tracking the market dynamic pricing and learning in a changing environment dynamic pricing of commodities without knowing the exact relation between price and demand is a much studied problem most existing studies assume that the parameters describing the market are constant during the selling period this severely reduces their practical applicability since in reality market characteristics may change all the time without the firm always being aware of it in the present paper we study dynamic pricing and learning in a changing market environment we introduce a methodology that enables the price manager to hedge against changes in the market and provide explicit upper bounds on the regret a measure of the performance of the firm s pricing decisions in addition this methodology guides the selection of the optimal way to estimate the market process we provide numerical examples from practically relevant situations to illustrate the methodology

close the gaps a learning while doing algorithm for single product revenue management problems we consider a retailer selling a single product with limited on hand inventory over a finite selling season customer demand arrives according to a poisson process the rate of which is influenced by a single action taken by the retailer such as price adjustment sales commission advertisement intensity etc the relationship between the action and the demand rate is not known in advance however the retailer is able to learn the optimal action on the fly as she maximizes her total expected revenue based on the observed demand reactions using the pricing problem as an example we propose a dynamic learning while doing algorithm that only involves function value estimation to achieve a near optimal performance our algorithm employs a series of shrinking price intervals and iteratively tests prices within that interval using a set of carefully chosen parameters we prove that the performance of our algorithm is among the best of all possible algorithms in terms of the asymptotic regret the relative loss compared to the full information optimal solution our result closes the performance gaps between parametric and nonparametric learning and between the post price mechanism and the customer bidding mechanism important managerial insight from this research is that the values of information on both the parametric form of the demand function as well as each customer s exact reservation price are less important than prior literature suggests our results also suggest that firms would be better off to perform dynamic learning and action concurrently rather than sequentially

foreign locals a cautionary tale on the culture of mnc local employees multinational corporations mncs rely heavily on local employees when conducting their international operations yet the international business literature provides few instances of true focus on these employees the commonly used label host country nationals hcns confers them an identity strongly related to the culture of their country prompting both researchers and practitioners to know them through the knowledge about the local culture this paper provides evidence that a more sophisticated view of the culture of hcns is needed through an ethnographic exploration of hcns working in local subsidiaries of american mncs in romania i reveal that hcns are not always culturally interchangeable with the rest of the host country population hcns can display a variety of cultural profiles more or less reflective of the national culture depending on their enacted stance towards the native culture and the cultural landscape of the mncs themselves the findings call for further specification of theories relying on the assumed localness of hcns and should contribute to the ongoing conversation on the interplay between the cultures specific to the mnc and its host countries

dynamic pricing with real time demand learning in many service industries the firm adjusts the product price dynamically by taking into account the current product inventory and the future demand distribution because the firm can easily monitor the product inventory the success of dynamic pricing relies on an accurate demand forecast in this paper we consider a situation where the firm does not have an accurate demand forecast but can only roughly estimate the customer arrival rate before the sale begins as the sale moves forward the firm uses real time sales data to fine tune this arrival rate estimation we show how the firm can first use this modified arrival rate estimation to forecast the future demand distribution with better precision and then use the new information to dynamically adjust the product price in order to maximize the expected total revenue numerical study shows that this strategy not only is nearly optimal but also is robust when the true customer arrival rate is much different from the original forecast finally we extend the results to four situations commonly encountered in practice unobservable lost customers time dependent arrival rate batch demand and discrete set of allowable prices

forecasting and trading monetary policy effects on the riskless yield curve with regime switching nelson siegel models abstract we use 1982 2014 data on the us riskless yield curve to show that regime switching dynamics in nelson siegel factor models extended to encompass variables that summarize the state of monetary policy lead to superior predictive accuracy such spread in forecasting power turns out to be statistically significant even controlling for parameter uncertainty and sample variation exploiting regimes we obtain evidence that the increase in predictive accuracy is stronger during the great financial crisis when monetary policy underwent a significant sudden shift although more caution applies in comparisons to a naive random walk benchmark over a few sub samples and when transaction costs are accounted for we report that the increase in predictive power owed to the combination of regimes and of variables that capture the stance of unconventional monetary policies is tradeable we devise and test butterfly strategies that exploit the forecasts from the models and obtain evidence of risk adjusted profits both per se and in comparisons to simpler models

what is the effect of unconventional monetary policy on bank performance this paper examines the relationship between unconventional monetary policy and the us banking performance unconventional monetary policy is captured through the central bank s assets and excess reserves results show that unconventional monetary policy has a negative relationship with bank performance further analysis shows that the negative association between unconventional monetary policy and performance is mitigated for banks with a high level of asset diversification and low deposit funding we also find that the negative relationship between unconventional monetary policy and performance subdues for deposit insured financial institutions finally we use dynamic panel threshold analysis which reveals that the negative association between unconventional monetary policy and bank performance is particularly pronounced above the reported threshold value

simultaneously learning and optimizing using controlled variance pricing price experimentation is an important tool for firms to find the optimal selling price of their products it should be conducted properly since experimenting with selling prices can be costly a firm therefore needs to find a pricing policy that optimally balances between learning the optimal price and gaining revenue in this paper we propose such a pricing policy called controlled variance pricing cvp the key idea of the policy is to enhance the certainty equivalent pricing policy with a taboo interval around the average of previously chosen prices the width of the taboo interval shrinks at an appropriate rate as the amount of data gathered gets large this guarantees sufficient price dispersion for a large class of demand models we show that this procedure is strongly consistent which means that eventually the value of the optimal price will be learned and derive upper bounds on the regret which is the expected amount of money lost due to not using the optimal price numerical tests indicate that cvp performs well on different demand models and time scales this paper was accepted by assaf zeevi stochastic models and simulation

