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on Computational Economics |
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Issue of 2009‒10‒31
six papers chosen by |
| By: | Roman N. Makarov; Devin Glew |
| Abstract: | We consider the exact path sampling of the squared Bessel process and some other continuous-time Markov processes, such as the CIR model, constant elasticity of variance diffusion model, and hypergeometric diffusions, which can all be obtained from a squared Bessel process by using a change of variable, time and scale transformation, and/or change of measure. All these diffusions are broadly used in mathematical finance for modelling asset prices, market indices, and interest rates. We show how the probability distributions of a squared Bessel bridge and a squared Bessel process with or without absorption at zero are reduced to randomized gamma distributions. Moreover, for absorbing stochastic processes, we develop a new bridge sampling technique based on conditioning on the first hitting time at zero. Such an approach allows us to simplify simulation schemes. New methods are illustrated with pricing path-dependent options. |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:0910.4177&r=cmp |
| By: | Gilles Pag\`es (PMA); Benedikt Wilbertz (PMA) |
| Abstract: | We propose a new Quantization algorithm for the approximation of inhomogeneous random walks, which are the key terms for the valuation of CDO-tranches in latent factor models. This approach is based on a dual quantization operator which posses an intrinsic stationarity and therefore automatically leads to a second order error bound for the weak approximation. We illustrate the numerical performance of our methods in case of the approximation of the conditional tranche function of synthetic CDO products and draw comparisons to the approximations achieved by the saddlepoint method and Stein's method. |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:0910.5655&r=cmp |
| By: | Ciscar, Juan Carlos; Paroussos, Leonidas; Van Regemorter, Denise |
| Abstract: | Climate change has become a critical issue in the international policy making agenda. At the UNFCC conference in Bali 2007, countries decided on a roadmap to achieve a ‘secure climate future’. Given the commitment to limit the temperature increase to 2° Celsius relative to the preindustrial levels, the EU decided in March 2007, as a first step, a 20% reduction of its GHG emissions by 2020, going to 30% if a comprehensive international agreement can be reached. This study uses the multi-sector multi-region world model GEM-E3 in order to identify the world economic implications of different participation schemes for post Kyoto. The scenarios reported in this paper have contributed to the EU communication on ‘Limiting Global Change to 2° Celsius the way ahead to 2020 and beyond’. |
| Keywords: | Climate change; Computable general equilibrium modeling; Emission reduction; |
| JEL: | D58 Q54 Q43 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18030&r=cmp |
| By: | Fernando DI NICOLA (ISAE - Institute for Studies and Economic Analyses) |
| Abstract: | In this paper reforms of both present Italian personal income taxation and family allowances are evaluated with the aim to make the tax benefit system able to better support family burden. Two kind of reforms are considered: family quotient, based on the change of the tax unit from persons to families, and a new generalized family allowance, based on equivalent income and absorbing current family tax credits and allowances. After an evaluation of some limits of family quotient (higher effective marginal tax rate for spouse with lower income and a reduced support for low income families) and the current mix of tax credits and allowances (families with higher equivalent income can receive higher support for family burden), the comparison among two specific reforms is performed using a microsimulation model built on Bank of Italy survey about the Italian household and personal incomes. Results shows that it is possible to shape quotient family based reforms with redistributive effects, but also that the new generalized family allowance here presented is able to better support bottom quintiles of population, with or without dependent children. Each of the two reforms would cost about 9 billion of euro, an acceptable share of both the Italian GNP and the public budget. |
| Keywords: | Personal income taxation, Family allowances, Family quotient, Tax benefit system |
| JEL: | H24 D31 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:isa:wpaper:118&r=cmp |
| By: | Megha Sharma,Diptesh Ghosh |
| Abstract: | In this paper we present a strategy for speeding up the estimation of expected maximum flows through reliable networks. Our strategy tries to minimize the repetition of computational effort while evaluating network states sampled using the crude Monte Carlo method. Computational experiments with this strategy on three types of randomly generated networks show that it reduces the number of flow augmentations required for evaluating the states in the sample by as much as 52% on average with a standard deviation of 7% compared to the conventional strategy. This leads to an average time saving of about 71% with a standard deviation of about 8%. |
| Date: | 2009–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:2009-04-05&r=cmp |
| By: | Jan Gottschalk; Vu Manh Le,; Hans Lofgren; Kofi Nouve |
| Abstract: | This paper analyses economic implications and the transmission mechanisms of different options for creating and using fiscal space. For creating fiscal space, we consider prioritizing expenditures, raising revenue, and scaled-up aid. Fiscal space is used for increasing health and education spending, infrastructure spending, or both. The analysis takes place within the World Bank's MAMS model, which is a multisectoral real computable general equilibrium model that incorporates the Millennium Development Goals. The model has been calibrated for Burkina Faso, which serves as an illustrative country example. Some of the key results are that absorbing a more educated labor force requires fundamental structural change in the economy; increasing health and education spending can face sizeable capacity constraints; and infrastructure spending has a positive effect on growth as well as education and health outcomes. |
| Date: | 2009–10–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:09/227&r=cmp |