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on Computational Economics |
|
Issue of 2005‒06‒05
seven papers chosen by |
| By: | Marc Henrard (Bank for International Settlements) |
| Abstract: | A popular way to value (Bermudan) swaption in a Hull-White or extended Vasicek model is to use a tree approach. In this note we show that a more direct approach through iterated numerical integration is also possible. A brute force numerical integration would lead to a complexity exponential in the number of exercise dates in the base of the number of points ($p^N$). By carefully choosing the integration points and their order we can reduce it to a complexity $pN^2$ versus a quadratic $(pN)^2$ in the tree. We also provide a semi-explicit formula that leads to a faster converging implementation. |
| Keywords: | Bermudan option, swaption, Hull-White model, one-factor model, numerical integration. |
| JEL: | G13 E43 |
| Date: | 2005–05–30 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0505023&r=cmp |
| By: | Posch Peter N. (University of Ulm); Loeffler Gunter (University of Ulm); Schoene Christiane (University of Ulm) |
| Abstract: | We propose a Bayesian methodology that enables banks to improve their credit scoring models by imposing prior information. As prior information, we use coefficients from credit scoring models estimated on other data sets. Through simulations, we explore the default prediction power of three Bayesian estimators in three different scenarios and find that they perform better than standard maximum likelihood estimates. We recommend that banks consider Bayesian estimation for internal and regulatory default prediction models. |
| Keywords: | Credit Scoring, Bayesian Inference, Bankruptcy Prediction |
| JEL: | C11 G21 G33 |
| Date: | 2005–05–31 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0505024&r=cmp |
| By: | Montserrat Hernández López (Dpto. de Economía de las Instituciones, Estadística Económica y Econometría Facultad de Ciencias Económicas y Empresariales; Universidad de La Laguna Campus de Guajara.38071 La Laguna; 38071; La Laguna; Tenerife.Islas Canarias.España Teléfono: 922317032) |
| Abstract: | Aunque los algoritmos genéticos se diseñaron originalmente como método de optimización, también pueden ser utilizados, en el contexto económico, como herramienta predictiva de los cambios en la composición de una población, en términos de las características individuales de los agentes que la componen. En este documento, se desarrolla un algoritmo genético específico capaz de predecir los cambios en las características de los turistas que visitan el sur de Tenerife. Los resultados obtenidos sugieren la conveniencia de sustituir los tradicionales operadores de cruce y mutación por la acción de una adecuada matriz de transición. Esta matriz dirige la dinámica de transformación de la población en el sentido de que permite introducir consideraciones económicas que otorgan mayores probabilidades a ciertas transformaciones en las características de los turistas que visitan la Isla. |
| Keywords: | Algoritmos genéticos, predicción económica, operadores genéticos, matriz de transición. |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:can:series:2005-02&r=cmp |
| By: | Dirk T.G. Rübbelke (Chemnitz University of Technology); Andreas Löschel (Zentrum für Europäische Wirtschaftsforschung) |
| Abstract: | Impure public goods represent an important group of goods. Almost every public good exerts not only effects which are public to all but also effects which are private to the producer of this good. What is often omitted in the analysis of impure public goods is the fact that – regularly – these private effects can also be generated independently of the public good. In our analysis we focus on the effects alternative technologies – independently generating the private effects of the public good – may have on the provision of impure public goods. After the investigation in an analytical impure public good model, we numerically simulate the effects of alternative technologies in a parameterized model for climate policy in Germany. |
| Keywords: | Impure public goods, Climate policy, Rationing |
| JEL: | H41 C61 Q53 Q54 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2005.60&r=cmp |
| By: | Fredriksson, Peter (IFAU - Institute for Labour Market Policy Evaluation); Holmlund, Bertil (Uppsala University) |
| Abstract: | This paper analyses crucial design features of unemployment insurance (UI) policies. We examine three different means of improving the efficiency of UI: the duration of benefit payments, monitoring in conjunction with sanctions, and workfare. To that end we develop a quantitative model of equilibrium unemployment. The model features worker heterogeneity in preferences for leisure. The numerical analysis suggests that a system with monitoring and sanctions restores search incentives most effectively, since it brings additional incentives to search actively so as to avoid the sanction. Therefore, the UI provider can offer a more generous UI replacement rate in a system with monitoring and sanctions than in the other two systems. Workfare appears to be inferior to the other two systems. |
| Keywords: | Unemployment insurance; search equilibrium; time limits; monitoring and sanctions; workfare |
| JEL: | J64 J68 |
| Date: | 2005–05–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2005_013&r=cmp |
| By: | Keigo Kameda (Niigata university); Masao Nakata (Ministry of Finance Japan) |
| Abstract: | Recently, the outstanding debt of the Japanese government amounts to 695 trillion yen, which implies 139.5% of GDP. In this paper, we constructed three IS-LM type dynamic models and estimate the eigenvalues of their differential systems. Then we confirm whether or not the huge amount of public debt violates the stability conditions for the Japanese economy. Our estimation concludes the Japanese economy to be unstable with the existence of a saddle-point equilibrium. Our simulation also shows that severe tax reform would be required to restore the economic stability. Concretely, the government has to raise the consumption tax rate to 15% from 5%, and in addition, allowing the income elasticities of income taxes and inhabitant taxes to increase by 0.033 each, which is equivalent to tax hikes of about 8.3 trillion yen. We assert that structural reform for the government budget including a tax system is essential and emergent. |
| Keywords: | Public Debt, Macroeconomic Stability, Japan, Yen, GDP, consumption tax, saddle-point equilibrium, IS-LM type dynamic models, eigenvalues |
| JEL: | C30 H61 H63 H20 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:eab:macroe:481&r=cmp |
| By: | Jason S. Seligman (University of Georgia) |
| Abstract: | Current debate on the Social Security Administrations long-term finance of benefits includes proposals for independent private investment via individual accounts. The author first investigates what implications disability might have for equity savings account balances. In light of results, incentives to exit the workforce ahead of retirement age are considered when a defined benefit program for disability insurance continues to be available. Included simulation uses historic wage series, equity market performance, and current OASDI regulations for cohorts retiring over the period of 1929 - 2003. |
| Keywords: | Seligman, SSA, individual, accounts |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:05-116&r=cmp |