the demand curve for recreational fishing with an application to stock enhancement activities mcconnell and sutinen 1979 and bishop and samples 1980 have developed models of recreational fishing and have derived conditions for optimal management policy both with and without joint commercial harvest while these models are correct their structures do not explicitly consider the stock externality in terms of the demand curve for recreational fishing the effect each participant has on others in terms of quality and quantity is central to an intuitive understanding of recreational fisheries management and it can be clearly demonstrated in the demand curve model presented below the work is a synthesis of the above models and the leibenstein 1950 bandwagon and snob goods concept which has been used by a number of authors dealing with recreation anderson l 1980a 1980b anderson f and bonsor 1974 cicchetti and smith 1973 fisher and krutilla 1972 freeman and haveman 1977 mcconnell and duff 1976 the model is applicable to a number of relevant problems including joint recreation commercial exploitation but here it will only be applied to the optimization of enhancement a topic that has not been treated previously the inverse demand curve of an individual for recreational fishing on a single independent fish stock can be expressed as

fishing effort its testing specification and internal structure in fisheries economics and management abstract the concept of fishing effort is central to fisheries economics and management however effort is an aggregate index of inputs which can be consistently formed only under the condition on production technology of homothetic separability of inputs this paper develops the conditions under which effort can be consistently formed it then provides the first empirical test for effort and jointness in inputs in a fishery by estimating a multiproduct function for the new england otter trawl fleet after not rejecting input output separability and rejecting nonjointness in inputs the construction of a superlative index for effort is demonstrated through estimating a translog production function the implications of effort s internal structure for fisheries management are then considered

testing for non jointness in oil and gas exploration a variable profit function approach although the assumption of non joint production is made in a number of areas of economics its empirical validity is seldom examined in this paper we investigate the hypothesis of non jointness in the context of a multiple output production process which utilizes both fixed and variable inputs specifically we test the hypothesis of almost non jointness in the input quantities and prices as well as the hypothesis that inputs and outputs are separable using data on oil and natural gas exploration in alberta canada to facilitate global tests of these hypotheses we estimate a generalized linear generalized leontief variable profit function both with and without the restrictions implied by nonjointness and by separability on the basis of likelihood ratio tests we reject the hypothesis of separability but are unable to reject the non jointness hypothesis based on the maximum likelihood estimates obtained in the non joint case we examine some empirical issues concerning oil and gas exploration activity

the effect of within season variability on estimates of recreational value for trout anglers in new zealand abstract recreational benefit estimates can be substantially improved by incorporation of data on attributes that are averaged over shorter periods of time so as to better represent within season variability this approach may be advantageous across a wide range of non market valuation settings we use angling survey data that includes bimonthly data on angler demand water quality and fish weight in the rotorua lakes and compare our results with those obtained using attribute data averaged over the year estimates of marginal willingness to pay for catching fish based on annual data are 5 times higher than those based on bimonthly data likewise the estimated welfare gain from a 1 m increase in water clarity is 1 5 times higher in models using annual data we find that within season variability in recreational site attributes can have a statistically significant effect on welfare estimates the effect of seasonal variation in site attributes has rarely been accounted for in travel cost random utility models of recreation we conclude that appropriate treatment of temporal variability can assist environmental managers to design more cost effective policies based on improved estimates of welfare gains

lp modeling for asset liability management a survey of choices and simplifications dynamic linear programming lp models for asset liability management alm are quite powerful and flexible but face two challenges 1 many modeling choices not all consistent with one another or with finance theory and 2 solution difficulties due to the large number of scenarios obtained from standard interest rate models we first survey these modeling choices with a view to help researchers make self consistent choices next we review how the dynamic lp model for alm and the representation of uncertainty therein have been simplified in the past to motivate new or hybrid models emphasizing tractability to this end we review existing static lp models as extreme modeling simplifications and aggregation as a simplification of uncertainty

financial portfolio management through the goal programming model current state of the art abstract since markowitz 1952 formulated the portfolio selection problem many researchers have developed models aggregating simultaneously several conflicting attributes such as the return on investment risk and liquidity the portfolio manager generally seeks the best combination of stocks assets that meets his her investment objectives the goal programming gp model is widely applied to finance and portfolio management the aim of this paper is to present the different variants of the gp model that have been applied to the financial portfolio selection problem from the 1970s to nowadays

bank credit rationing and the customer relation abstract this paper investigates the theory that preference in situations of bank rationing is given to those customers with the strongest customer relation it has shown that within a certainty model where competitive pressure among banks requires full compensation for other bank relationships neither deposit levels nor intertemporal demand would produce the preferential treatment claimed it has also been shown that the prime borrowers would be unable to bargain effectively for credit line protection from such occasions of credit restriction

interest rate volatility and the term structure a two factor general equilibrium model we develop a two factor general equilibrium model of the term structure the factors are the short term interest rate and the volatility of the short term interest rate we derive closed form expressions for discount bonds and study the properties of the term structure implied by the model the dependence of yields on volatility allows the model to capture many observed properties of the term structure we also derive closed form expressions for discount bond options we use hansen s generalized method of moments framework to test the cross sectional restrictions imposed by the model the tests support the two factor model there are essentially two approaches to the modeling of the term structure of interest rates in continuous time the equilibrium approach pioneered by

the duration vector a continuous time extension to default free interest rate contingent claims abstract this paper presents a continuous time contingent claims framework for the traditional duration vector models of chambers et al journal of financial and quantitative analysis march 1988 89 104 prisman and shores journal of banking and finance 12 1988 493 504 and others by embedding these into the merton the bell journal of economics and management science 4 1973 141 183 stochastic interest rate option pricing model using this framework we analyze the interest rate risk characteristics of bond options and callable bonds we derive duration measures that are significantly different from the ones reported previously in the literature by garman journal of financial economics 14 1985 309 315 jamshidian and zhu advances in futures and options research 3 1988 63 95 and others the upper and lower bounds of the duration vectors of bond options and callable bonds are investigated an empirical technique based on the implied volatility methodology is suggested for the computation of the duration vectors of bond options and callable bonds

age dynamics and economic growth revisiting the nexus in a nonparametric setting abstract nonparametric panel regressions between economic growth and age structured population for oecd and non oecd countries show significant non linear relationship contributing to their growth volatilities over the 1960 2000 period with interesting current and feedback effects

the valuation of floating rate instruments abstract a framework for valuing floating rate notes is developed to examine the effects of 1 lags in the coupon formula 2 special contractual features and 3 default risk evidence from a sample of floaters indicates they sold at significant discounts while lags in the coupon formulas and other contractual features make these notes more variable they do not account for the magnitude of the discounts we conclude that the fixed default premium in the coupon formula of a typical note is inadequate to compensate for time varying default premiums demanded by investors who treat other corporate short term paper as close substitutes

