effective sub simulation free upper bounds for the monte carlo pricing of callable derivatives and various improvements to existing methodologies abstract we present a new non nested approach for computing additive upper bounds for callable derivatives using monte carlo simulation it relies on the regression of greeks computed using adjoint methods we also show that it is possible to early terminate paths once points of optimal exercise have been reached a natural control variate for the multiplicative upper bound is introduced which renders it competitive to the additive one in addition a new bi iterative family of upper bounds is introduced which takes a stopping time an upper bound and a martingale as inputs

cross hedging minimum return guarantees basis and liquidity risks we reveal pitfalls in the hedging of insurance contracts with a minimum return guarantee on the underlying investment e g an external mutual fund we analyze basis risk entailed by hedging the guarantee with a dynamic portfolio of proxy assets for the funds we also take account of liquidity risk which arises since the insurer may need to advance funds for performing the hedge based on a least squares monte carlo simulation we study the economic implications of basis and liquidity risks we demonstrate that both risks may be surprisingly high and show how the design of the contract and the hedging strategy may help to alleviate them

poverty reduction strategy papers a new convergence abstract poverty reduction strategy papers represent both a primary policy device of international development institutions and an instance of a wider international convergence of public policy around global integration and social inclusion charting the emergence of these approaches this paper argues that this convergence has a number of structural predilections which favor the technical and juridical over the political economic and a disciplinary framework over a practical contest drawing extensively on decentralized governance and poverty reduction programs in uganda this paper shows how these predilections obscure power relations and restrict practical and political options while exacting heavy establishment and compliance costs

instruments randomization and learning about development there is currently much debate about the effectiveness of foreign aid and about what kind of projects can engender economic development there is skepticism about the ability of econometric analysis to resolve these issues or of development agencies to learn from their own experience in response there is increasing use in development economics of randomized controlled trials rcts to accumulate credible knowledge of what works without overreliance on questionable theory or statistical methods when rcts are not possible the proponents of these methods advocate quasirandomization through instrumental variable iv techniques or natural experiments i argue that many of these applications are unlikely to recover quantities that are useful for policy or understanding two key issues are the misunderstanding of exogeneity and the handling of heterogeneity i illustrate from the literature on aid and growth actual randomization faces similar problems as does quasi randomization notwithstanding rhetoric to the contrary i argue that experiments have no special ability to produce more credible knowledge than other methods and that actual experiments are frequently subject to practical problems that undermine any claims to statistical or epistemic superiority i illustrate using prominent experiments in development and elsewhere as with iv methods rct based evaluation of projects without guidance from an understanding of underlying mechanisms is unlikely to lead to scientific progress in the understanding of economic development i welcome recent trends in development experimentation away from the evaluation of projects and toward the evaluation of theoretical mechanisms jel c21 f35 o19

monte carlo methods for security pricing the monte carlo approach has proved to be a valuable and flexible computational tool in modern finance this paper discusses some of the recent applications of the monte carlo method to security pricing problems with emphasis on improvements in efficiency we first review some variance reduction methods that have proved useful in finance then we describe the use of deterministic low discrepancy sequences also known as quasi monte carlo methods for the valuation of complex derivative securities we summarize some recent applications of the monte carlo method to the estimation of partial derivatives or risk sensitivities and to the valuation of american options we conclude by mentioning other applications

human scale economics economic growth and poverty reduction in northeastern thailand under what conditions does economic growth benefit the poor one way to answer this question is to identify and compare positive and negative outlier areas those that experience greater and lesser poverty reduction respectively compared to what was anticipated given their levels of economic growth the more similar these areas the more leverage there is to unearth the factors that allow the poor to benefit from growth in this paper we employ an inductive approach to glean possible pathways out of poverty from two highly similar underdeveloped neighboring provinces in northeastern thailand using extensive fieldwork and interviews we explore factors that can account for one province reducing poverty at a quicker pace than expected even as the other failed to channel its faster growth into significant poverty reduction our study finds that in surin province because a strong network of local ngos was working closely with provincial leadership national policies that targeted the poor found fertile ground and thrived small scale low tech rural based initiatives including organic rice handicraft production and rural tourism helped drive initially high levels of poverty down though many in si saket also pursued many of these initiatives they were structured in ways that promoted economic growth but largely prevented poor farmers from benefitting further research can examine whether this kind of micro oriented path to rapid rural poverty reduction is useful in other contexts

