nonlinear valuation under credit funding and margins existence uniqueness invariance and disentanglement abstract since the 2008 global financial crisis the banking industry has been using valuation adjustments to account for default risk and funding costs these adjustments are computed separately and added together by practitioners as if the valuation equations were linear this assumption is too strong and does not allow to model market features such as different borrowing and lending rates and replacement default closeout hence we argue that the full valuation equations are nonlinear and this paper is devoted to studying the nonlinear valuation equations introduced in pallavicini et al 2011 we illustrate all the cash flows exchanged by the parties involved in a derivative contract in presence of default risk collateralisation with re hypothecation and funding costs then we show how to obtain semi linear pdes or forward backward stochastic differential equations fbsdes from present valuing said cash flows in an arbitrage free setup and we study the well posedness of these pdes and fbsdes in a viscosity and classical sense moreover from a financial perspective we discuss cases where classical valuation adjustments xva can be disentangled we show how funding costs are offset by treasury valuation adjustments when one takes a whole bank perspective in the valuation while the same costs are not offset by such adjustments when taking a shareholder perspective we show that although we use a risk neutral valuation framework based on a locally risk free bank account our final valuation equations do not depend on the risk free rate finally we show how to consistently derive a netting set valuation from a portfolio level one

measuring and assessing capacity utilization in the manufacturing sectors of nine oecd countries following a tradition established by cassels klein and hickman we employ the economic theory of cost and production and define economic capacity output as that output at which short and long run average total cost curves are tangent to one another capacity utilization cu rates are then computed as the ratio of actual to capacity output we implement this framework empirically by specifying and estimating a translog variable cost function for the manufacturing sectors of nine oecd countries we find that by the end of the historical sample the early 1980s pervasive and chronic excess capacity exists while the average cost consequence of excess capacity was relatively modest in the 1960s the burden increased considerably after opec i and after opec ii the premium was as large as 15 of average total costs we also find that electricity and fuel price increases had small impacts on capacity output relative to that from labor or capital finally we adjust conventional measures of multifactor productivity growth for changes in cu and find that the adjusted growth is larger after 1973 than that based on traditional procedures

non constant discounting in finite horizon the free terminal time case abstract this paper derives the hjb hamilton jacobi bellman equation for sophisticated agents in a finite horizon dynamic optimization problem with non constant discounting in a continuous setting by using a dynamic programming approach special attention is paid to the case of free terminal time strotz s model a cake eating problem of a non renewable resource with non constant discounting is revisited a consumption saving model is used to illustrate the results in the free terminal time case

long and short run non parametric cost frontier efficiency an application to spanish savings banks the utilisation rate of installed capacity is a popular concept in both the performance appraisal literature and in publications on industrial organisation however a common consensus has yet to be reached concerning the most appropriate way to measure the capacity utilisation of physical inputs and its final effect on company results on the one hand there are approaches that establish capacity utilisation with reference to the maximum level of production that can be achieved in contrast there are other approaches more strictly related to economic analysis of operating costs in this paper our main objective is to define an analytical process that uses non parametric frontier methodology to provide the distance between the total costs of a given unit and the short run frontier costs as a natural extension of this proposal it is possible to compute the short run inefficiency caused by a non optimal dimension of the fixed inputs we define this as capacityefficiency the proposed evaluation process is applied to spanish savings banks covering the period between 1986 and 1995 throughout the period analysed the greater part of cost inefficiency is due to capacity efficiency 2002 elsevier science b v all rights reserved

anomalies in intertemporal choice evidence and an interpretation research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility eu anomalies behaviors that violate the expected utility axioms the relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility du anomalies we enumerate a set of du anomalies analogous to the eu anomalies and propose a model that accounts for the anomalies as well as other intertemporal choice phenomena incompatible with du we discuss implications for savings behavior estimation of discount rates and choice framing effects

new evidence on the link between housing environment and children s educational attainments abstract there is extensive literature that posits the hypothesis that a better housing environment enhances a child s educational attainment however there is little causal evidence demonstrating the presence of this effect in this study we examine the effect of housing environment on a child s educational attainment using census files covering the entire population of taiwan because the taiwan census data contains unique address information for every household we try to control the neighborhood effect and unobserved family heterogeneity by comparing a child with his peers of the same age cohort in the same neighborhood after accounting for tens of thousand area dummies the chance of high school enrollment for teens aged 16 and 17 and college enrollment for young adults aged 19 and 20 is found to be positively correlated with an increase in floor space an increase in residential stability and with homeownership but negatively correlated to an increase in housing crowdedness and an increase in building age among these housing variables residential stability and homeownership are the ones generating the largest positive effects on the child s schooling