term structure intermediation by depository institutions abstract term structure intermediation in which institutions purchase assets and sell liabilities of different maturities is analyzed theoretically and the results are applied to current policy issues the theoretical model allows the identification of alternative reasons for mismatched portfolios including risk loving utility functions interest rate forecasts that differ from the market s forward rates and risk premia in the yield curve the risk premia case appears empirically relevant and intermediation in which lending is long earning the risk premium and borrowing is short not paying a risk premium may offset capital market imperfections but such intermediation is also risky creating a dilemma for bank regulators

an analysis of congestion measures and heterogeneous angler preferences in a random utility model of recreational fishing the potential importance ofcongestion effects on the management andrationing of recreational facilities andservices in the presence of heterogeneouspreferences were highlighted nearly twenty fiveyears ago by freeman and haveman 1977 whilethere have been a number of theoretical modelsextending and expanding upon this work mcconnell 1988 anderson 1993 empiricalresearch evaluating such impacts is limited evidence of the potential impacts of congestionon resource usage is of obvious importance especially for natural resource managers whounderstand that congestion can be an effectiverationing device and because users likelydiffer in both their preferences for use andaversion to congestion it is the objective ofthis research to compare alternative measuresof congestion for explaining site choice withina random utility modeling framework thecongestion measures differ with respect to thetime horizon over which they are assumed to beformulated and the measure of central tendencyused to represent them furthermore weinvestigate how the response to thesecongestion measures may differ across twodistinct angler types and the implications ofthose differences on the per trip willingnessto pay for stock enhancement

bond pricing and the term structure of interest rates a new methodology for contingent claims valuation this paper presents a unifying theory for valuing contingent claims under a stochastic term structure of interest rates the methodology based on the equivalent martingale measure technique takes as given an initial forward rate curve and a family of potential stochastic processee for its subsequent movements a no arbitrage condition restricts this family of processes yielding valuation formulae for interest rate sensitive contingent claims which do not explicitly depend on the market prices of risk examples are provided to illustrate the key results in relation to the term structure of interest rates arbitrage pricing theory has two purposes the first is to price all zero coupon default free bonds of varying maturities from a finite number of economic fundamentals called state variables the second is to price all interest rate sensitive contingent claims taking as given the prices of the zero coupon bonds this paper presents a general theory and a unifying framework for understanding arbitrage pricing theory in this context of which all existing arbitrage pricing models are special cases in particular vasicek 1977 brennan and schwartz 1979 langetieg 1980 ball and torous 1983 ho and lee 1986 schaefer and schwartz 1987 and artzner and delbaen 1988 the primary contribution of this paper however is a new methodology for solving the second problem i e the pricing of interest rate sensitive contingent claims given the prices of all zero coupon bonds the methodology is new because i it imposes its stochastic structure directly on the evolution of the forward rate curve ii it does not require an inversion of the term structure to eliminate the market prices of risk from contingent claim values and iii it has a stochastic spot rate process with multiple stochastic factors influencing the term structure the model can be used to consistently price and hedge all contingent claims american or european on the term structure and it is derived from necessary and more importantly sufficient conditions for the absence of arbitrage the arbitrage pricing models of vasicek 1977 brennan and schwartz 1979 langetieg 1980 and artzner and delbaen 1988 all require an iformerly titled bond pricing and the term structure of interest rates a new methodology

agricultural bank portfolio adjustments to risk an asset allocation model is developed in which the bank s problem is one of selecting the mix of loan assets and securities that will generate desired levels of portfolio return and risk a reduced form econometric model is derived and historical rural bank asset allocations are predicted asset equations show consistency with the framework of equilibrium adjustments under uncertainty higher expected default rates on variable rate loans result in significant joint effects which alter a bank s optimal allocation

interest rate risk management and the mix of fixed and floating rate debt we analyze the after swap mix of fixed and floating rate debt in a sample of non financial firms using hand collected data from a window of time when derivative positions were included in accounting disclosures to motivate the analyses we present a simple theoretical model that highlights the special features of interest rate risk consistent with the theory we find that firms that issue more fixed rate debt have higher liquidity ratios and lower operating income ratios we also document that individual firms actively vary the proportion of their fixed rate debt to a strikingly high extent there is a debate as to whether such variation should be interpreted as hedging or speculation we show that the firms more actively varying their debt mix respond to different hedging motives than those with low activity we then empirically motivate an alternative indicator of speculative activity co variation between ex post profitability of financial decisions and operating results

an equilibrium model of bond pricing and a test of market efficiency in two previous and related papers 3 4 the authors have reported the results of estimating a particular equilibrium model of bond pricing using quarterly data on canadian government bonds for the period 1964 to 1979 this paper reports the results of applying a similar model to the pricing of u s government bonds for the period 1958 1979 using data from the crsp government bond file the paper also extends the previous empirical analysis by evaluating the ability of the pricing model to detect underpriced and overpriced bonds the data reveal a strong relation between price prediction errors and subsequent bond returns

duration measures immunization and utility maximization abstract this paper explores the conditions under which a risk averse investor behaves like an immunizer in choosing the maturity structure of a balance sheet the setting is similar to grove s study in that the liabilities are assumed fixed but differs in the assumed evolution of interest rates m a grove on duration and the optimal maturity structure of the balance sheet bell journal of economics and management science 5 1974 696 709 it transpires that the circumstances under which a risk averse investor behave like an immunizer are not as limited as concluded in grove s study the model thus explains the extensive use of immunization by the business community

generalising interest rate duration with directional derivatives direction x and applications conventional or fisher weil duration is an ordinary derivative that measures the response of portfolio value to marginal parallel shifts in the term structure while other proposed measures are generally specific to particular interest rate processes in this paper we show that portfolio responses to arbitrary shifts in the term structure may be handled by the use of frechet or directional derivatives presenting a simple algorithm for the directional derivative of a fixed interest portfolio viewed as a set of cash flows for a given portfolio one can locate the most sensitive areas along the term structure by computing a function or profile direction x that gives the term structure movement to which the portfolio is most exposed immunisation techniques can be based on choosing ancillary assets that ensure that the portfolio directional derivative is zero or as close to zero as possible this generalises approaches based on factor models of the term structure the analysis is applied to both continuous and discrete time