central bank announcements of asset purchases and the impact on global financial and commodity markets abstract we present evidence on the effects of large scale asset purchases by the federal reserve and the bank of england since 2008 we show that announcements about these purchases led to lower long term interest rates and depreciations of the u s dollar and the british pound on announcement days while commodity prices generally declined despite this more stimulative financial environment we suggest that lsap announcements likely involved signaling effects about future growth that led investors to downgrade their u s growth forecasts lowering long term us yields depreciating the value of the u s dollar and triggering a decline in commodity prices moreover our analysis illustrates the importance of controlling for market expectations when assessing these effects we find that positive u s monetary surprises led to declines in commodity prices even as long term interest rates fell and the u s dollar depreciated in contrast on days of negative u s monetary surprises i e when markets evidently believed that monetary policy was less stimulatory than expected long term yields the value of the dollar and commodity prices all tended to increase

real time dynamic pricing with minimal and flexible price adjustment we study a standard dynamic pricing problem where the seller a monopolist possesses a finite amount of inventories and attempts to sell the products during a finite selling season despite the potential benefits of dynamic pricing many sellers still adopt a static pricing policy because of 1 the complexity of frequent reoptimizations 2 the negative perception of excessive price adjustments and 3 the lack of flexibility caused by existing business constraints in this paper we develop a family of pricing heuristics that can be used to address all these challenges our heuristic is computationally easy to implement it requires only a single optimization at the beginning of the selling season and automatically adjusts the prices over time moreover to guarantee a strong revenue performance the heuristic only needs to adjust the prices of a small number of products and do so infrequently this property helps the seller focus his effort on the prices of the most important products instead of all products in addition in the case where not all products are equally admissible to price adjustment due to existing business constraints such as contractual agreement strategic product positioning etc our heuristic can immediately substitute the price adjustment of the original products with the price adjustment of similar products and maintain an equivalent revenue performance this property provides the seller with extra flexibility in managing his prices

the effects of the ecb s expanded asset purchase programme abstract this paper provides empirical evidence on the financial and macroeconomic impact of the news associated to the announcement launching the ecb s expanded asset purchase programme app we proxy the app announcement shock with an announcement variable derived from the institutional features of the app and survey based evidence the variable is used in a time varying coefficient var model with stochastic volatility to estimate the effects of the announcement shock the evidence suggests that this shock had a significant upward effect on both real economic activity and hicp inflation in the euro area the response of long term interest rates gave rise to a flattening of the yield curve in the short term followed by a steepening in the medium term several channels of transmission appear to have been activated including the portfolio rebalancing channel the exchange rate channel and the credit channel

game theoretic pricing models in hotel revenue management an equilibrium choice based conjoint analysis approach abstract this paper explores a game theoretically founded approach to conjoint analysis that determines equilibrium room rates under differentiated price competition in an oligopolistic hotel market competition between hotels is specified in terms of market share functions that can be estimated using multinomial logit models of consumer choice the approach is based on choice based conjoint analysis that permits the estimation of attributes weights part worths for an additive utility formulation of the utility function from this room rates that equilibrate the market conditioned on the differences in services and facilities offered by competing hotels can be determined the approach is illustrated by an example

price dispersion and incomplete learning in the long run abstract in each period a seller chooses a price and the customer for that period buys either one unit or nothing the relationship between price and purchase probability is one of two linear functions it is shown that the seller behaving optimally does not necessarily learn which function is the actual relationship since there can be a positive probability of sequences of prices converging to the price at which the two functions give the same purchase probability

international spillovers of large scale asset purchases this paper evaluates the international spillover eects of large scale asset purchases lsaps using a two country dynamic stochastic general equilibrium model with nominal and real rigidities and portfolio balance eects portfolio balance eects arise from imperfect substitution between short and long term bond portfolios in each country as well as between domestic and foreign bonds within these portfolios we show that lsaps lower both domestic and foreign long term yields and stimulate economic activity in both countries international spillover eects

asset market responses to conventional and unconventional monetary policy shocks in the united states abstract we quantify the responses of a wide range of united states financial market variables to domestic monetary policy shocks over conventional and unconventional monetary policy environments our results show that responses to policy shocks are in the same direction but generally larger and more significant in the unconventional period the larger responses are mostly due to larger shocks in the unconventional period but some variables show evidence of a larger transmission of shocks we separately use our framework to test shadow short rate estimates as a proxy for short maturity interest rates across conventional and unconventional periods

the role of no arbitrage on forecasting lessons from a parametric term structure model abstract parametric term structure models have been successfully applied to numerous problems in fixed income markets including pricing hedging managing risk as well as to the study of monetary policy implications in turn dynamic term structure models equipped with stronger economic structure have been mainly adopted to price derivatives and explain empirical stylized facts in this paper we combine flavors of those two classes of models to test whether no arbitrage affects forecasting we construct cross sectional allowing arbitrages and arbitrage free versions of a parametric polynomial model to analyze how well they predict out of sample interest rates based on us treasury yield data we find that no arbitrage restrictions significantly improve forecasts arbitrage free versions achieve overall smaller biases and root mean square errors for most maturities and forecasting horizons furthermore a decomposition of forecasts into forward rates and holding return premia indicates that the superior performance of no arbitrage versions is due to a better identification of bond risk premium

