This volume consists of four papers, which in principle could be read in any order. The common denominator is that they deal with contingent claims models of a firm's securities or related derivatives. A Framework for Valuing Corporate Securities Early applications of contingent claims analysis to the pricing of corporate liabilities tend to restrict themselves to situations where debt is perpetual or where financial distress can only occur at debt maturity. This paper relaxes these restrictions and provides an exposition of how most corporate liabilities can be valued as packages of two fundamental barrier contingent claims: a down-and-out call and a binary option. Furthermore, it is shown how the comparative statics of the resulting pricing formulae can be derived.A New Compound Option Pricing ModelThis paper extends the Geske (1979) compound option pricing model to the case where the security on which the option is written is a down-and-out call as opposed to a standard Black and Scholes call. Furthermore, we develop a general and flexible framework for valuing options on more complex packages of contingent claims - any claim that can be valued using the ideas in chapter 1. This allows us to study the interaction between the detailed characteristics of a firm's capital structure and the prices of for example stock options.Implementing Firm Value Based ModelsThis paper evaluates an implementation procedure for contingent claims models suggested by Duan (1994). Duan's idea is to use time series data of traded securities such as shares of common stock in order to estimate the dynamics of the firm's asset value. Furthermore, we provide an argument which allows us to relax the (common) assumption that the firm's assets may be continuously traded. It is sufficient to assume that the firm's assets are traded at one particular point in time.Asset Substitution, Debt Pricing, Optimal Leverage and MaturityChapters 1-3 have focused on the problem of pricing corporate securities.They have thus abstracted strategic aspects of corporate finance theory. This paper is an attempt to combine the contingent claims literature with the non-dynamic corporate finance literature. I allow the management of the firm to alter its investment policy strategically. This yields a model which allows us to examine the relationship between bond prices, agency costs, optimal leverage and maturity. / Diss. Stockholm : Handelshögsk.

Many insurance and finance activities involve multiple risks. Dependence structures between different risks play an important role in both theoretical models and practical applications. However, stochastic and actuarial models with dependence are very challenging research topics. In most literature, only special dependence structures have been considered. However, most existing special dependence structures can be integrated into more-general contexts. This thesis is motivated by the desire to develop more-general dependence structures and to consider their applications. This thesis systematically studies different dependence notions and explores their applications in the fields of insurance and finance. It contributes to the current literature in the following three main respects. First, it introduces some dependence notions to actuarial science and initiates a new approach to studying optimal reinsurance problems. Second, it proposes new notions of dependence and provides a general context for the studies of optimal allocation problems in insurance and finance. Third, it builds the connections between copulas and the proposed dependence notions, thus enabling the constructions of the proposed dependence structures and enhancing their applicability in practice. The results derived in the thesis not only unify and generalize the existing studies of optimization problems in insurance and finance, but also admit promising applications in other fields, such as operations research and risk management.

<p>This dissertation concerns methods to test whether or not self-control</p><p>is costly, the form of temptation, and the affects different assumptions</p><p>about costly self-control and temptation have on optimal borrowing</p><p>and saving mechanisms. The second chapter shows that costly self-control</p><p>and temptation can be differentiated from changing impatience in a</p><p>stochastic income consumption-savings environment. The third chapter</p><p>describes an experiment to test whether subjects have time inconsistent</p><p>preferences, whether self-control is costly, and if so, whether the</p><p>cost of self-control is time dependent. The fourth chapter describes</p><p>the affects on the optimal borrowing and savings mechanisms that assumptions</p><p>about the myopia of temptation and the strength of costly self-control</p><p>have.</p> / Dissertation

The exact D-optimal design problems for regression models has been in-vestigated in many literatures. Huang (1987) and Gaffke (1987) provided a sufficient condition for the minimum sample size for an certain set of candidate designs to be exact D-optimal for polynomial regression models on a compact interval. In this work we consider a mixture experiment with q nonnegative components, where the proportions of components are sub- ject to the simplex restriction $sum_{i=1}^q x_i =1$, $x_i ¡Ù 0$. The exact D-optimal designs for mixture experiments for Scheffe¡¦s quadratic models are investigated. Based on results in Kiefer (1961) results about the exact D-optimal designs for mixture models with two or three ingredients are provided and numerical verifications for models with ingredients between four and nine are presented.

Abstract Based upon the Nordhaus' model, we can analyze the political business cycle (PBC) of parliamentarian system. This is our point in this paper. Adding an uncertain factor in the Nordhaus' assumptions, we can get unemployment rate of optimal control path by using the dynamic optimal control theory. Comparing these two results, the model of political business cycle of parliamentarian system has higher elective frequency and lower amplitude in the unemployment rate of optimal control path. From the social welfare point of view, which one is better is hard to say? The social welfare is decided by voters' preferences when voters face these two type of PBC. Keywords: Political business cycle (PBC). Parliamentarian system. The optimal

A central bank is usually assigned two functions: the control of inflation and the maintenance of a safetybanking sector. What are the precise conditions under which trigger strategies from the private sector can solve the time inconsistency problem and induce the central bank to choose zero inflation under a nonstationary natural rate? Can an optimal contract be used together with reputation forces to implement a desired socially optimal monetary policy rule? How to design a truthtelling contract to control the risk taking behaviors of the bank? My dissertation attempts to deal with these issues using three primary methodologies: monetary economics, game theory and optimal stochastic control theory.