an assessment of agricultural development policies in iran abstract agricultural development policies in iran for the past two decades have been based on important misconceptions derived from a dualistic analysis of the economy the government concentrated on the development of the dynamic oil and industrial sector at the expense of the static rural sector as a result iranian self sufficiency in food and agricultural produce has been seriously eroded and the country has become increasingly dependent on the international market both in terms of importing foodstuffs and in gaining its main income through the export of a single item oil the present government s attempts at alleviating this problem should extend beyond revolutionary rhetoric and blanket policies and return the means of production to the cultivator and encourage the emergence of a peasant based and independent agricultural sector

pricing american style securities using simulation abstract we develop a simulation algorithm for estimating the prices of american style securities i e securities with opportunities for early exercise our algorithm provides both point estimates and error bounds for the true security price it generates two estimates one biased high and one biased low both asymptotically unbiased and converging to the true price combining the two estimators yields a confidence interval for the true price the proposed algorithm is especially attractive compared with lattice and finite difference methods when there are multiple state variables and a small number of exercise opportunities preliminary computational evidence is given

practical policy iteration generic methods for obtaining rapid and tight bounds for bermudan exotic derivatives using monte carlo simulation abstract we introduce a set of improvements which allow the calculation of very tight lower bounds for bermudan derivatives using monte carlo simulation these tight lower bounds can be computed quickly and with minimal hand crafting our focus is on accelerating policy iteration to the point where it can be used in similar computation times to the basic least squares approach but in doing so introduce a number of improvements which can be applied to both the least squares approach and the calculation of upper bounds using the andersen broadie method the enhancements to the least squares method improve both accuracy and efficiency results are provided for the displaced diffusion libor market model demonstrating that our practical policy iteration algorithm can be used to obtain tight lower bounds for cancellable cms steepener snowball and vanilla swaps in similar times to the basic least squares method

economic policy distribution and poverty the nature of disagreements abstract the last 20 years have seen growing areas of agreement on poverty reduction strategies but disagreements on economic policy distribution and poverty seem to have intensified this paper tries to identify the underlying nature of these disagreements related to differences in perspective and framework between finance ministry and civil society tendencies it is argued that the deep divisions one sees can be located in differences in the level of aggregation adopted the time horizon considered and assumptions made on market structure and power mutual understanding could be advanced by further exploration of these differences and the adoption by both sides of the approach of dialogue rather than negotiation

financial development and poverty reduction can there be a benefit without a cost abstract this article investigates how financial development helps to reduce poverty directly through a distributional effect beyond its indirect effect through economic growth the results obtained with data for a sample of developing countries from 1966 through 2000 suggest that the poor benefit from the ability of the banking system to facilitate transactions and provide savings opportunities through the mckinnon conduit effect but to some extent fail to reap the benefit from greater availability of credit moreover financial development is accompanied by financial instability which is particularly detrimental to the poor nevertheless the benefits of financial development for the poor outweigh the cost