a risk minimizing strategy for portfolio immunization consider a fixed income portfolio whose duration is equal to the length of a given investment horizon it is shown that there is a lower limit on the change in the end ofhorizon value of the portfolio resulting from any given change in the structure of interest rates this lower limit is the product of two terms of which one is a function of the interest rate change only and the other depends only on the structure of the portfolio consequently this second term provides a measure of immunization risk if this measure is minimized the exposure of the portfolio to any interest rate change is the lowest the traditional theory of immunization as formalized by fisher and weil 6 defines the conditions under which the value of an investment in a bond portfolio is protected against changes in the level of interest rates the specific assumptions of this theory are that the portfolio is valued at a fixed horizon date that there are no cash inflows or outflows within the horizon and that interest rates change only by a parallel shift in the forward rates under these assumptions a portfolio is said to be immunized if its value at the end of the horizon does not fall below the target value where the target value is defined as the portfolio value at the horizon date under the scenario of no change in the forward rates the main result of this theory is that immunization is achieved if the duration of the portfolio is equal to the length of the horizon the assumption that interest rates can only change by a parallel shift that is by the same amount for all maturities has been the subject of considerable concern bierwag 1 2 bierwag and kaufman 3 khang 7 and others have postulated alternative models of interest rate behaviors each of these specifications implies a different measure of duration with immunization attained if this duration measure is equal to the horizon length a limitation of this approach is that the portfolio is protected only against the particular type of interest rate change assumed in a more recent development cox et al 5 brennan and schwartz 4 and others have investigated immunization conditions when interest rates are governed by a continuous process consistent with a market equilibrium depending on the specilfication of the interest rate process there is a duration like measure possibly multidimensional as in brennan and schwartz such that the portfolio is immunized if a proper value of this measure is maintained this assumes a continuous rebalancing of the portfolio again immunization is achieved only if interest rate changes conform to the specific process assumed in this paper we wish to pursue a different approach if it turned out that the

maturity intermediation and intertemporal lending policies of financial intermediaries this paper considers the maturity intermediation and intertemporal lending decisions of risk averse financial intermediaries in particular the maturity mismatch problem and the fixed versus variable rate lending decision are modeled when the major source of risk involves uncertain future interest rates the results imply that the strategy of matching the maturity of assets and liabilities is not generally optimal or even minimum risk this is due primarily to the built in hedge that the intermediary has as a result of rolling over short term loans while continuing to finance long term loans intertemporal dependencies between loan demand and costs or both also have an effect on the optimal degree of maturity mismatching and provide one rationale for making loans at rates below current marginal cost

an analysis of bank loan rate indexation this paper examines the economic rationale for the use of bank loan commitments and the effect on the allocation of bank credit of indexing the loan rate offered through the commitment to the prime a simple model of the loan market is constructed and used to examine the effect changes in loan demand and the cost of bank funds have on the allocation of bank credit under indexation it is shown that indexing implies changes in the relative cost of borrowing for certain groups of bank customers for nonprime customers an increase in the cost of bank funds results in a decline in the relative cost of borrowing under commitments the pattern of commitment use is found to be consistent with the predictions of the model recent surveys have found that the majority of commercial and industrial loans are made under pre existing loan commitments these surveys also find that for most commercial and industrial loans the interest rate is tied or indexed to the prime rate although indexing loan rates is widespread there has been little theoretical or empirical work on the effect of this pricing scheme on the allocation of bank credit the paucity of research in this area is surprising considering the frequency with which indexed contracts are used and the current controversy surrounding the use of the prime as an index 2 the purpose of this paper is to provide an analysis of the effect of indexed loan rates on the intertemporal allocation of bank credit a simple model of the loan market is constructed and used to examine the effect changes in the cost of bank funds and changes in loan demand have on the allocation of credit under indexation use of this model demonstrates that indexed contracts do not result in an efficient allocation in the sense that the resulting allocation does not replicate the allocation obtained with complete contingent contracts finally the model is tested empirically using data on commitment use from the quarterly survey of the terms of commercial bank lending it is shown that indexing

single factor duration models in a discrete general equilibrium framework single factor duration models sfdms for valuing debt securities have gained rapid acceptance by bond practitioners in recent years but slower acceptance by academics in large measure the slower academic acceptance reflects the lack of a rigorously developed underlying economic or financial theoretic base partially as a result some sfdms have undesirable behavioral characteristics foremost among these is that they appear to be inconsistent with accepted general equilibrium conditions this paper has two purposes the first is to construct explicitly the theoretical underpinnings of the model and the second is to develop the conditions under which the model does satisfy general equilibrium conditions this is done in sections i and ii respectively

measurement error in recreation demand models the joint estimation of participation site choice and site characteristics abstract in the demand for recreational fishing sites an important explanatory variable differentiating sites is the unobserved expected catch rate since the observed catch rate is subject to sampling variability using the average of a site s observed catch rates causes the parameter estimator on catch to be biased downward we develop and demonstrate a solution to this errors in variables problem when there are repeated measurements on the catch rate consistent and efficient estimates of both the demand parameters and the expected catch rates are obtained by simultaneously estimating them by maximum likelihood an empirical example demonstrates the importance of simultaneous estimation

designing an immunized portfolio is m squared the key abstract the theoretical and empirical properties of m squared a measure of cash flow dispersion used in designing duration hedged portfolios are examined contrary to prior research minimizing m squared is not independent of the stochastic process and the minimum m squared portfolio is a bullet only under a specific convexity condition derived in the paper using a data base of default free government of canada bonds to set up minimum m squared duration matching portfolios we find that the convexity property does not hold in general and that minimum m squared portfolios fail to hedge as effectively as portfolios including a bond maturing on the horizon date

dispersion measures as immunization risk measures the quadratic and linear cash flow dispersion measures m 2 and n are two immunization risk measures designed to build immunized bond portfolios this paper generalizes these two measures by showing that any dispersion measure is an immunization risk measure and therefore it sets up a tool to be used in empirical testing each new measure is derived from a different set of shocks changes on the term structure of interest rates and depends on the corresponding subset of worst shocks consequently a criterion for choosing appropriate immunization risk measures is to take those developed from the most reasonable sets of shocks and the associated subset of worst shocks and then select those that work best empirically adopting this approach this paper then explores both numerical examples and a short empirical study on the spanish bond market in the mid 1990s to show that measures between linear and quadratic are the most appropriate and amongst them the linear measure has the best properties this confirms previous studies on us and canadian markets that maturityconstrained duration matched portfolios also have good empirical behavior 2002 elsevier science b v all rights reserved

