Essays on finance, international economics, and national security
By: a dissertation presented by Daniel Pyounghyun Ahn
Published: 2008
Language: eng
Number of pages: 133
Description: The first chapter builds upon the Grossman-Stiglitz (1980) costly information framework by introducing a continuum of agents heterogeneous in talent. Agents decide whether to purchase noisy "data," and apply their talent to refine the precision of the signal within the data. There will be a cutoff level of talent below which agents will not purchase data and hold little to no amounts of the risky asset. More talented agents will actively hold more risky assets and gain higher returns. Increasing the initial precision of the data improves market efficiency, causes informed traders to exit the market, and reduces investor performance. The second chapter presents a simple continuous-time model of the US Strategic Petroleum Reserve (SPR) and derives optimal price stabilization policy. Oil prices are assumed to follow a mean-reverting stochastic process. Importantly, the SPR can be exhausted, presenting a "liquidity" constraint to the optimization problem. The derived optimal policy has a "real option" intuition. Comparing the simulated paths for optimal policy with actual empirical data, the model suggests that the US government deviated considerably from optimal policy during the oil panics of the 1970s, but closely followed optimal policy in the late 1980s and 1990s. However, since 2001, the model suggests that the US government is using the SPR suboptimally for price management once again. The third chapter presents a novel purpose for the SPR for national energy security. In a repeated game framework, the chapter demonstrates how a reserve of sufficient size can potentially deter an oil cartel such as OPEC from any noncompetitive qu
Notes: "January 2008."

Thesis (Ph.D., Dept. of Economics)--Harvard University, 2008.

Includes bibliographical references.
Table of contents: title: Heterogeneous talent, market efficiency, and investor performance --; title: Optimal control of the US strategic petroleum reserve --; title: The US strategic petroleum reserve and cartel deterrence.