Operations Research
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Operations Research2014-10-22Walter FrischSubgame-Perfect Equilibria in Stochastic Timing Games
http://d.repec.org/n?u=RePEc:bie:wpaper:524&r=ore
We introduce a notion of subgames for stochastic timing games and the related notion of subgame-perfect equilibrium in possibly mixed strategies. While a good notion of subgame-perfect equilibrium for continuous-time games is not available in general, we argue that our model is the appropriate version for timing games. We show that the notion coincides with the usual one for discrete-time games. Many timing games in continuous time have only equilibria in mixed strategies - in particular preemption games, which often occur in the strategic real option literature. We provide a sound foundation for some workhorse equilibria of that literature, which has been lacking as we show. We obtain a general constructive existence result for subgame-perfect equilibria in preemption games and illustrate our findings by several explicit applications.Frank Riedel, Jan-Henrik Steg2014-09timing games, stochastic games, mixed strategies, subgame-perfect equilibrium in continuous time, optimal stoppingUnbalanced Fractional Cointegration and the No-Arbitrage Condition on Commodity Markets
http://d.repec.org/n?u=RePEc:aim:wpaimx:1445&r=ore
A necessary condition for two time series to be nontrivially cointegrated is the equality of their respective integration orders. Nonetheless, in some cases, the apparent unbalance of integration orders of the observables can be misleading and the cointegration theory applies all the same. This situation refers to unbalanced cointegration in the sense that balanced long run relationship can be recovered by an appropriate filtering of one of the time series. In this paper, we suggest a local Whittle estimator of bivariate unbalanced fractional cointegration systems. Focusing on a degenerating band around the origin, it estimates jointly the unbalance parameter, the long run coefficient and the integration orders of the regressor and the cointegrating errors. Its consistency is demonstrated for the stationary regions of the parameter space and a finite sample analysis is conducted by means of Monte Carlo experiments. An application to the no-arbitrage condition between crude oil spot and futures prices is proposed to illustrate the empirical relevance of the developed estimator. Non-technical abstract:The no-arbitrage condition between spot and future prices implies an analogous condition on their underlying volatilities. Interestingly, the long memory behavior of the volatility series also involves a long-run relationship that allows to test for the no-arbitrage condition by means of cointegration techniques. Unfortunately, the persistent nature of the volatility can vary with the future maturity, thereby leading to unbalanced integration orders between spot and future volatility series. Nonetheless, if a balanced long-run relationship can be recovered by an appropriate filtering of one of the time series, the cointegration theory applies all the same and unbalanced cointegration operates between the raw series. In this paper, we introduce a new estimator of unbalanced fractional cointegration systems that allows to test for the no-arbitrage condition between the crude oil spot and futures volatilities.Gilles de Truchis, Florent Duboisunbalanced cointegration, Fractional cointegration, no-arbitrage condition, local Whittle likelihood, commodity marketsAsymptotic Distribution and Finite-Sample Bias Correction of QML Estimators for Spatial Error Dependence Model
http://d.repec.org/n?u=RePEc:siu:wpaper:15-2014&r=ore
In studying the asymptotic and finite-sample properties of quasi-maximum likelihood (QML) estimators for the spatial linear regression models, much attention has been paid to the spatial lag dependence (SLD) model; little has been given to its companion, the spatial error dependence (SED) model. In particular, the effect of spatial dependence on the convergence rate of the QML estimators has not been formally studied, and methods for correcting finite-sample bias of the QML estimators have not been given. This paper fills in these gaps. Of the two, bias correction is particularly important to the application of this model. Contrary to the common perceptions, both the large and small sample behaviors of the QML estimators for the SED model can be different from those for the SLD model in terms of the rate of convergence and the magnitude of bias. Monte Carlo results show that the bias can be severe and the proposed bias correction procedure is very effective.Shew Fan Liu, Zhenlin Yang2014-09Asymptotics; Bias Correction; Bootstrap; Concentrated estimating equation; Monte Carlo; Spatial layout; Stochastic expansionSpecification Testing in Nonstationary Time Series Models
http://d.repec.org/n?u=RePEc:yor:yorken:14/19&r=ore
