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Advertising arbitrage
(2014)
Speculators often advertise arbitrage opportunities in order to persuade other investors and thus accelerate the correction of mispricing. We show that in order to minimize the risk and the cost of arbitrage an investor who identifies several mispriced assets optimally advertises only one of them, and overweights it in his portfolio; a risk-neutral arbitrageur invests only in this asset. The choice of the asset to be advertised depends not only on mispricing but also on its "advertisability" and accuracy of future news about it. When several arbitrageurs identify the same arbitrage opportunities, their decisions are strategic complements: they invest in the same asset and advertise it. Then, multiple equilibria may arise, some of which inefficient: arbitrageurs may correct small mispricings while failing to eliminate large ones. Finally, prices react more strongly to the ads of arbitrageurs with a successful track record, and reputation-building induces high-skill arbitrageurs to advertise more than others.
We study the behavioral underpinnings of adopting cash versus electronic payments in retail transactions. A novel theoretical and experimental framework is developed to primarily assess the impact of sellers’ service fees and buyers’ rewards from using electronic payments. Buyers and sellers face a coordination problem, independently choosing a payment method before trading. In the experiment, sellers readily adopt electronic payments but buyers do not. Eliminating service fees or introducing rewards significantly boosts the adoption of electronic payments. Hence, buyers’ incentives play a pivotal role in the diffusion of electronic payments but monetary incentives cannot fully explain their adoption choices. Findings from this experiment complement empirical findings based on surveys and field data.
This paper is the first to conduct an incentive-compatible experiment using real monetary payoffs to test the hypothesis of probabilistic insurance which states that willingness to pay for insurance decreases sharply in the presence of even small default probabilities as compared to a risk-free insurance contract. In our experiment, 181 participants state their willingness to pay for insurance contracts with different levels of default risk. We find that the willingness to pay sharply decreases with increasing default risk. Our results hence strongly support the hypothesis of probabilistic insurance. Furthermore, we study the impact of customer reaction to default risk on an insurer’s optimal solvency level using our experimentally obtained data on insurance demand. We show that an insurer should choose to be default-free rather than having even a very small default probability. This risk strategy is also optimal when assuming substantial transaction costs for risk management activities undertaken to achieve the maximum solvency level.
Motivated by the question whether sound and expressive applicative similarities for program calculi with should-convergence exist, this paper investigates expressive applicative similarities for the untyped call-by-value lambda-calculus extended with McCarthy's ambiguous choice operator amb. Soundness of the applicative similarities w.r.t. contextual equivalence based on may-and should-convergence is proved by adapting Howe's method to should-convergence. As usual for nondeterministic calculi, similarity is not complete w.r.t. contextual equivalence which requires a rather complex counter example as a witness. Also the call-by-value lambda-calculus with the weaker nondeterministic construct erratic choice is analyzed and sound applicative similarities are provided. This justifies the expectation that also for more expressive and call-by-need higher-order calculi there are sound and powerful similarities for should-convergence.
Are rules and boundaries sufficient to limit harmful central bank discretion? Lessons from Europe
(2014)
Marvin Goodfriend’s (2014) insightful, informative and provocative work explains concisely and convincingly why the Fed needs rules and boundaries. This paper reviews the broader institutional design problem regarding the effectiveness of the central bank in practice and confirms the need for rules and boundaries. The framework proposed for improving the Fed incorporates key elements that have already been adopted in the European Union. The case of ELA provision by the ECB and the Central Bank of Cyprus to Marfin-Laiki Bank during the crisis, however, suggests that the existence of rules and boundaries may not be enough to limit harmful discretion. During a crisis, novel interpretations of the legal authority of the central bank may be introduced to create a grey area that might be exploited to justify harmful discretionary decisions even in the presence of rules and boundaries. This raises the question how to ensure that rules and boundaries are respected in practice
This chapter analyzes the risk and return characteristics of investments in artists from the Middle East and Northern Africa (MENA) region over the sample period 2000 to 2012. With hedonic regression modeling we create an annual index that is based on 3,544 paintings created by 663 MENA artists. Our empirical results prove that investing in such a hypothetical index provides strong financial returns. While the results show an exponential growth in sales since 2006, the geometric annual return of the MENA art index is a stable13.9 percent over the whole period. We conclude that investing in MENA paintings would have been profitable but also note that we examined the performance of an emerging art market that has only seen an upward trend without any correction, yet.
