We analyze the intertemporal portfolio problem of an investor who has access to both taxable and tax-deferred (retirement) accounts and is subject to borrowing and short-selling constraints. We provide conditions under which the commonly used location rule of preferring higher-taxed assets in the tax-deferred account might not be optimal. We also derive analytical solutions for the optimal port...

A method for reducing hand-printed characters to directed graphs is described. When hand-printed characters are reduced to this form, area zoning techniques which have been successfully applied in real time environments can be used. Al ternat ively, the data in this form can be used to generate descriptions in a simple character-description language.

We show how to obtain coherent structural-form (SF) exclusion restrictions using the reduced-form (RF) parameter ratios. It will be shown that an over-identified SF corresponds to a group of regressors sharing the same RF ratio value; those regressors should be excluded jointly from the SF. If there is no group structure, then the SF is just-identified; in this case, however, it is no longer cl...

This paper compares model-based and reduced-form forecasts of financial volatility when high-frequency return data are available. We derived exact formulas for the forecast errors and analyzed the contribution of the “wrong” data modeling and errors in forecast inputs. The comparison is made for “feasible” forecasts, i.e. we assumed that the true data generating process, latent states and param...

Numerical air quality models are being used for assessing emission control strategies for improving ambient pollution levels across the globe. This paper applies probabilistic modeling to evaluate the effectiveness of emission reduction scenarios aimed at lowering ground-level ozone concentrations. A Bayesian hierarchical model is used to combine air quality model output and monitoring data in ...

This paper presents a nonlinear canonical form which is used for the design of a reduced order observer. Sufficient and necessary geometric conditions are given in order to transform a special class of nonlinear systems to the proposed nonlinear canonical form and the corresponding reduced order observer is analyzed.

We derive an analytical solution for the wage from an alternating-offer wage bargaining game à la Hall and Milgrom (2008) under a plausible parameter restriction. This solution is simple, micro-founded and permits a transparent analysis of the driving forces of wages. We argue that it can be used in a wide range of economic models incorporating the search and matching theory of unemployment to ...

This paper employs non-parametric specification tests developed in Hong and Li (2005) to evaluate several one-factor reduced-form credit risk models for actual default intensities. Using estimates for actual default probabilities provided by Moody’s KMV from 1994 to 2005 for 106 U.S. firms in seven industry groups, we strongly reject popular univariate affine model specifications. As a good com...

In this paper, we use a feedback to change the orientation and the shape of the center manifold of a system with uncontrollable linearization. This change will directly affect the reduced dynamics on the center manifold, and hence will change the stability properties of the original system.

Corporate defaults may be triggered by some major market news or events such as financial crises or collapses of major banks or financial institutions. With a view to develop a more realistic model for credit risk analysis, we introduce a new type of reduced-form intensity-based model that can incorporate the impacts of both observable “trigger” events and economic environment on corporate defa...