on the measurement of capacity utilization capacity utilization is usually defined as the ratio of actual output to the output corresponding to 1 the minimum point on the short run average total cost curve and 2 the point of tangency between the long run average total cost and short run average total cost curves in practice however capacity utilization is often measured as the ratio of actual to the maximum potential output consistent with a given capital stock this paper demonstrates how to estimate the theoretical measures of capacity utilization and examines the correlation between three measures of capacity utilization and the mcgraw hill estimates of capacity utilization using data from a sample of u s privately owned electric utilities for 1961 83 copyright 1989 by blackwell publishing ltd

why is taiwan s homeownership rate so high with an annual growth rate of 0 62 per cent since 1980 taiwan s homeownership rate reached 88 per cent in 2007 this study explores possible causes of taiwan s high homeownership rates the instit

singular dividend optimization for a linear diffusion model with time inconsistent preferences abstract with the advancement of behavioral economics the use of exponential discounting for decision making in neoclassical economics has been questioned since it cannot provide a realistic way to explain certain decision making behavior the purpose of this paper is to investigate strategic decision making on dividend distribution policies of insurance companies when the management adopts a more realistic way for discounting namely stochastic quasi hyperbolic discounting the use of this more realistic way for discounting is motivated by some recent developments in behavioral economics a game theoretic approach is adopted to establish economic equilibrium results namely subgame perfect markov equilibrium strategies it is shown that 1 under certain mild technical conditions the barrier strategy with an optimal barrier which is widely used in the traditional approach to optimal dividend problems is a perfect markov equilibrium strategy 2 the optimal barrier is lower than the barrier of an optimal strategy obtained from the respective time consistent optimal dividend problem and 3 the solution based on the barrier strategy does not exist in some situations

consumption and portfolio rules for time inconsistent investors abstract this paper extends the classical consumption and portfolio rules model in continuous time merton r c 1969 lifetime portfolio selection under uncertainty the continuous time case review of economics and statistics 51 247 257 merton r c 1971 optimum consumption and portfolio rules in a continuous time model journal of economic theory 3 373 413 to the framework of decision makers with time inconsistent preferences the model is solved for different utility functions for both naive and sophisticated agents and the results are compared in order to solve the problem for sophisticated agents we derive a modified hjb hamilton jacobi bellman equation it is illustrated how for crra functions within the family of hara functions logarithmic and power utilities the optimal portfolio rule does not depend on the discount rate but this is not the case for a general utility function such as the exponential cara utility function

a note on the benefits of homeownership abstract this brief note adds to recent work that attempts to identify externalities associated with homeownership the results suggest that some of the homeownership effect found by green and white is driven by family characteristics associated with homeownership especially residential stability however as much as homeownership increases residential stability it appears to be correlated with higher school attainment attempts to control for endogeneity cannot eliminate this finding

a nonparametric approach to expenditure constrained profit maximization a nonparametric approach to expenditure constrained profit maximization is developed a deterministic frontier profit function is constructed with and without expenditure constraints foregone profit is used as dual evidence for the existence of expenditure constraints individual evaluations on performance and expenditure constraints are produced empirical analysis is based on survey data for california rice farms seventeen of the eighty two surveyed farms experience profit loss as a result of expenditure constraints

returns to scale and input substitution for large u s banks the united states commercial banking industry has experienced significant changes in recent years the recent wave of mergers and the near term prospects of interstate banking suggests that the industry is moving toward much larger average banking organizations rhoades 1985 will a more concentrated banking industry result in lower costs due to scale economies we address this question by examining the cost function for large banks numerous studies of economies of scale in banking exist generally tracing their roots to the classic papers by benston 1965 and bell and murphy 1968 a good review of the most recent studies can be found in clark 1988 the majority of the papers uses samples of smaller banks that is under 1 billion in deposits finding generally that economies of scale are quickly exhausted and that further increases in bank size occur at constant or possibly increasing cost the extrapolation of previous findings for samples of smaller banks to large banks may be problematic especially in the current environment first large banks service a different mix of markets and customers than small banks suggesting that large and small banks probably face different cost structures second the process of deregulation may have rendered the results of prior studies moot since the data pertain to periods before significant deregulation since we