This dissertation contains three essays. The first and second essays examine intergenerational mobility in earnings in Brazil using a data set spanning three generations. I use data from PNAD{a nationally representative household survey in Brazil. I build a three-generations data set consisting of 5,125 grandfather-father- son triplets by restricting the sample to households with adult sons. The first essay estimates some relationships between a child's earnings and family background implied by the Becker-Tomes model. I find that the estimates contradict some of its predictions, like the negative relationship between child's earnings and grandparent's earnings when controlling for parent's earnings. I propose a modified version of the Becker-Tomes model and find that the estimates are consistent with its predictions. I find that family background explains 34.9% of the variation in earnings among young males who live with their parents. If it were possible to eliminate the differences in investment in the children's human capital, the variation in earnings would fall by no more than 21.1%. Additionally, if there were no differences in endowments among children, the variation in earnings would fall by no less than 26%. The second essay examines the evolution of the intergenerational elasticity across generations and im- plications of marriage, education and fertility on mobility. I find that the estimate of the intergenerational elasticity in earnings is 0.847. The elasticity of earnings between son-in-law and father-in-law, 0.89, is approximately the same as the elasticity between son and father, 0.9. Additionally, controlling for fathers' percentile in the earnings distribution, each additional sibling decreases the sons' percentile by 1.77 percentiles. The third essay estimates an indicator of the optimal investment in electricity generation in Texas, and the associated efficiency gains. The essay presents a method to estimate the optimal investment in each technology available to generate electricity. The estimation considers the expected entry and exit of generation plants, future fuel prices, different demand elasticities and a potential carbon allowance mar- kets. Considering a carbon allowance price equal to two times the level in Europe, the optimal investment in electricity generation in Texas is zero.

Consider a linear regression model with a two-dimensional control vector (x_1, x_2) and an m-dimensional response vector y = (y_1, . . . , y_m). The components of y are correlated with a known covariance matrix. Based on the assumed regression model, there are two problems of interest. The first one is to estimate unknown control vector x_c corresponding to an observed y, where xc will be estimated by the classical estimator. The second one is to obtain a suitable estimation of the control vector x_T corresponding to a given target T = (T_1, . . . , T_m) on the expected responses. Consideration in this work includes the deviation of the expected response E(y_i) from its corresponding target value T_i for each component and defines the optimal control vector x, say x_T , to be the one which minimizes the weighted sum of squares of standardized deviations within the range of x. The objective of this study is to find c-optimal designs for estimating x_c and x_T , which minimize the mean squared error of the estimator of xc and x_T respectively. The comparison of the difference between the optimal calibration design and the optimal design for estimating x_T is provided. The efficiencies of the optimal calibration design relative to the uniform design are also presented, and so are the efficiencies of the optimal design for given target vector relative to the uniform design.

This dissertation includes three chapters. The first chapter studies the question of whether countries with different fiscal capacity should optimally have different ex-ante minimum bank capital requirements. In an environment with endogenously incomplete markets and overinvestment because of moral hazard and pecuniary externalities, I show that countries with larger fiscal capacity should have lower minimum ex-ante bank capital requirements. I also show that, in addition to the minimum capital requirement, regulators in countries with a concentrated financial sector and large fiscal capacity (which are also countries with strong moral hazard) should impose a limit on the amount of liquidity pledged by financial institutions in a crisis state (for example, restrict the amount of put options/CDS contracts sold by financial institutions). The second chapter studies the welfare implications of a concentrated, imperfectly competitive banking sector, which faces a bank net worth constraint in a small open economy (SOE) environment. There are two standard sources of inefficiency --- pecuniary externalities, which lead to overinvestment, and a standard monopolistic underinvestment force. I show that the optimal policy instruments include subsidies on firm borrowing costs in certain periods and capital account controls in others, which is a good proxy for the behavior of emerging markets. For every country, there exists a financial sector with a particular banking sector concentration, for which the inefficiencies offset each other and no government intervention is required in some periods. Furthermore, this paper documents a novel theoretical result --- the interaction between future binding bank net worth constraints and dynamic (future) underinvestment could lead to ex-ante overinvestment even in economies with a single monopolistic bank where there are no pecuniary externalities. The last third chapter, which is coauthored with Kenneth Rogoff, evaluates a new class of exchange rate forecasting studies, which claim that structural models are getting closer to being able to forecast exchange rates at short horizons. We argue that misinterpretation of some new out-of-sample tests for nested models, over-reliance on asymptotic test statistics, and failure to sufficiently check robustness to alternative time windows have led many studies to overstate even the relatively thin positive results that have been found. / Economics

Time-optimal solutions provide us with the fastest means to regulate a system in presence of input constraints. This advantage of time-optimal control solutions is offset by the fact that their real-time implementation involves computationally intensive iterative techniques. Moreover, time-optimal controls depend on the initial state and have to be recalculated for even the slightest perturbation. Clearly time-optimal controls are not good candidates for online regulation. Consequently, the search for alternatives to time-optimal solutions is a very active area of research. The work described here is inspired by the simplicity of optimal-aim concept. The "optimal-aim strategies" provide online regulation in presence of bounded inputs with minimal computational effort. These are based purely on state-space geometry of the plant and are inherently adaptive in nature. Optimal-aim techniques involve aiming of trajectory derivative (or the state velocity vector) so as to approach the equilibrium state in the best possible manner. This thesis documents the efforts to develop an online regulation algorithm for systems with input constraints. Through a number of hypotheses focussed on trying to reproduce the exact time-optimal solution, the diffculty associated with this task is demonstrated. A modification of optimal-aim concept is employed to develop a novel regulation algorithm. In this algorithm, aim directions are chosen in a special manner to generate the time-optimal control approximately. The control scheme thus developed is shown to be globally stabilizing for systems having eigenvalues in the CLHP (closed left half-plane). It is expected that this method or its modifications can be extended to higher dimensional systems as a part of future research. An alternative control algorithm involving a simple state-space aiming concept is also developed and discussed.