unconventional monetary policy fiscal side effects and euro area im balances we study the macroeconomic effects of unconventional monetary policy in the euro area using structural vector autoregressions identified with external instruments the instruments are based on the common unexpected variation in euro area sovereign yields for different maturities on policy announcement days we first show that expansionary monetary surprises are effective at lowering public and private interest rates and increasing economic activity consumer prices and inflation expectations we then document that the shocks lead to a rise in primary public expenditures and a widening of internal trade balances

actively learning about demand and the dynamics of price adjustment by observing the quantity demanded at particular prices a firm may learn about the parameters of its demand curve in such an environment price changes obstruct the learning process by inducing additional noise the authors paper constructs a dynamic model where a price setting firm endogenously controls the speed of learning the model provides a possible explanation for price inertia as a stable pricing policy allows the firm to learn more rapidly which improves future expected profits furthermore even in the long run learning continues to affect the firm s optimal price copyright 1990 by royal economic society

quantitative easing in the 1930s during the 1934 39 recovery from the u s great depression overnight interest rates were usually at a lower bound meanwhile american monetary authorities followed policies related to today s debates on quantitative easing they tried to stabilize yields on treasury bonds with open market operations they created rapid growth in high powered money and they allowed transitory factors to affect high powered money effects of these policies on bond yields reveal a portfolio effect of short duration asset supply on term premiums this portfolio effect helps explain why high powered money growth was associated with recovery of real activity over 1934 39

on the surprising sufficiency of linear models for dynamic pricing with demand learning we consider a multiperiod single product pricing problem with an unknown demand curve the seller s objective is to adjust prices in each period so as to maximize cumulative expected revenues over a given finite time horizon in doing so the seller needs to resolve the tension between learning the unknown demand curve and maximizing earned revenues the main question that we investigate is the following how large of a revenue loss is incurred if the seller uses a simple parametric model that differs significantly i e is misspecified relative to the underlying demand curve we measure performance by analyzing the price trajectory induced by this misspecified model and quantifying the magnitude of revenue losses as a function of the time horizon relative to an oracle that knows the true underlying demand curve the price of misspecification is expected to be significant if the parametric model is overly restrictive somewhat surprisingly we show under reasonably general conditions that this need not be the case this paper was accepted by gerard cachon stochastic models and simulation

dynamic pricing and learning with finite inventories we study a dynamic pricing problem with finite inventory and parametric uncertainty on the demand distribution products are sold during selling seasons of finite length and inventory that is unsold at the end of a selling season perishes the goal of the seller is to determine a pricing strategy that maximizes the expected revenue inference on the unknown parameters is made by maximum likelihood estimation we show that this problem satisfies an endogenous learning property which means that the unknown parameters are learned on the fly if the chosen selling prices are sufficiently close to the optimal ones we show that a small modification to the certainty equivalent pricing strategy which always chooses the optimal price w r t current parameter estimates satisfies regrett olog2t where regrett measures the expected cumulative revenue loss w r t a clairvoyant who knows the demand distribution we complement this upper bound by showing an instance for which the regret of any pricing policy satisfies i log t

on the minimax complexity of pricing in a changing environment we consider a pricing problem in an environment where the customers willingness to pay wtp distribution may change at some point over the selling horizon customers arrive sequentially and make purchase decisions based on a quoted price and their private reservation price the seller knows the wtp distribution pre and postchange but does not know the time at which this change occurs the performance of a pricing policy is measured in terms of regret the loss in revenues relative to an oracle that knows the time of change prior to the start of the selling season we derive lower bounds on the worst case regret and develop pricing strategies that achieve the order of these bounds thus establishing the complexity of the pricing problem our results shed light on the role of price experimentation and its necessity for optimal detection of changes in market response wtp our formulation allows for essentially arbitrary consumer wtp distributions and purchase request patterns

analytical solutions to the dynamic pricing problem for time normalized revenue abstract in this work we consider dynamic pricing for the case of continuous replenishment an essential ingredient in such a formulation is the use of time normalized revenue or profit function in other words revenue or profit per unit time this provides the incentive to sell many items in the shortest time and of course at a high price moreover for most firms what matters most is how much revenue or profit is achieved in a certain time frame for example per year this changes the problem qualitatively and methodologically we develop a new dynamic pricing model for this formulation we derive an analytical solution to the pricing problem in the form of a simple to solve ordinary differential equation ode equation the trajectory of this ode gives the optimal pricing curve unlike many of the models existing in the literature that rely on computationally demanding dynamic programming type solutions our model is relatively simple to solve also we apply the derived equation to two commonly used price demand functions the exponential and the power functions and derive closed form pricing curves for these functions

stock market reaction to fed funds rate surprises state dependence and the financial crisis this paper examines the response of us stock returns to federal funds rate ffr surprises between 1989 and 2012 focusing on the impact of the recent financial crisis we find that outside the crisis period stock prices increased as a response to unexpected ffr cuts state dependence is identified with stocks exhibiting larger increases when interest rate easing coincided with recessions bear markets and tightening credit conditions however an important structural shift occurred during the crisis changing the stocks response to ffr shocks and the nature of state dependence throughout the crisis period stocks did not react positively to unexpected ffr cuts which were interpreted as signals of worsening future economic conditions this triggered a rebalancing of investment portfolios away from falling equities and towards safe haven assets our results highlight the severity of the crisis and the ineffectiveness of conventional monetary policy close to the zero lower bound