the role of land reform in economic development policies and politics as the extensive literature on the subject attests the issue of land reform has been and remains heatedly debated 1 the latest massive demonstration of interest came with the 1979 world conference on agrarian reform and rural development where representatives of no less than 145 nations and three liberation movements agreed that equitable distribution and efficient use of land are indispensable for rural development for the mobilization of human resources and for increased production for the alleviation of poverty fao at one time or another but especially since 1960 virtually every country in the world has passed land reform laws yet the record is far more modest than the promise a in spite of decades if not centuries tuma of land reform activities landownership remains extremely skewed concentration of landownership is almost universally increasing the mass of landless is growing rapidly and the extent of rural poverty and malnutrition has reached horrendous proportions and b in spite of widespread agreement on the need for land reform there are virtually no significant ongoing land reform programs except under extreme political pressures revolutionary in el salvador and postrevolutionary in nicaragua mozambique and angola in several countries the progressive gains achieved by land reform programs are being either eroded by the forces of economic growth mexico venezuela and south korea or purposefully canceled by public policies chile the question i want to explore in this paper is why this blatant discrepancy between rhetoric and reality or to put it another way why is land reform no longer a significant policy issue even though it remains an important political issue in most countries of the world 2 to answer we need first to explore in a positive sense what has been the nature of different land reforms that occurred in the past what were their purposes achievements and limits this will be done by developing a typology of land reforms in the third world because it is essential to distinguish carefully among a wide variety of reforms following the approach of political economy i will do this in the context of modes of production social class structure and types of land tenure

spatial price transmission and asymmetry in the ghanaian maize market abstract this paper utilizes recently developed threshold cointegration tests that allow for asymmetric adjustment toward a long run equilibrium relationship to examine price linkages between principal maize markets in ghana unlike previous studies the approach employed here assumes that economic agents only act to move the system back to equilibrium when the deviation from equilibrium exceeds a critical threshold whereby the benefits of this adjustment exceed the costs the findings indicate that major maize markets in ghana are well integrated both the threshold cointegration and asymmetric error correction models reveal that wholesale maize prices in local markets accra and bolgatanga respond more swiftly to increases than to decreases in central market techiman prices accra prices are found to react faster than bolgatanga prices to changes in techiman market prices

primal dual simulation algorithm for pricing multidimensional american options this paper describes a practical algorithm based on monte carlo simulation for the pricing of multidimensional american i e continuously exercisable and bermudan i e discretely exercisable

macro and micro perspectives of growth and poverty in africa this article reviews trends in poverty economic policies and growth in a sample of african countries during the 1990s drawing on the better household data now available experiences have varied some countries have seen sharp drops in income poverty whereas others have witnessed marked increases in some countries overall economic growth has been pro poor and in others not but the aggregate numbers hide systematic distributional effects taking both macro and micro perspectives of growth and poverty in africa the article draws four key conclusions first economic policy reforms improving macroeconomic balances and liberalizing markets appear conducive to reducing poverty second market connectedness is crucial to enable participation in the gains from economic growth some regions and households by virtue of their remoteness were left behind when growth picked up third education and access to land emerge as key private endowments to help households benefit from new economic opportunities finally rainfall variations and ill health have profound effects on poverty outcomes underscoring the significance of social risk management in poverty reduction strategies in africa

the political economy of growth a critical survey of the recent literature this article reviews the recent literature on the political economy of growth focusing on the research that has developed at the intersection of the endogenous growth literature and the new political economy it explores the relationship among four key variables economic growth and capital accumulation political instability political freedom and democratic institutions and income inequality

blending top down federalism with bottom up engagement to reduce inequality in ethiopia donors increasingly fund interventions to counteract inequality in developing countries where they fear it can foment instability and undermine nation building efforts to succeed aid relies on the principle of upward accountability to donors but federalism shifts the accountability of subnational officials downward to regional and local voters what happens when aid agencies fund anti inequality programs in federal countries does federalism undermine aid does aid undermine federalism or can the political and fiscal relations that define a federal system resolve the contradiction internally this study explores this paradox via the promotion of basic services program in ethiopia the largest donor financed investment program in the world using an original panel database comprising the universe of ethiopian woredas districts the study finds that horizontal geographic inequality decreased substantially donor financed block grants to woredas increased the availability of primary education and health care services in the bottom 20 percent of woredas weaker evidence from household surveys suggests that vertical inequality across wealth groups within woredas also declined implying that individuals from the poorest households benefit disproportionately from increasing access to and utilization of such services the evidence suggests that by combining strong upward accountability over public investment with extensive citizen engagement on local issues ethiopia s federal system resolves the instrumental dissonance posed by aid funded programs to combat inequality in a federation