Arzneimittelrückstände werden heute in zahlreichen Gewässern nachgewiesen. Kleinste Spuren finden sich sogar im Trinkwasser. Auch wenn die Konzentrationen in der Regel sehr gering sind, belegen Forschungsergebnisse für einzelne Wirkstoffe klare Umweltrisiken. Fische, Frösche und Kleinstlebewesen zeigen deutliche Reaktionen auf Medikamentenwirkstoffe im Wasser. Gefahren für die menschliche Gesundheit bestehen nach heutigem Kenntnisstand nicht. Aus Umweltschutz- und Vorsorgegründen ist es jedoch geboten, die Einträge von Arzneimittelwirkstoffen in die Umwelt zu reduzieren. Der aktuelle rechtliche Rahmen liefert für wirksame Maßnahmen kaum eine Handhabe. Deshalb muss auch über Handlungsmöglichkeiten nachgedacht werden, die jenseits rechtlicher Lösungsansätze durchführbar sind. Der hier vorgelegte Text umreißt den gegenwärtigen Wissensstand zum Thema „Arzneimittelwirkstoffe im Wasserkreislauf“ und zeigt praktische Handlungsoptionen auf, wie der Eintrag von Arzneimittelwirkstoffen in die Umwelt verringert werden kann. Dabei wird ein integrierter Ansatz verfolgt, der Handlungsmöglichkeiten auf drei verschiedenen Ebenen empfiehlt: bei der Arzneimittelentwicklung, der technischen Abwasserbehandlung und beim Umgang mit Arzneimitteln. Dieser Bericht ist im Rahmen des Projekts „Arznei für Mensch und Umwelt?“ im Auftrag des Umweltbundesamtes entstanden und richtet sich in erster Linie an die Zielgruppe Ärztinnen/Ärzte und Studierende der Medizin.
Arzneimittelrückstände lassen sich heute in nahezu allen Gewässern nachweisen. Die Konzentrationen sind sehr gering; dennoch werden Risiken für die Umwelt und die Menschen vermutet. Daher ist zu klären, ob und wie es möglich ist, in Verfolgung des Vorsorgegedankens ihren Eintrag in die aquatische Umwelt möglichst zu verhindern oder zumindest zu reduzieren. Hierzu bieten sich umwelttechnische und gesundheitspolitische Maßnahmen sowie innovative Ansätze in der Arzneimittelentwicklung an.
Im Rahmen des BMBF-Projekts „SAUBER+ Innovative Konzepte und Technologien für die separate Behandlung von Abwasser aus Einrichtungen des Gesundheitswesens“ sind im Austausch mit Praxisakteuren zwei Zukunftsszenarien entstanden. Diese beschreiben von heute bis zum Jahr 2030 wie Maßnahmen in den genannten Handlungsfeldern umgesetzt und miteinander kombiniert werden können. Das erste Szenario ist eine Fortführung der bisherigen Entwicklungen. Im zweiten wird hingegen davon ausgegangen, dass sich die Bundesregierung einer sektor-übergreifenden Nachhaltigkeitspolitik verpflichtet und sich auf diese Weise die Einträge in die aquatische Umwelt auf ein Minimum reduzieren lassen.
We outline a procedure for consistent estimation of marginal and joint default risk in the euro area financial system. We interpret the latter risk as the intrinsic financial system fragility and derive several systemic fragility indicators for euro area banks and sovereigns, based on CDS prices. Our analysis documents that although the fragility of the euro area banking system had started to deteriorate before Lehman Brothers' file for bankruptcy, investors did not expect the crisis to affect euro area sovereigns' solvency until September 2008. Since then, and especially after November 2009, joint sovereign default risk has outpaced the rise of systemic risk within the banking system.