measuring euro area monetary policy abstract we map ecb policy communication into yield curve changes and study the information flow on policy dates a byproduct is the publicly available euro area monetary policy event study database ea mpd containing intraday asset price changes we find that policy target forward guidance and quantitative easing factors capture about all the variation in the yield curve with different factors appearing in the windows covering the policy decision announcement and the press conference and having time varying variance shares we study sovereign yields exchange rates stock prices persistence of effects and response asymmetry our methodology can be implemented for any policy related event

prediction with misspecified models many decision makers in the public and private sectors routinely consult the implications of formal economic and statistical models in their work especially in large organizations and for important decisions there are often competing models of course no model under consider ation is a literal representation of reality for the purposes at hand more succinctly no model is true and different models focus on different aspects of the relevant environment this fact can often be supported by formal econometric tests concluding that the models at hand are indeed misspecified in various dimensions there are well developed practical bayesian procedures with solid theoretical foundations for combining competing models in decisionmaking geweke 2005 section 1 5 but these procedures all condition on one of the models under consideration being true non bayesian model selection procedures may be less formal but proceed under the same maintained hypothesis this leads to the common situation in which decision makers are left to balance informally the various predictions and decisions that are formal consequences of competing economic and statistical models in this circumstance serious attention is typically granted to the implications of models to which formal econometric procedures assign very little credence the approach taken here draws on a literature long established in statistics and recently emerging in econometrics that dispenses with the condition that one of the models under consider ation is true in its place it substitutes a log scor

expatriate managers loyalty to the mnc myth or reality an exploratory study this exploratory study examines five antecedent conditions of organizational commitment among groups of american dutch israeli and british managers in six multinational banking corporations role nationality age seniority and rank are tested as correlates of the organizational commitment construct among three groups of managers headquarters hq officials expatriate managers and host country managers in foreign subsidiaries

technical note dynamic pricing and demand learning with limited price experimentation in a dynamic pricing problem where the demand function is not known a priori price experimentation can be used as a demand learning tool existing literature usually assumes no constraint on price changes but in practice sellers often face business constraints that prevent them from conducting extensive experimentation we consider a dynamic pricing model where the demand function is unknown but belongs to a known finite set the seller is allowed to make at most m price changes during t periods the objective is to minimize the worst case regret i e the expected total revenue loss compared with a clairvoyant who knows the demand distribution in advance we demonstrate a pricing policy that incurs a regret of ologmt or m iterations of the logarithm furthermore we describe an implementation of this pricing policy at groupon a large e commerce marketplace for daily deals the field study shows significant impact on revenue and bookings the e companion is available at https doi org 10 1287 opre 2017 1629

announcements of ecb unconventional programs implications for the sovereign spreads of stressed euro area countries abstract this paper studies the effects of ecb communications about unconventional monetary policy operations on the sovereign spreads of greece ireland italy portugal and spain relative to germany between 2008 and 2012 more than fifty events concerning non standard operations are identified and classified with respect to the specific ecb program the empirical results suggest that the ecb announcements about unconventional monetary policies substantially reduced long term government bond yield spreads relative to german counterparts in all countries except greece particularly among the different types of measures news about the securities markets programme strongly affected the perceived sovereign risk of the five stressed euro area countries while the announcements of the outright monetary transactions seem to have a significant impact only in italy and spain

the effects of conventional and unconventional monetary policy on forecasting the yield curve abstract we investigate how conventional and unconventional monetary policies affect the dynamics of the yield curve by assessing the performance of individual yield curve models and their mixtures out of sample forecasts for u s bond yields show that the arbitrage free nelson siegel model and its mixtures with other models perform well in the period of conventional monetary policy whereas the random walk model outperforms all the other models in the period of unconventional monetary policy the diminished role of the no arbitrage restriction in forecasting the yield curve since 2009 can be attributed to unconventional monetary policy which resulted in low correlations between short and long term bond yields and little variation in the short term rates during the period of the maturity extension program in 2011 2012 the superiority of the random walk forecasts is more pronounced reinforcing our finding that the monetary policy framework affects yield curve forecast accuracy

learning and pricing with models that do not explicitly incorporate competition in revenue management research and practice demand models are used that describe how demand for a seller s products depends on the decisions such as prices of that seller even in settings where the demand for a seller s products also depends on decisions of other sellers the models often do not explicitly account for such decisions it has been conjectured in the revenue management literature that such monopoly models may incorporate the effects of competition because the parameter estimates of the monopoly models are based on data collected in the presence of competition in this paper we take a closer look at such a setting to investigate the behavior of parameter estimates and decisions if monopoly models are used in the presence of competition we consider repeated pricing games in which two competing sellers use mathematical models to choose the prices of their products over the sequence of games each seller attempts to estimate the values of the parameters of a demand model that expresses demand as a function only of its own price using data comprised only of its own past prices and demand realizations we analyze the behavior of the sellers parameter estimates and prices under various assumptions regarding the sellers knowledge and estimation procedures and we identify situations in which a the sellers prices converge to the nash equilibrium associated with knowledge of the correct demand model b the sellers prices converge to the cooperative solution and c the sellers prices have many potential limit points that are neither the nash equilibrium nor the cooperative solution and that depend on the initial conditions we compare the sellers revenues at potential limit prices with their revenues at the nash equilibrium and the cooperative solution and we show that it is possible for sellers to be better off when using a monopoly model than at the nash equilibrium

