove structural results. Although assignment is not generally monotonically increasing in offer value, we show that, in a special case “additive” model, monotonicity holds if costs are submod...

The role of product market reforms in achieving the objective of higher employment and growth has recently received much attention amongst academics. The aim of this paper is to analyse some of the channels through which cross-market effects come about and to assess their policy relevance. The analytic strategy of this paper relies upon the stochastic real options modelling approach. In a nutsh...

Non-strategic firms with rational expectations make investment and emissions decisions. The investment rule depends on firms’ beliefs about future emissions policies. We compare emissions taxes and quotas when the (strategic) regulator and (nonstrategic) firms have asymmetric information about abatement costs, and all agents use Markov Perfect decision rules. Emissions taxes create a secondary ...

Article history: Received 9 May 2011 Received in revised form 24 October 2011 Accepted 1 November 2011 Available online 9 November 2011 We survey 290 LATAM firms on capital budgeting, cost of capital and capital structure issues. We analyze the results and compare them to those of other studies. We interpret differences according to special features characterizing both emerging markets and SME....

Why do some men father children outside of marriage without providing support? Why do some women have children outside of marriage when they receive little support from fathers? Why is this behavior more common among blacks than whites? We estimate a dynamic equilibrium model of marriage, employment, fertility, and child support decisions. We consider the extent to which low earnings, marriage ...

We present a decomposition approach for integrated assessment modeling of climate policy based on a linear approximation of the climate system. Our objective is to demonstrate the usefulness of decomposition for integrated assessment models posed in a complementarity format. First, the complementarity formulation cum decomposition permits a precise representation of post-terminal damages thereb...

We propose a methodology for constructing confidence regions with partially identified models of general form. The region is obtained by inverting a test of internal consistency of the econometric structure. We develop a dilation bootstrap methodology to deal with sampling uncertainty without reference to the hypothesized economic structure, and apply a duality principle to reduce the dimension...