congestion travel cost recreational demand models and benefit evaluation abstract the treatment of congestion in travel cost demand models for recreational sites is a subject of considerable importance for both the allocation and management of public lands in a recent issue of this journal wetzel argued that the use of the travel cost method will always lead to underestimates of the true benefits provided by a site because of the role of congestion the purpose of this paper is to show that his results are misleading it is not possible to derive a priori the direction of the bias in the aggregate demand for a recreational site s services due to congestion in a given season thus wetzel s conclusions on the bias in benefits are misleading the most appropriate treatment of congestion requires that travel cost models be amended to reflect the effects of congestion on a the modeling of individual behavior b the estimation of an individual s demand for a recreational site s service and c the description of how a site s services are allocated across individual users

empirics of world income inequality this article employs a common general formula for inequality indexes to answer several basic questions about intercountry income inequality in recent decades has inequality across nations increased or declined and why have earlier studies yielded mixed results have different rates of population growth played a significant role in the trend have large nations dominated the trend are the results robust over different inequality measures and different income series two findings stand out first different rates of population growth in rich and poor nations played the predominant role in determining change in the distribution of per capita income across nations second the centuries old trend of rising inequality leveled off from 1960 to 1989 the dependency theory thesis of a polarizing world system receives no support

are german banks different in recent years there has been a vigorous revival of the long standing debate about the uniqueness of german banks to date little consensus has been reached while some see few differences between the role of banks in germany and in other countries others claim that universal banks equity shareholdings in and nomination of representatives to the boards of nonfinancial firms are the key institutional features driving the rest of the german model of long term investment in high quality internationally competitive manufacturing this article argues that the uniqueness of the german banking system lies 1 in its unusually high capacity to provide industrial finance in the form of long term debt capital and 2 in its avoidance of the speculative boom credit crunch cycle experienced by almost every other advanced industrialized country in the 1980s and early 1990s these two key characteristics are attributable to a regulatory framework which involves strict prudential regulation access to long term refinancing sources and a federalist form of corporatism furthermore the behavior of german banks must be analyzed within a broader institutional system of economic governance which includes corporatist labor market institutions and a relatively large and modern sme sector

population dynamics and economic development age specific population growth rates and economic growth in developing countries 1965 to 1990 in theory rapid population growth forces capital to be spent upon nonproductive segments of the population and encourages the undercapitalization of the economy underemployment low wages and weak market demand rapid population growth is therefore often blamed for economic stagnation in less developed countries others however believe that rapid labor force growth is good for the economy the authors conducted a cross national study of the economic growth rates of 75 developing countries in which the annual average percentage change in real gross domestic product per capita is regressed from 1965 to 1990 on demographic models which incorporate either total population growth rates and labor force growth rates or age specific population growth rates the study found that an increase in the child population impedes economic progress while an increase in the adult population fosters economic development this phenomenon may be due to demographic transition which allows a massive one time boost in economic development as rapid labor force growth occurs in the absence of large and growing youth dependency there may also be a demographic ratchet effect in which economies remain stagnant during baby booms but grow rapidly as baby boomers age and assume economically productive roles in society

non joint technologies the hypothesis of non jointness in input quantities separate production functions is well known and it plays an important role in many areas of economics in this paper we define three additional forms of non jointness which have received little or no attention in the literature and which might be relevant for the firm as well as for the representation of the aggregate technology we characterize all forms of non jointness in terms of variable profit and joint cost functions this yields a number of restrictions which are all testable empirically the assumption that production is non joint in input quantities separate production functions inputs allocated between the different production processes plays a crucial role in many areas of economic theory we need only think of international trade theory public finance macroeconomics growth theory or traded non traded good models of international finance in fact it is safe to say that more often than not production is assumed non joint in input quantities in multiple output models little work has been done to test the empirical validity of the assumption of non jointness in input quantities samuelson 1966 studies the characterization of non joint technologies in terms of the transformation function as pointed out by hall 1973 however samuelson s results do not seem very useful for econometric work hall studies the characterization of non jointness in input quantities in terms of the joint cost function this leads to a number of restrictions which can easily be imposed or tested for and which were used in empirical work by burgess 1976 and by kohli 1981 lau 1972 1978 finally characterizes non jointness in input quantities in terms of the profit function besides non jointness in input quantities lau also examines the case of non jointness in output quantities when an input can be cracked into several outputs in this paper we define two additional cases of non jointness and we characterize them in terms of the joint cost function and the variable or normalized restricted profit function the new forms of non jointness that we define may be useful to describe technologies at the level of the firm and may be even more so at the aggregate level some may be useful concepts in other areas of economics as well such as consumer theory by distinguishing between the various forms of non jointness one obtains a number of testable restrictions on the corresponding joint cost or variable profit functions

allocatable fixed inputs and jointness in agricultural production implications for economic modeling allocatable fixed inputs such as land are a potentially important source of jointness in agriculture as with other causes of jointness they necessitate multiple product systems for modeling product supply and input demand in other important ways however their analytical implications are very different from other causes of jointness model specification differs demand functions for the quantities of each input used in the production of individual commodities can be derived if a primal approach is used but such allocation equations cannot in general be identified from a dual specification available allocation data are not even useful in such dual estimations

the banking industry under uncertain monetary policy abstract the optimal loan decisions of banks are shown to be dependent on the banks rational forecast of the future federal funds rate which in turn is related to the policy rule used by the fed consequently a change in the policy of the fed will alter the reduced form model of the banking industry this result brings into question the fed s ability to predict and control the money stock under the procedure adopted by the fed between october 1979 and september 1982

immunization derived from a polynomial duration vector in the spanish bond market abstract this paper focuses on the spanish government debt market in an attempt to evaluate the immunization performance of the polynomial duration model of chambers and carleton chambers d r carleton w t 1988 a generalized approach to duration in chen a h ed research in finance vol 7 jai press greenwich pp 163 181 in default free and option free fixed income portfolios and to ascertain whether traditional convexity is an earnings generating element empirical tests show that three constraints namely those related to the level slope and curvature of term structure shifts are necessary to guarantee a return close to the target the only exception to this rule is found in portfolios including an asset that matures near the horizon date in which classical immunization performs properly

variable rate deposit insurance a re examination abstract this paper investigates the impact of variable rate deposit insurance on the financial and real sectors of the economy and its role as an absorber of bankruptcy risk within these sectors a variable rate system raises the cost of funds to the real sector and increases probability of bankruptcy of the borrowing firms when such bankruptcies occur society experiences a dead weight loss we argue that appropriate deposit insurance pricing must weigh the social costs connected with both financial firm failure and real sector bankruptcy