measuring the effects of federal reserve forward guidance and asset purchases on financial markets i extend the methods of gurkaynak sack and swanson 2005 to separately identify the effects of federal reserve forward guidance and large scale asset purchases lsaps during the 2009 15 u s zero lower bound zlb period i find that both forward guidance and lsaps had substantial and highly statistically significant effects on medium term treasury yields stock prices and exchange rates comparable in magnitude to the effects of the federal funds rate before the zlb forward guidance was more effective than lsaps at moving short term treasury yields while lsaps were more effective than forward guidance and the federal funds rate at moving longer term treasury yields corporate bond yields and interest rate uncertainty however the effects of forward guidance were not very persistent with a half life of 1 4 months the effects of lsaps seem to be more persistent i conclude that overall in terms of these criteria lsaps were a more effective policy tool than forward guidance during the zlb period

dynamic pricing with a prior on market response we study a problem of dynamic pricing faced by a vendor with limited inventory uncertain about demand and aiming to maximize expected discounted revenue over an infinite time horizon the vendor learns from purchase data so his strategy must take into account the impact of price on both revenue and future observations we focus on a model in which customers arrive according to a poisson process of uncertain rate each with an independent identically distributed reservation price upon arrival a customer purchases a unit of inventory if and only if his reservation price equals or exceeds the vendor s prevailing price we propose a simple heuristic approach to pricing in this context which we refer to as decay balancing computational results demonstrate that decay balancing offers significant revenue gains over recently studied certainty equivalent and greedy heuristics we also establish that changes in inventory and uncertainty in the arrival rate bear appropriate directional impacts on decay balancing prices in contrast to these alternatives and we derive worst case bounds on performance loss we extend the three aforementioned heuristics to address a model involving multiple customer segments and stores and provide experimental results demonstrating similar relative merits in this context

bayesian dynamic pricing policies learning and earning under a binary prior distribution motivated by applications in financial services we consider a seller who offers prices sequentially to a stream of potential customers observing either success or failure in each sales attempt the parameters of the underlying demand model are initially unknown so each price decision involves a trade off between learning and earning attention is restricted to the simplest kind of model uncertainty where one of two demand models is known to apply and we focus initially on performance of the myopic bayesian policy mbp variants of which are commonly used in practice because learning is passive under the mbp that is learning only takes place as a by product of actions that have a different purpose it can lead to incomplete learning and poor profit performance however under one additional assumption a constrained variant of the myopic policy is shown to have the following strong theoretical virtue the expected performance gap relative to a clairvoyant who knows the underlying demand model is bounded by a constant as the number of sales attempts becomes large this paper was accepted by gerard p cachon stochastic models and simulation

high frequency identification of monetary non neutrality the information effect we present estimates of monetary non neutrality based on evidence from high frequency responses of real interest rates expected inflation and expected output growth our identifying assumption is that unexpected changes in interest rates in a 30 minute window surrounding scheduled federal reserve announcements arise from news about monetary policy in response to an interest rate hike nominal and real interest rates increase roughly one for one several years out into the term structure while the response of expected inflation is small at the same time forecasts about output growth also increase the opposite of what standard models imply about a monetary tightening to explain these facts we build a model in which fed announcements affect beliefs not only about monetary policy but also about other economic fundamentals our model implies that these information effects play an important role in the overall causal effect of monetary policy shocks on output

expectation and duration at the effective lower bound abstract with risk averse arbitrageurs and an effective lower bound elb on nominal rates nonlinear interactions among short rate expectations bond supply and term premia emerge in equilibrium these interactions which are absent from affine models help explain the observed behavior of the yield curve near the elb including evidence about unconventional monetary policy the impact of both short rate expectations and bond supply are attenuated at the elb however in simulations of the post crisis experience in the u s shocks to investors duration risk exposures have much smaller effects than shocks to the anticipated path of short rates the latter shocks matter in part because of the reduction in interest rate volatility associated with a longer expected stay at the elb a novel channel of unconventional policy

reoptimization and self adjusting price control for network revenue management we consider a standard dynamic pricing problem with finite inventories finite selling horizon and stochastic demands where the objective of the seller is to maximize total expected revenue we introduce a simple improvement of the popular static price control known in the literature the proposed heuristic only requires a single optimization at the beginning of the selling horizon and does not require any reoptimization at all this provides an advantage over the potentially heavy computational burden of reoptimization especially for very large applications with frequent price adjustments in addition our heuristic can be implemented in combination with a few reoptimizations to achieve a high level revenue performance this hybrid of real time adjustment and reoptimization allows the seller to enjoy the benefit of reoptimization without overdoing it

short rate nonlinearities and regime switches abstract using non parametric estimation methods various authors have shown distinct non linearities in the drift and volatility function of the us short rate which are inconsistent with standard affine term structure models we document how a regime switching model with state dependent transition probabilities between regimes can replicate the patterns found by the non parametric studies to do so we use data from the uk and germany in addition to us data and include term spreads in some of our models we also examine the drift and volatility function of the term spread