In this paper, we consider a specification testing problem in nonlinear time series models with nonstationary regressors and propose using a nonparametric kernel-based test statistic. The nullasymptotics for the proposed nonparametric test statistic have been well developed in the existing literature such as Gao et al (2009b) and Wang and Phillips (2012). In this paper, we study the local asymptotics of the test statistic, i.e., the asymptotic properties of the test statistic under a sequence of general nonparametric local alternatives, and show that the asymptotic distribution depends on the asymptotic behaviour of the distance function which is the local deviation from the parametrically specified model in the null hypothesis. In order to implement the proposed test in practice, we introduce a bootstrap procedure to approximate the critical values of the test statistic and establish a novel result of Edgeworth expansion which is used to justify the use of such an approximation. Based on the approximate critical values, we develop a bandwidth selection method, which chooses the optimal bandwidth that maximises the local power of the test while its size is controlled at a given significance level. The local power is defined as the power of the proposed test for a given sequence of local alternatives. Such a bandwidth selection is made feasible by an approximate expression for the local power of the test as a function of the bandwidth. A Monte-Carlo simulation study is provided to illustrate the finite sample performance of the proposed test.Jia Chen, Jiti Gao, Degui Li, Zhengyan Lin2014-09Asymptotic distribution; Edgeworth expansion; local power function; nonlinear time series; quadratic form; size function; specification testing; unit root.Volatility Modelling of CO2 Emission Allowance Spot Prices with Regime-Switching GARCH Models
http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2014-050&r=ore
I compare the performance of solution methods in solving a standard real business cycle model with labor market search frictions. Under the conventional calibration, the model is solved by the projection method using the Chebyshev polynomials as its basis, and the perturbation methods up to third order in both levels and logs. Evaluated by two accuracy tests, the projection approximation achieves the highest degree of accuracy, closely followed by the third order perturbation in levels. Although different in accuracy, all the approximated solutions produce simulated moments similar in value.Thijs Benschopa, Brenda López Cabrera, , 2014-09CO2 Emission Allowances, CO2 Emission Trading, Spot Price Modelling, Markov Switching GARCH Models, Volatility ForecastingInternational Transmission of Credit Shocks: Evidence from Global Vector Autoregression Model
http://d.repec.org/n?u=RePEc:ltv:wpaper:201405&r=ore
In this paper, we examine international transmission of the negative credit supply shock, which originated in the euro area and the US. We use the multi-country global vector autoregression (GVAR) approach with trade and bilateral banking exposures as weights, and identify five structural shocks via sign restrictions. Special focus of this research is on CESEE – a region that shares strong financial linkages with the euro area. Our main results are as follows. First, US-specific shocks account for a significant share in explaining the deviations from growth trends in output and total credit in both the euro area and the US; second, compared to a domestic aggregate demand shock, the economic downturn caused by the credit supply shock in the US and the euro area can bring more harm in the long run, yet the international spillover of the former is stronger; third, the transmission of euro area shocks to emerging Europe is faster and more pronounced compared to US shocks; fourth, there is strong heterogeneity in responses of emerging Europe to shocks in the euro area and the US.Ludmila Fadejeva, Martin Feldkircher, Thomas Reininger2014-09-25credit shock, global vector autoregressions, sign restrictionsE-Skills, Brains and Performance of the Firms: ICT and Ability of Firms to Conduct Successful Projects in Luxembourg
http://d.repec.org/n?u=RePEc:ipg:wpaper:2014-587&r=ore
This paper provides original empirical evidence on the causal links between e-skills, usage of Information and Communication Technologies (ICT) and firm’s performance using a sample of Luxembourgian manufacturing and services firms. Firm performance is measured in terms of innovation (success of new projects settled). Our main findings are: (i) there’s no relationship between the absorptive technology capacity of the firm (measured by ICT staff and Training) and the probability of the implementation of successful ICT projects, (ii) there is a positive effect of e-applications usage (ICT usage) on the probability of the implementation of successful new projects, and (iii) there is an asymmetric effect of usage of e-commerce and eadministration confirming findings of the recent literature.Anissa Chaibi, Adel Ben Youssef, Leila Peltier- Ben Aoun2014-09-25Innovation; Usage of ICT; Depth of ICT adoption; Ordered models; Innovative projects.