using linear and goal programming to immunize bond portfolios abstract bierwag and khang s 1979 model of immunizing a portfolio of default free government bonds is expanded here to include default grade corporate bonds the immunizing equation is found to be slightly different both linear and goal programming are shown to be alternative techniques for identifying an investor s optimal immunizing portfolio

a comparison of welfare estimates from four models for linking seasonal recreational trips to multinomial logit models of site choice we compare four methods of linking a site choice random utility model to a seasonal trip model the four approaches are those proposed by morey et al 1993 am j agric econom 75 578 592 hausman et al 1995 j public econom 56 1 30 parsons and kealy 1995 j environ econom management29 357 367 and feather et al 1995 j environ econom management29 214 227 we estimate the alternative models using a common data set and calculate a change in welfare for two policy scenarios across the models we find that there is little practical difference between the approaches of morey et al and hausman et al they are nearly the same mathematically and the welfare estimates in our empirical example are quite close the approaches of parsons and kealy and feather et al generated welfare estimates that were substantially different from the previous two approaches as well as from each other they also generated results that reveal the inconsistencies between their site choice and season trip models

variable rate debt instruments and corporate debt policy sustained high rate of inflation has led to the creation of debt instruments with variable interest rate the availability of these debt instruments presents management with the problem of the choice of the optimal debt portfolio this paper deals with this problem assuming a given and optimal debt to equity ratio given expected monetary value maximization an efficient frontier is derived in terms of the expected net income and probability of bankruptcy where net income is defined as operating income minus debt repayment this efficient frontier is shown to be also mean variance efficient it is also shown that in most cases the optimal debt portfolio includes more than one debt instrument in other words the firm will avoid the policy of minimizing the expected cost of its debt repayments or the policy of minimizing the costs of bankruptcy the optimal solution itself is affected by market variables like the relative expected cost of different debt instruments and by firm specific variables like the variability of its operating income stream and the covariance between the operating income and the debt repayments

the large small bank dichotomy in the federal funds market abstract despite the central importance of the federal fund market little research has been undertaken on the micro decision making of individual market participants and their interactions this paper demonstrates that there are asymmetries of information between federal funds lenders and borrowers that can only be resolved through frequent and continuous trading smaller banks are constrained in their ability to borrow federal funds due to their size and location it is shown that information asymmetries and resulting adverse selection problems may be resolved through the use of implicit multi period contracts

basis risk partial takedown and hedging by financial intermediaries in this paper we provide a model of futures market equilibrium in which both financial intermediaries and their customers are able to hedge both quantity and price risk the interplay between alternative loan commitment arrangements and hedging decisions is examined in some detail as an example we show conditions under which futures contracts can be used in conjunction with a particular loan pricing scheme to replicate another pricing mechanism by considering both input and output price uncertainty we argue that due to the built in hedge on their balance sheets the equilibrium hedge ratios for both firms and intermediaries is less than one that is a partial hedge this generalization also allows us to provide counterexamples to some commonly held beliefs concerning futures trading for example that hedgers would always want to avoid basis risk

immunization strategies for funding multiple liabilities a number of recent papers have shown that it is possible for an investor to immunize a portfolio of default and option free coupon bonds so that the return realized over a given planning period will never be less than that promised at the time the bonds were purchased in this way a future fixed dollar liability may be discharged with certainty by acquiring an asset portfolio with a market value equal to the present value of the liability and setting its appropriate duration equal to the time remaining to the date of discharge 1 however most investors have more than one liability to discharge in his seminal article in 1952 f m redington showed that a stream of liabilities may be immunized if an asset portfolio having the same present value as the liabilities is selected so that 1 its duration is equal to the duration of the liabilities and

credit rationing and implicit contract theory an empirical study abstract this paper investigate whether or not implicit contract relations predominate in the japanese bank loan market and produce equilibrium credit rationing the empirical evidence suggests that risks are shared between banks and firms through interest rate arrangements this implies that commercial banks in japan operate in a market dominated by implicit contract relations however the evidence does not support the view that japanese commercial banks execute credit rationing in the sense of fried and howitt 1980 furthermore the results show that large banks differ from small banks in the risk consideration of loan contracts these empirical results are completely consistent with the intermarket business group hypothesis such that the group formation aims to share risks and profits among members

floating rate notes and immunization as shown in several of those papers the appropriate immunizing duration is a function of the assumption regarding the stochastic process describing the man ner in which the term structure of interest rates changes the theory has been well developed for ordinary bonds this paper extends the existing literature on duration and immunization to a different type of security the floating rate note the floating rate note frn is a debt security in which coupon payments adjust according to changes in interest rates the coupons are closely tied to cur rent short term spot rates with the result that prices of frns are always at or near par value they became popular in this country in 1974 with a citieorp issue

fixed versus variable rate loans this paper discusses the nature of fixed and variable loan contracts and derives the conditions which determine the optimal quantity of each the results indicate that the payoff functions are quite different and dependent upon the project financed the appropriate conditions for the allocation of loan terms to a set of borrowers are then developed finally the analysis derives the optimal portfolio frontier and risk return trade off for the banking firm here it is demonstrated that the solution is unlikely to be at a point of zero interest rate risk

a discrete choice model of recreational participation site choice and activity valuation when complete trip data are not available abstract a discrete choice model of the demand for site specific recreational activities is developed and estimated it simultaneously predicts both how many trips the individual will take and which site will be chosen on each trip the model is formulated to estimate demand when the data set reports the total number of trips in a given time period but the actual destinations for only a subset of the total the model also includes a correction for sample selectivity bias the application is marine recreational fishing the consumer s surplus associated with any change in supply conditions is derived and used to assess the impact of changes in species availability

interest rate indexation and the pricing of loan commitment contracts abstract the central question addressed in this paper is why most loan pricing agreements between banks and their commercial customers involve additive rather than multiplicative markups over the base lending rate it is argued that banks generally prefer additive pricing because the real value of the premiums moves inversely with inflation therefore this pricing formula provides an automatic partial inflation hedge for banks most borrowers who hold long positions in nominal assets also prefer this formula for the same reason however some borrowers who hold net short positions in nominal assets prefer multiplicative pricing banks provide them with such a form of pricing in exchange for appropriate compensation supporting empirical evidence is provided

heterogeneous preferences for congestion abstract this paper studies the problem of congested recreation facilities when the users differ with regard to their willingness to pay for access to the site and their aversion to congestion the simple model of the paper shows that some user groups may actually increase their use of a site if they are less price responsive and more averse to congestion than the central tendencies of all users these results help explain many administrators reluctance to use fees to ration entrance to congested sites under plausible assumptions about the effects of income on price and congestion responsiveness the use of a fee would tend to ration sites toward people with higher incomes