monetary policy surprises and interest rates evidence from the fed funds futures market abstract this paper estimates the impact of monetary policy actions on bill note and bond yields using data from the futures market for federal funds to separate changes in the target funds rate into anticipated and unanticipated components interest rates response to anticipated target rate changes is small while their response to unanticipated changes is large and highly significant these responses are generally consistent with the expectations hypothesis of the term structure surprise target rate changes have little effect on expectations of future actions however which helps to explain the lack of empirical support for the expectations hypothesis at the short end of the yield curve

dual values based organizational identification in mnc subsidiaries a multilevel study dual organizational identification with both the whole corporation and the local subsidiary is considered valuable for subsidiary employees international assignees and multinational corporations mncs while extant research has examined antecedents of separate targets of identification it has not fully addressed the challenge of identifying factors capable of supporting both simultaneously this study examines the influence of individual and organizational level factors on the dual values based identification of foreign subsidiary employees drawing on acculturation and organizational socialization theory we test hypotheses on multilevel data from 793 managers and professionals in 90 foreign subsidiaries belonging to 11 nordic mncs the results show that dual values based identification is associated with acculturation and first hand contact at the individual level and a supportive social context for affective learning at the organizational level through its emphasis on higher order elements that connect different parts of the mnc rather than those that lead to the formation of in groups and out groups the values based approach to identification contributes to our understanding of dual identification in mnc subsidiaries and represents a more positive treatment of cultural diversity the findings have heightened practical relevance given the emphasis individuals are placing on values congruence in career choices and mnc efforts at instilling shared values

optimal experimentation in a changing environment this paper studies optimal experimentation by a monopolist who faces an unknown demand curve subject to random changes and who maximizes profits over an infinite horizon in continuous time we show that there are two qualitatively very different regimes determined by the discount rate and the intensities of demand curve switching and the dependence of the optimal policy on these parameters is discontinuous one regime is characterized by extreme experimentation and good tracking of the prevailing demand curve the other by moderate experimentation and poor tracking moreover in the latter regime the agent eventually becomes trapped into taking actions in a strict subset of the feasible set

dynamic pricing in the presence of inventory considerations research overview current practices and future directions the benefits of dynamic pricing methods have long been known in industries such as airlines hotels and electric utilities where the capacity is fixed in the short term and perishable in recent years there has been an increasing adoption of dynamic pricing policies in retail and other industries where the sellers have the ability to store inventory three factors contributed to this phenomenon 1 the increased availability of demand data 2 the ease of changing prices due to new technologies and 3 the availability of decision support tools for analyzing demand data and for dynamic pricing this paper constitutes a review of the literature and current practices in dynamic pricing given its applicability in most markets and its increasing adoption in practice our focus is on dynamic intertemporal pricing in the presence of inventory considerations

regime shifts in a dynamic term structure model of u s treasury bond yields this article develops and empirically implements an arbitrage free dynamic term structure model with priced factor and regime shift risks the risk factors are assumed to follow a discrete time gaussian process and regime shifts are governed by a discrete time markov process with state dependent transition probabilities this model gives closed form solutions for zero coupon bond prices an analytic representation of the likelihood function for bond yields and a natural decomposition of expected excess returns to components corresponding to regime shift and factor risks using monthly data on u s treasury zero coupon bond yields we show a critical role of priced state dependent regime shift risks in capturing the time variations in expected excess returns and document notable differences in the behaviors of the factor risk component of the expected returns across high and low volatility regimes additionally the state dependence of the regime switching probabilities is shown to capture an interesting asymmetry in the cyclical behavior of interest rates the shapes of the term structure of volatility of bond yield changes are also very different across regimes with the well known hump being largely a low volatility regime phenomenon jel g12 this article develops and empirically implements an arbitrage free dynamic term structure model dtsm with priced factor and regimeshift risks the risk factors are assumed to follow a discrete time gaussian process and regime shifts are governed by a discrete time markov process with state dependent transition probabilities agents are assumed to know both the current state of the economy and the regime they are currently in this leads to regime dependent risk neutral pricing and an equilibrium term structure that reflects the risks of both changes in the state and shifts in regimes

dynamic pricing under a general parametric choice model we consider a stylized dynamic pricing model in which a monopolist prices a product to a sequence of t customers who independently make purchasing decisions based on the price offered according to a general parametric choice model the parameters of the model are unknown to the seller whose objective is to determine a pricing policy that minimizes the regret which is the expected difference between the seller s revenue and the revenue of a clairvoyant seller who knows the values of the parameters in advance and always offers the revenue maximizing price we show that the regret of the optimal pricing policy in this model is theta sqrt t by establishing an omega sqrt t lower bound on the worst case regret under an arbitrary policy and presenting a pricing policy based on maximum likelihood estimation whose regret is cal o sqrt t across all problem instances furthermore we show that when the demand curves satisfy a well separated condition the t period regret of the optimal policy is log t numerical experiments show that our policies perform well

monetary policy bond returns and debt dynamics abstract using the government s intertemporal budget constraint we quantify the contribution of returns paid on the u s government s debt portfolio to the evolution of the debt to gdp ratio we show that announcements of unconventional monetary policy measures by the federal reserve between 2008 iv and 2012 as a part of macroeconomic stabilization were associated with a sizable increase in returns and debt to gdp ratios and contributed to fiscal imbalances we use the federal reserve s portfolio composition as a proxy for unconventional monetary policy measures and show that it is significantly related to future bond returns and fiscal balances