ramsey meets laibson in the neoclassical growth model the neoclassical growth model is modified to include a variable rate of time preference with no commitment ability and log utility the equilibrium features a constant effective rate of time preference and is observationally equivalent to the standard model the extended framework yields testable linkages between the extent of commitment ability and the rates of saving and growth the model also has welfare implications including the optimal design of institutions that facilitate household commitments steady state results are obtained for general concave utility functions and some properties of the transitional dynamics are characterized for isoelastic utility

the more the merrier the effect of family size and birth order on children s education there is an extensive theoretical literature that postulates a tradeoff between child quantity and quality within a family however there is little causal evidence that speaks to this theory using a rich dataset on the entire population of norway over an extended period of time we examine the effects of family size and birth order on the educational attainment of children while we find a negative correlation between family size and children s education when we include indicators for birth order and or use twin births as an instrument family size effects become negligible in addition birth order has a significant and large negative effect on children s education we also study adult earnings employment and teenage childbearing and find strong evidence for birth order effects with these outcomes particularly among women these findings suggest the need to revisit economic models of fertility and child production focusing not only on differences across families but differences within families as well

the impacts of family size on investment in child quality using multiple births as an exogenous shift in family size i investigate the impact of the number of children on child investment and child well being using data from the 1980 us census five percent public use micro sample 2sls results demonstrate that parents facing a change in family size reallocate resources in a way consistent with becker s quantity quality model a larger family generated by twins in a later birth reduces the likelihood that older children attend private school reduces the mother s labor force participation and increases the likelihood that parents divorce the impact of family size on a measure of child outcome such as grade retention is less clear the results indicate that for both measures of child investment and child well being the 2sls estimates are statistically distinguishable from ols estimates indicating an omitted variables bias in the single equation model

house price growth when children are teenagers a path to higher earnings abstract this paper examines whether rising house prices immediately prior to children entering college have an impact on their earnings as adults higher house prices provide homeowners with additional funding to invest in their children s human capital but also raise housing costs the results show that a 1 percentage point increase in house prices when children are 17 years old results in roughly 0 9 percent higher annual income for the children of homeowners and 1 5 percent lower annual income for the children of renters house price appreciation at age 17 also leads to higher college enrollment rates at age 19 and an increased likelihood of attendance at higher ranked post secondary institutions for children of homeowners as well as lower college enrollment rates for children of renters

deregulation and productivity decline the case of spanish savings banks abstract during the 1980s many regulatory constraints limiting competition in spanish banking were relaxed or removed although deregulation came later to savings banks than to the rest of the banking sector two consequences of partial deregulation of savings banks have been a rapid growth in branching activity much of it geographically dispersed and a burst of merger activity in this paper we investigate productive efficiency and total factor productivity change in spanish savings banks over the 1986 1991 post deregulation period neither branching nor mergers provide an adequate explanation for the magnitude or the nature of the productivity decline we observe over the period

the effect of overcrowded housing on children s performance at school this paper provides estimates of the causal effect of living in an overcrowded home on performance at school in france our identification strategy relies on the fact that the size and housing conditions of families vary with the sex composition of the siblings in particular large families in which the two youngest children are by descending age a boy and a girl tend to live less often in overcrowded housing than the other families french parents seem to be more reluctant about bringing up their children in the same room when they are not of the same sex especially when the youngest one is a girl we build on these results to develop several econometric analyses of the effect of overcrowding on schooling outcomes using variables describing the sex composition of the siblings as instrumental variables these different strategies reveal that the very strong statistical relationship between housing conditions and academic failure is plausibly one of cause and effect children in large families perform much less well than children in small families but our iv estimates suggest that this is mostly due to the fact that they live in more overcrowded homes

consumption investment strategies with non exponential discounting and logarithmic utility abstract in this paper we revisit the consumption investment problem with a general discount function and a logarithmic utility function in a non markovian framework the coefficients in our model including the interest rate appreciation rate and volatility of the stock are assumed to be adapted stochastic processes following yong 2012a b s method we study an n person differential game we adopt a martingale method to solve an optimization problem of each player and characterize their optimal strategies and value functions in terms of the unique solutions of bsdes then by taking limit we show that a time consistent equilibrium consumption investment strategy of the original problem consists of a deterministic function and the ratio of the market price of risk to the volatility and the corresponding equilibrium value function can be characterized by the unique solution of a family of bsdes parameterized by a time variable