bank loan commitments and interest rate volatility bank loan commitments are examined in the context of option pricing models and a valuation formula is obtained the partial takedown phenomenon which is both distinctive and vexatious is considered in detail finally estimates of the value of u s bank loan commitments and their sensitivity to interest rate changes are provided

hedging interest rate risk with futures portfolios under term structure effects this study develops and tests a methodology for reducing interest rate risk in a fixed spot portfolio of assets and liabilities with default free cash flows a minimum variance hedge is constructed by adding a portfolio of financial futures to the spot portfolio theorems are given which establish necessary and sufficient conditions for the existence of unique and zero variance hedges the risk reduction characteristics of the methodology are demonstrated by an empirical analysis unexpected interest rate fluctuations may have significant impact on the market value of both bond portfolios and interest sensitive institutions the early literature on this subject includes the seminal works of samuelson 27 redington 26 and wallas 29 all of whom consider the impact of unexpected interest rate changes on financial institutions briefly their results indicate that interest rate risk is minimized when the mean time of the assets and liabilities are equal assuming equal initial asset and liability values redington coined the term immunization to refer to the absence of interest rate risk the immunization solutions in their simplest form depend on the duration mean time of asset and liability cash flows the concept of duration was apparently developed independently by macaulay 22 and hicks 18 macaulay interested in the effective maturity of a bond defined duration as

intra day tests of the efficiency of the treasury bill futures market in this paper we use intra day prices to examine the efficiency of the treasury bill futures market the use of intra day data allows us to carefully match in time trades in the futures and cash markets by matching trades and allowing delays between observing apparent inefficiencies and the trade we are examining realistic trading strategies we find profitable arbitrage swaps and a preferred strategy for initial purchase these profits do not depend on an assumption of an equilibrium model hence these tests are direct tests of efficiency rather than a joint test of efficiency and equilibrium t his paper examines the efficiency of the treasury bill futures market this subject has been examined before by capozza and cornell 1979 cornell 1981 lang and rasche 1978 rendleman and carabini 1979 vignola and dale 1979 poole 1978 and puglisi 1978 there are a number of reasons why this paper makes an important contribution to the literature the first reason is that by using trade by trade futures prices we can make more realistic assumptions about the pnces at which trades could have taken place this paper uses intra day prices to examine efficiency prior studies at best used closing prices to examine apparent inefficiencies and assumed that transactions took place at these closing prices there are two problems with this procedure first simultaneous transactions cannot actually occur at closing prices there is almost an hour difference between the closing of the chicago futures and new york spot markets thus when the closing spot market price is observed the futures market has been closed for about an hour closing prices could be used to judge apparent discrepancies however it would be necessary to execute trades at the open making decisions based on closing prices and then assuming trades can take place at these prices is an approximation which could significantly affect results in addition using only closing prices ignores any intra day trades which could lead to profits in this study we match in time intra day prices in the spot and futures market these matched prices are used to identify apparently profitable trading rules we then assume trades take place at prices which are observed later in the day this is a test of a trading rule which an investor could actually follow as we discuss later in the paper our results differ from prior studies these differences are primarily due to using intra day prices and carefully matching times so that information used to initiate trades would actually be available to the investor at the time of the trade the second reason is that we examine more complex trading strategies than those which have been employed in other studies the random walk literature provides a useful analogy the original random walk studies simply correlated past and future prices or returns later studies examined filter rules and other more complicated trading rules in this study we employ alternative trading rules of increased complexity to test for the existence of trading profits finally we explicitly examine the consequence of t bills futures contracts being futures rather than forward contracts futures contracts unlike forward contracts involve flows every settlement day the intermediate cash flows on futures contracts can affect the profitability of any strategy the only prior study that even considered this effect is the one by rendleman and carabini 1979 they used the theoretical model of cox ingersoll and ross 1981 to try to estimate whether the difference between forward and futures prices was likely to be large enough to affect the payoff from alternative trading strategies this is a useful first attempt however ultimately the effect of daily settlement or marking to the market has to be examined directly as part of trading strategies to see if it affects the outcome of these strategies there are other problems with prior studies these involve gross estimates of prices and averaging data in a way that can mask inefficiencies since these problems are discussed in some detail in rendleman and carabini there is no reason to review them further here probably no area in finance has received more attention than the efficiency literature the reader may well wonder why even given the approximareceived for publication august 23 1982 revision accepted for publication may 20 1983 new york university new york university and baruch college respectively the authors would like to thank the center for the study of futures markets at columbia business school for financial support

discussion of morey and waldman s measurement error in recreation demand models abstract morey and waldman have proposed a method for handling measurement error in site attributes such as catch rates in models of anglers choice of fishing sites we discuss the properties of this method and compare these properties with those of the standard estimation procedure we show that i both methods are biased and ii the standard procedure is consistent whenever morey and waldman s procedure is consistent as well as under more general conditions in particular morey and waldman s procedure is inconsistent if any site attributes are omitted from the model whereas the standard procedure is consistent in the presence of omitted site attributes as long as the impact of these attributes on the dependent variable is uncorrelated with included variables a condition shared by all regression models

miller s equilibrium shareholder leverage clienteles and optimal capital structure the purpose of this paper is twofold first we examine the individual portfolio decisions when income from stocks and bonds is taxed at different rates second a rationale for the existence of risky debt in the presence of leverage related costs and differential personal income taxation is provided previous studies on capital structure with differential personal income taxation have ignored either the portfolio risk consideration and or the possibility of losing personal and corporate interest tax shields due to insufficient taxable earnings e g 8 2 3 14 13 6 7 1 9 19 20 21 23 in section i of this paper both the portfolio risk consideration and the possibility of losing personal and corporate interest tax shields are explicitly introduced this enables us to provide a rationale for the shareholder leverage clientele phenomenon within a mean variance framework we also demonstrate a non corner solution for the optimal corporate capital structure in a tax environment similar to that of miller s debt and taxes 14 in sections ii and iii of this paper miller s world is further modified to include risky debt and the attendant costs we re examine and synthesize recent studies on the theory of optimal capital structure which have appeared since the publication of debt and taxes e g 4 6 7 13 19 20