assessing the effects of unconventional monetary policy and low interest rates on pension fund risk incentives this study quantifies the effects of persistently low interest rates near to the zero lower bound and unconventional monetary policy on pension fund risk incentives in the united states using two structural vector autoregressive var models and a counterfactual scenario analysis the results show that monetary policy shocks as identified by changes in treasury yields following changes in the central bank s target interest rates lead to a substantial increase in pension funds allocation to equity assets notably the shift from bonds to equity securities is greater during the period where the us federal reserve launched unconventional monetary policy measures additional findings show a positive correlation between pension fund risk taking low interest rates and the decline in treasury yields across both well funded and underfunded public pension plans which is thus consistent with a structural risk shifting incentive

identifying vars based on high frequency futures data abstract using the prices of federal funds futures contracts we measure the impact of the surprise component of federal reserve policy decisions on the expected future trajectory of interest rates we show how this information can be used to identify the effects of a monetary policy shock in a standard var this alternative approach to identification is quite different and we argue more plausible than the conventional identifying restrictions we find that a usual recursive identification of the model is rejected as is any identification that insists on a monetary policy shock having an exactly zero effect on prices contemporaneously we nevertheless agree with the conclusion of much of the var literature that only a small fraction of the variance of output can be attributed to monetary policy shocks

unconventional monetary policy and bank risk taking abstract we analyze the presence of bank risk taking associated with unconventional monetary policy in the united states between 2008 and 2015 using corporate syndicated loan data at the bank firm level we measure monetary policy using the identification through heteroskedasticity approach with a var model to identify the risk taking channel we control for time varying heterogeneity in credit demand and supply our results indicate that accommodating monetary conditions are associated with overall lower loan spreads however the spread reduction is lower for riskier firms suggesting that there is no risk taking behavior in the syndicated loan market during the ump period

nonparametric advertising budget allocation with inventory constraint abstract in this paper we study the optimization problem of the advertising budget allocation for revenue management faced by a marketer besides the advertising budget the marketer is subject to an inventory constraint during the promotion season the marketer can affect sales by spending on advertising but does not initially know the relationship between the advertising expense and consequent sales we propose a nonparametric learning while doing budget allocation policy for the problem specifically we first conduct a sequence of advertising experiments to learn predict the market sales response through observing realized sales exploration then based on the learned sales function determine the following budget allocation planning exploitation in particular during the exploration and exploitation phases we need to balance the advertising and inventory budgets simultaneously we show that our policy is asymptotically optimal as the size of the market increases by constructing a worst case example we show that our policy achieves near best asymptotic performance we also provide numerical illustrations to show how our policy works and discuss how its performance changes as the system parameters vary we also glen some managerial implications of our model and policy from the numerical results

a new normal for interest rates evidence from inflation indexed debt the downtrend in u s interest rates over the past two decades may partly reflect a decline in the longer run equilibrium real rate of interest we examine this issue using dynamic term structure m

dynamic pricing with an unknown demand model asymptotically optimal semi myopic policies we consider a monopolist who sells a set of products over a time horizon of t periods the seller initially does not know the parameters of the products linear demand curve but can estimate them based on demand observations we first assume that the seller knows nothing about the parameters of the demand curve and then consider the case where the seller knows the expected demand under an incumbent price it is shown that the smallest achievable revenue loss in t periods relative to a clairvoyant who knows the underlying demand model is of order t in the former case and of order log t in the latter case to derive pricing policies that are practically implementable we take as our point of departure the widely used policy called greedy iterated least squares ils which combines sequential estimation and myopic price optimization it is known that the greedy ils policy itself suffers from incomplete learning but we show that certain variants of greedy ils achieve the minimum asymptotic loss rate to highlight the essential features of well performing pricing policies we derive sufficient conditions for asymptotic optimality

decomposing the effects of monetary policy using an external instruments svar we study the effects of monetary policy on economic activity separately identifying the effects of a conventional change in the fed funds rate from the policy of forward guidance we use a structural var identified using external instruments from futures market data the response of output to a fed funds rate shock is found to be consistent with typical monetary var analyses however the effect of a forward guidance shock that increases long term interest rates has an expansionary effect on output this counterintuitive response is shown to be tied to the asymmetric information between the federal reserve and the public

estimating and forecasting the yield curve using a markov switching dynamic nelson and siegel model we estimate versions of the nelson siegel model of the yield curve of u s government bonds using a markov switching latent variable model that allows for discrete changes in the stochastic process followed by the interest rates our modeling approach is motivated by evidence suggesting the existence of breaks in the behavior of the u s yield curve that depend for example on whether the economy is in a recession or a boom or on the stance of monetary policy our model is parsimonious relatively easy to estimate and exible enough to match the changing shapes of the yield curve over time we also derive the discrete time non arbitrage restrictions for the markov switching model we compare the forecasting performance of these models with that of the standard dynamic nelson and siegel model and an extension that allows the decay rate parameter to be time varying we show that some parameterizations of our model with regime shifts outperform the single regime nelson and siegel model and other standard empirical models of the yield curve