land reform policies in iran land reform 1962 71 contrary to a widespread view gave land on highly favorable terms to all of iran s 1 8 million tenant cultivators and benefited 74 of all farmers and 67 of rural households it thus radically changed landownership and resulted in a far reaching socioeconomic tranformation it did not however result in political stability this article identifies some of the sources of error in the literature on land reform in iran and shows that official land reform data are correct and consistent with numerous census results

halving global poverty the goal of central importance to this paper is to cut in half the proportion of people living below 1 a day from around 30 percent of the developing world s population in 1990 to 15 percent by 2015 based on population projections in 1990 this would correspond to around one billion people exiting poverty this paper begins by discussing poverty trends on a global scale where the poor are located in the world and how their numbers have been changing over time it then discusses the relationship of economic growth and income distribution to poverty reduction finally it suggests an evidence based agenda for poverty reduction in the developing world full text available at official url

identifying vulnerability to poverty a critical survey in the economic literature on poverty various methods have been proposed for measuring a phenomenon known as vulnerability however after more than a quarter century of research no consensus has been reached on how to identify such vulnerable individuals within a given population some misunderstandings have also arisen from the overlapping of other closely related concepts such as the expectation of being poor expected poverty multi period poverty and risk exposure this paper offers a detailed conceptual discussion on vulnerability to poverty and its related elements reviewing a wide range of identifying criteria provided in the literature it is found that according to the state of the art in this field of research two key elements stand out in identifying vulnerable individuals an expected well being below the poverty line and a relevant risk of falling into poverty due to downside deviation from a reference level of well being the traditional classification of vulnerability approaches has been updated into four groups i those that stress the element of exposure to risk ii those that emphasize the element of expected poverty iii those that define vulnerability through a utility gap and iv those that are supported by a mean risk dominance criterion

ten years of q squared implications for understanding and explaining poverty summary over the past decade there have been a number of initiatives to promote a more systematic integration of quantitative and qualitative or q squared approaches to poverty analysis in the global south and a large body of literature had emerged the objective of the article is to present a selective review of this empirical work with a view to demonstrate the value it has added for understanding and explaining poverty the evidence strongly suggests that q squared approaches have aided our understanding of the characteristics of the poor and the causes of poverty

randomized quasi monte carlo methods in pricing securities abstract today quasi monte carlo methods are used successfully in computational finance and economics as an alternative to the monte carlo method one drawback of these methods however is the lack of a practical way of error estimation to address this issue several researchers introduced the so called randomized quasi monte carlo methods in the last decade in this paper we will present a survey of randomized quasi monte carlo methods and compare their efficiencies with the efficiency of the monte carlo method in pricing certain securities we will also investigate the effects of box muller and inverse transformation techniques when they are applied to low discrepancy sequences

beyond the poverty agenda insights from the new politics of development in uganda summary the politics of development has shifted significantly in recent years with largely negative implications for the poverty agenda this is particularly apparent in countries like uganda where poverty reduction papers have been displaced by national development plans aimed at structural transformation driven by the discovery of oil the growing influence of rising powers vis a vis traditional donors and domestic political shifts although this heralds the possibility of deeper national ownership over development policy international financial institutions have adopted strategies to maintain their influence moreover uganda currently lacks the underlying political capacities and relationships required to roll out this ambitious new agenda

the politics of staying poor exploring the political space for poverty reduction in uganda summary despite claims that uganda s recent success in poverty reduction has been significantly related to getting the politics right there are concerns that the poorest may not have benefited from this form of poverty reduction or the types of politics that have helped shape it employing the analytical framework of political space reveals that although some of the poorest groups are represented within the political system political discourse reveals a strong bias toward the economically active leaving the poorest excluded from poverty programs significantly there is an increasing divergence between the regime s political project of modernization and the international poverty agenda with important implications for the poorest