general equilibrium tragedy of the commons many poor economies depend on open access resources for their livelihoods households in resource based economies allocate their time and other factors between resource extraction and other activities as a result factors may shift from one sector to another as marginal returns change this has two important implications first it implies potentially strong linkages between resource and non resource sectors second it means that unmanaged resources cause inefficient allocations of inputs across all sectors and the effects of resource management spill into other sectors we construct a local general equilibrium model that accounts for inputs that over allocate to an open access resource and create a general equilibrium tragedy of the commons this model describes resource rent dissipation more adequately in economies with mobile factors than a model with slowly dissipating rents perfectly mobile factors dissipate rent in every period but endogenous wages cause labor and capital allocations to change with the resource stock we use the model to illustrate medium run impacts of a limit on capital in an artisanal fishery in honduras simulation results reveal that fishery management has economy wide impacts on prices and wages managers in developing countries thus should consider these linkages when implementing policies to conserve fish stocks

accounting for the recent decline in global income inequality following nearly two centuries of growth global income inequality declined in the last decades of the 20th century to determine the causes of that historic decline we focus on income inequality across nations and find that the major equalizing force is faster than world average income growth in china and south asia industrializing regions where 40 of the world s people live apparently what matters most about economic globalization thus far is its role in the spread of industrialization throughout populous poor regions of the world if so then globalization most likely has reduced global income inequality this decline is anticipated to continue over the next few decades first because of the continued industrialization of poor regions and second because most of the growth in the world s working age population will occur in poor regions

bank income taxes and interest rate risk management a note banks and other financial institutions are concerned with the management of their interest rate risk in the frictionless markets of most finance theory however one interest rate risk management policy is just as good as another hence the finance literature does not provide convincing reasons for managers to want to control interest rate risk consequently the literature has provided little guidance on what to control how far to go with this control or on how to explain differences in interest rate risk exposure among banks given frictionless markets shareholder indifference to the bank s interest rate risk policy plus management s preference to reduce risk could lead to policies that reduce or eliminate exposure to interest rate risk i e to immunization strategies however if part of the reason for the existence of banks is the provision of maturity intermediation services managers who avoid exposure to interest rate risk are likely to come out second best to managers who choose asset and liability portfolios that do expose the bank s shareholders to this risk in this note we develop and analyze a model of bank decisions in which tax considerations induce banks to control interest rate risk in the u s banks have many opportunities to shield current income against federal and state taxation foreign tax credits investment tax credits and investment in tax exempt securities are three examples the tax position of a bank can be thought of as a stock of nonsaleable tax shields usable in the current or in future years the tax shields are an asset and if the bank s income falls below some level then the value of that asset will be reduced either by the loss of tax shielding opportunities or by the postponement of their realization 2 this note treats the bank tax position similarly to the models discussed by brennan and schwartz 2 miller 8 deangelo and masulis 4 and kim 6 however our interest is in the effect of tax shields on risk taking by financial institutions rather than a concern with capital structure decisions 3

rent dissipation and efficient rationalization in for hire recreational fishing abstract recreational fisheries are increasingly important in fisheries management for some species recreational take rivals or exceeds the amount harvested by commercial fishermen most recreational fisheries are regulated with gear restrictions bag limits and time area closures but there is increasing interest in the market based solutions employed in commercial fisheries this despite the lack of an adequate bioeconomic theory of the joint commercial recreational aspects of many recreational fisheries this paper integrates a detailed production specification with traditional bioeconomic tools in order to better understand the implications of rationalization schemes targeted at the charter sector while confirming some of the qualitative conclusions of the commercial fisheries literature on open access and regulated open access our model also generates rich and novel predictions with respect to input choices the number of vessels and congestion externalities we devise a system of instruments that generate efficient outcomes and extensively discuss issues associated with their real world implementation

joint estimation of catch and other travel cost parameters some further thoughts abstract e r morey and d m waldman propose and use an estimator that jointly estimates catch rates and the parameter on those catch rates it is designed for situations where there is limited catch data for some of the sites in the choice set and takes advantage of the fact that trip patterns reflect variations in catch rates anglers do not like to fish at sites with few fish k train d mcfadden and r johnson note that this estimator is particularly sensitive to omitted variable bias and suggest an alternative estimator but their estimator effectively eliminates poor sites from the choice set

unraveling the multiple margins of rent generation from individual transferable quotas individual transferable quotas itqs induce changes along both the extensive margin via consolidation of quota among fewer vessels and the intensive margin as harvesters adjust their behavior to itq incentives we use itq introduction in the bering sea crab fishery to decompose the sources of rent generation across both margins we embed an empirically calibrated structural model of the harvesting process into a sector level model allowing us to experimentally unravel the itq treatment we show that the magnitude and source of rent generation under itqs critically depends on the manner and degree of rent dissipation before itqs are implemented

immunization as a maxmin strategy the purpose of this paper is to broaden the analysis of immunization when it is viewed as amaxmin strategy several results are demonstrated which provide a new interpretation of maxmin strategy by using a more general theory of lagrangians we clarify the exact assumptions required for the duration strategy and the maxmin strategy to be equivalent in a world with taxes it is shown that in a world with taxes the immunization strategy requires the portfolio to satisfy a constraint about the bond to be included in addition to the duration constraint

the macroeconomic implications of financial deregulation abstract this paper explores the possible macroeconomic consequences of financial deregulation in an institutional environment where deregulation raises risks in banking the central bank is supposed to maximize an objective function in which the probability of bank failure is an argument it is then shown that the usual tradeoffs between policy objectives imply that financial deregulation will lead to more interest rate smoothing than would otherwise take place and further that because of restricted entry into banking deregulation will call for some inflation the transition toward deregulation raises special problems which are likely to require a more gradual approach toward the stationary equilibrium

a method for strategic asset liability management with an application to the federal home loan bank of new york strategic asset liability management is a primary concern in today s banking environment in this paper we present a methodology to assist in the process of asset liability selection in a stochastic interest rate environment in our approach a quadratic optimizer is embedded in a simulation model and used to generate patterns of dividends market value and duration of capital for randomly generated interest rate scenarios this approach can be used to formulate test and refine asset liability strategies we present results of applying this methodology to data from the federal home loan bank of new york

immunizing default free bond portfolios with a duration vector dissatisfaction occasionally has been expressed with traditional measures of duration for immunization on conceptual grounds however more elegant duration measures have not been found to be superior to the traditional ones in empirical tests of immunization efficacy under the assumption that the term structure of continuously compounded interest rates can be expressed as a polynomial chambers and carleton 1981 demonstrate that the finite and noninstantaneous return of a default free bond can be expressed as a vector product of a duration vector and a shift vector this study derives immunization strategies from the model and tests them the results of the portfolio tests indicate that the tradi tional duration approach of macaulay provides enhanced immunization relative to matu rity approaches or naive approaches however the duration vector approach produces further improvements