the effectiveness of alternative monetary policy tools in a zero lower bound environment this paper reviews alternative options for monetary policy when the shortterm interest rate is at the zero lower bound and develops new empirical estimates of the effects of the maturity structure of publicly held debt on the term structure of interest rates we use a model of risk averse arbitrageurs to develop measures of how the maturity structure of debt held by the public might affect the pricing of level slope and curvature term structure risk we find that these treasury factors historically were quite helpful for predicting both yields and excess returns over 1990 2007 the historical correlations are consistent with the claim that if in december 2006 the fed were to have sold off all its treasury holdings of less than 1 year maturity about 400 billion and use the proceeds to retire treasury debt from the long end this might have resulted in a 14 basis point drop in the 10 year rate and an 11 basis point increase in the 6 month rate we also develop a description of how the dynamic behavior of the term structure of interest rates changed after hitting the zero lower bound in 2009 our estimates imply that at the zero lower bound such a maturity swap would have the same effects as buying 400 billion in long term maturities outright with newly created reserves and could reduce the 10 year rate by 13 basis points without raising short term yields

volume volatility and public news announcements we provide new empirical evidence for the way in which financial markets process information our results rely critically on high frequency intraday price and volume data for the s p 500 equity portfolio and u s treasury bonds along with new econometric techniques for making inference on the relationship between trading intensity and spot volatility around public news announcements consistent with the predictions derived from a theoretical model in which investors agree to disagree our estimates for the intraday volume volatility elasticity around important news announcements are systematically below unity our elasticity estimates also decrease significantly with measures of disagreements in beliefs economic uncertainty and textual based sentiment further highlighting the key role played by differences of opinion

measuring the reaction of monetary policy to the stock market movements in the stock market can have a significant impact on the macroeconomy and are therefore likely to be an important factor in the determination of monetary policy however little is known about the magnitude of the federal reserve s reaction to the stock market in part because the simultaneous response of equity prices to interest rates makes it difficult to estimate this paper uses an identification technique based on the heteroskedasticity of stock market returns to measure the reaction of monetary policy to the stock market we find a significant policy response with a 5 percent rise fall in the s p 500 index increasing the likelihood of a 25 basis point tightening easing by about a half

the economics of options implied inflation probability density functions recently a market in options based on cpi in ation in ation caps and oors has emerged in the us this paper uses quotes on these derivatives to construct probability densities for in ation we study how these pdfs respond to news announcements and nd that the implied odds of de ation are sensitive to certain macroeconomic news releases we compare the option implied probability densities with those obtained by time series methods and use this information to construct empirical pricing kernels the options implied densities assign considerably more mass to extreme in ation outcomes either de ation or high in ation than do their time series counterparts this yields a u shaped empirical pricing kernel with investors having high marginal utility in states of the world characterized by either de ation or high in ation

monetary policy announcements and market interest rates response evidence from china abstract this paper examines the daily responses of market interest rates to three monetary policy announcements in china using the event study approach i find that the interest rate responses to announced changes in the regulated retail interest rate and the required reserve ratio are positive and significant at all maturities of interest rates but smaller at the long end of the yield curve by contrast market interest rates barely respond to the qualitative mpc announcements about the monetary policy stance these findings are robust to alternative econometric methods that correct for potential bias arising from violations of the identification assumption these findings suggest that the pbc should formulate its policy communication in a quantitative way

what does monetary policy do to long term interest rates at the zero lower bound this article uses a structural var with daily data to identify the effects of monetary policy shocks on various longer term interest rates since the federal funds rate has been stuck at the zero lower bound the var is identified using the assumption that monetary policy shocks are heteroskedastic monetary policy shocks have especially high variance on days of fomc meetings and certain speeches while there is otherwise nothing unusual about these days a complementary high frequency event study approach is also used i find that stimulative monetary policy shocks lower treasury and corporate bond yields but the effects die off fairly fast

monetary policy uncertainty and economic fluctuations uncertainty associated with the monetary policy transmission mechanism is a key driving force of business cycles to investigate this link we propose a new term structure model that allows the volatility of the yield curve to interact with macroeconomic indicators the data favors a model with two volatility factors that capture shortterm and long term monetary policy uncertainty increases in either of them lead higher unemployment rates but they interact with ination in opposite directions

a partially observed markov decision process for dynamic pricing in this paper we develop a stylized partially observed markov decision process pomdp framework to study a dynamic pricing problem faced by sellers of fashion like goods we consider a retailer that plans to sell a given stock of items during a finite sales season the objective of the retailer is to dynamically price the product in a way that maximizes expected revenues our model brings together various types of uncertainties about the demand some of which are resolvable through sales observations we develop a rigorous upper bound for the seller s optimal dynamic decision problem and use it to propose an active learning heuristic pricing policy we conduct a numerical study to test the performance of four different heuristic dynamic pricing policies in order to gain insight into several important managerial questions that arise in the context of revenue management

have we underestimated the likelihood and severity of zero lower bound events prior to the financial crisis most economists probably did not view the zero lower bound zlb as a major problem for central banks using a range of structural and statistical models we find that previous research understated the zlb threat by ignoring uncertainty about model parameters and latent variables focusing too much on the great moderation experience and relying on structural models whose dynamics cannot generate sustained zlb episodes our analysis also suggests that the federal reserve s asset purchases while materially improving macroeconomic conditions did not prevent the zlb constraint from having first order adverse effects on real activity and inflation