the impact of institutional and land use change on local incomes in chilean patagonia many developing rural economies depend on natural capital stocks for generating income and wealth however common property natural resources are often over exploited one method of solving over ex

growth effects of foreign and domestic investment over tha past few years numerous studies in sociology have concluded that foreign investment harms poor nations these studies have focused on the coefficient for foreign capital stock controlling for flow new investment and defying logic have inferred that a negative coefficient for stock reflects dependency effects that retard economic growth since capital stock is the denominator for investment rate the greater the stock the lower the investment rate for a given level of new investment hence the negative coefficient for capital stock found in dependency studies indicates a beneficial investment effect not a harmful effect this point is demonstrated by reanalysis of the data used in dependency studies in these data foreign investment spurs growth earlier analysts have concluded otherwise only because their conclusions have belied their findings

applying portfolio theory to global bank lending abstract portfolio theory provides some insights into how a bank should manage its global exposures practical application of some of the principles of portfolio analysis is possible if comparable credit ratings are available and if the impact on each loan s rating of likely future events can be assessed if further restrictive assumptions are made about which quality dimensions of the portfolio are more important and how much more important and if judgements can be quantified about what risk return tradeoffs are acceptable then it is possible to derive measures to guide exposure and pricing decisions this article is related to the other papers in this special issue in that country and corporate risk assessment methodologies can provide important inputs into the portfolio analysis this paper however attempts to go beyond the evaluation of risk at the level of individual companies countries or other loan customers and to focus instead on the problem of managing the riskiness of the overall bank loan portfolio

duration for bonds with default risk abstract does approximating duration estimates by ignoring default risk lead to error in the two major duration applications measuring interest rate price elasticity and immunization we derive a general expression for duration in the presence of default risk based on jonkhart s term structure model on the term structure of interest rates and the risk of default journal of banking and finance 3 253 262 1979 extended to encompass risk aversion the model includes terms for default probabilities and default payoffs in each period as well as for a delay between the occurrence of default and the final default payoff our main conclusion is that practical duration applications involving bonds with default risk must employ duration measures adjusted for default risk

toward a complete economic theory of the utilization and management of recreational fisheries abstract a model of individual behavior for recreational fisheries which considers both the participation decision and the activity level decision is developed the model also distinguishes between the catch rate which is a biologically determined parameter and the landings rate which is a control variable individual and fisherywide equilibria under open access are described for both homogeneous and heterogeneous participants optimal utilization is also described optimal utilization differs from open access in terms of activity levels of participants and number and type of participants regulations to achieve optimal utilization are described

a revealed preference approach to the measurement of congestion in travel cost models abstract travel cost models are regularly used to determine the value of recreational sites or particular site characteristics yet congestion a key site attribute is often excluded from such analyses one reason for this omission is that congestion is determined in equilibrium by the process of individuals sorting across sites and thus presents significant endogeneity problems this paper illustrates this source of endogeneity describes how previous research has dealt with it using stated preference techniques and describes an instrumental variables approach to address it in a revealed preference context we demonstrate that failing to address the endogeneity of congestion leads one to dramatically understate its costs we apply our technique to the valuation of a large recreational fishing site in wisconsin lake winnebago which if eliminated would induce significant re sorting of anglers amongst remaining sites ignoring congestion leads to an understatement of the lake s value by more than 50

when can you immunize a bond portfolio abstract this paper presents a condition equivalent to the existence of a riskless shadow asset that guarantees a minimum return when the asset prices are convex functions of interest rates or other state variables we apply this lemma to immunize default free and option free coupon bonds and reach three main conclusions first we give a solution to an old puzzle why do simple duration matching portfolios work well in empirical studies of immunization even though they are derived in a model inconsistent with equilibrium and shifts on the term structure of interest rates are not parallel as assumed second we establish a clear distinction between the concepts of immunized and maxmin portfolios third we develop a framework that includes the main results of this literature as special cases next we present a new strategy of immunization that consists in matching duration and minimizing a new linear dispersion measure of immunization risk

optimal bank interest margin under capital regulation and deposit insurance this paper examines the relationships among capital regulation deposit insurance and the optimal bank interest margin in a model where loan losses are the source of uncertainty changes in capital regulation or deposit insurance premiums have direct effects on the bank s interest margin an increase in bank capital requirement or in deposit insurance premiums results in a reduced interest margin under nonincreasing risk aversion comparative static analysis also explores the relation between asset quality and interest margin it is shown that a mean preserving spread of the distribution of loan losses results in a reduced margin

risk regulation and s l diversification into nontraditional assets abstract risk exposure is a central issue in the debate over allowing savings and loan associations s ls to expand into nontraditional activities this paper examines the relationship between risk and portfolio composition of three distinct groups of s l lenders based on their investment strategies real estate specialized res s l lenders with high holdings of adjustable rate mortgages arms res s l lenders with low arms and not real estate specialized nres s l lenders the major findings of this paper suggest that diversification into nontraditional assets leads to lower risk and higher average returns for res firms with low arms but for nres firms it leads to higher risk and in some cases lower average returns this latter group of institutions appears to be using nontraditional assets as a means to increase their risk exposure and not necessarily their average stock returns in addition we find that risk increases for res s ls with high arms as additional adjustable rate mortgages are added to their portfolios this is not the case for the low arms group and may indicate that at some level the increase in credit risk dominates the decrease in interest rate risk associated with additional arms relative to fixed rate mortgages these results strongly suggest that while additional diversification provides risk reduction opportunities for some s ls it also provides opportunities for other s ls to increase their risk exposure

vintage human capital demographic trends and endogenous growth we study how economic growth is affected by demographics in an overlapping generations model with a realistic survival law individuals optimally chose the dates at which they leave school to enter the labor market and at which they retire endogenous growth arises thanks to the accumulation of generation specific human capital favorable shifts in the survival probabilities always induce longer schooling and later retirement but have an ambiguous effect on growth the relationship between the growth of population and per capita growth is hump shaped increases in longevity can be responsible for a switch from a no growth regime to a sustained growth regime and for a positive relationship between fertility and growth to vanish

on the determinants of corporate hedging finance theory indicates that hedging increases firm value by reducing expected taxes expected costs of financial distress or other agency costs this paper provides evidence on these hypotheses using survey data on firm s use of forwards futures swaps and options combined with computstat data on firm characteristics of 169 firms in the sample 104 firms use hedging instruments in 1986 the data suggest that firms which hedge face more convex tax functions have less coverage of fixed claims are larger have more growth options in their investment opportunity set and employ fewer hedging substitutes