nep-cmp New Economics Papers
on Computational Economics
Issue of 2013‒11‒09
eight papers chosen by
Stan Miles
Thompson Rivers University

  1. Modeling catastrophic deaths using EVT with a microsimulation approach to reinsurance pricing By Matias Leppisaari
  2. Increasing labour market activity of the poor and females: Let’s make work pay in Macedonia By Blazevski, Nikica Mojsoska; Petreski, Marjan; Petreska, Despina
  3. Modelling production cost scenarios for biofuels and fossil fuels in Europe By Festel, Gunter; Würmseher, Martin; Rammer, Christian; Boles, Eckhard; Bellof, Martin
  4. The Accession of Kazakhstan, Russia and Ukraine to the WTO: What will it Mean for the World Trade in Wheat? By Burkitbayeva, Saule; Kerr, William A.
  5. A Microsimulation on Tax Reforms in LAC Countries: A New Approach Based on Full Expenditures By Carla Canelas; François Gardes; Silvia Salazar
  6. Creating and using fiscal space for accelerated development in Liberia By Lofgren, Hans
  7. The Multifactor Model of the Agent’s Power in Social Networks By Belik, Ivan; Hexmoor, Henry
  8. On the tracking and replication of hedge fund optimal investment portfolio strategies in global capital markets in presence of nonlinearities, applying Bayesian filters: 1. Stratanovich – Kalman – Bucy filters for Gaussian linear investment returns distribution and 2. Particle filters for non-Gaussian non-linear investment returns distribution By Ledenyov, Dimitri O.; Ledenyov, Viktor O.

  1. By: Matias Leppisaari
    Abstract: Recently, a marked Poisson process (MPP) model for life catastrophe risk was proposed in [6]. We provide a justification and further support for the model by considering more general Poisson point processes in the context of extreme value theory (EVT), and basing the choice of model on statistical tests and model comparisons. A case study examining accidental deaths in the Finnish population is provided. We further extend the applicability of the catastrophe risk model by considering small and big accidents separately; the resulting combined MPP model can flexibly capture the whole range of accidental death counts. Using the proposed model, we present a simulation framework for pricing (life) catastrophe reinsurance, based on modeling the underlying policies at individual contract level. The accidents are first simulated at population level, and their effect on a specific insurance company is then determined by explicitly simulating the resulting insured deaths. The proposed microsimulation approach can potentially lead to more accurate results than the traditional methods, and to a better view of risk, as it can make use of all the information available to the re/insurer and can explicitly accommodate even complex re/insurance terms and product features. As an example we price several excess reinsurance contracts. The proposed simulation model is also suitable for solvency assessment.
    Date: 2013–10
  2. By: Blazevski, Nikica Mojsoska; Petreski, Marjan; Petreska, Despina
    Abstract: The objective of this paper is to simulate the effects of two alternative social policies individual and family in-work benefits on labour market choices in Macedonia, with special focus on the poor and females. To that end, we use ex-ante analysis relying on a combination of a tax and benefit micro-simulation model for Macedonia (MAKMOD) and a structural model for labour supply, both utilising the 2011 Survey of Income and Labour Conditions. Results suggest that the proposed reforms will have a considerable effect on the working choices of Macedonians. The family in-work benefit is found to be more effective for singles and would potentially increase employment by 6 percentage points. On the other hand, the individual in-work benefit works better for couples where employment would increase by 2.5 percentage points. In addition, the effects are found to be larger for the poor and for females, the categories that are most prone to inactivity in Macedonia.
    Date: 2013–10–31
  3. By: Festel, Gunter; Würmseher, Martin; Rammer, Christian; Boles, Eckhard; Bellof, Martin
    Abstract: This paper presents the results of a calculation model for biofuel production costs in 2015 and 2020 based on raw material price projections and considering scale and learning effects. Distinguishing six types of biofuels, the paper finds that scale economies and learning effects are critical for 2nd generation biofuels to become competitive. In case these effects can be utilized, cost saving potentials for 2nd generation biofuels are significant. --
    Keywords: Biofuels,Production Cost Scenarios,Raw Material Price Projection,Conversion Costs
    JEL: L25 L26 J24
    Date: 2013
  4. By: Burkitbayeva, Saule; Kerr, William A.
    Abstract: International trade in wheat accounts for approximately one third of world grain trade and is expected to double by 2050.The KRU (Kazakhstan, Russia and Ukraine) countries account for approximately a quarter of world wheat exports and are collectively considered one of the key wheat exporting regions. The Ukraine became a member of the WTO only in 2008. Russia became an official member of the WTO in 2012 and Kazakhstan is expected to follow Russia and reach an accession deal with WTO members shortly. As a result of WTO accession, all three countries will be entitled to “most favoured nation” (MFN tariffs), and hence, gain improved access to a number of important markets that have been largely inaccessible due to very high tariffs that could be charged on imports from non-WTO countries. World wheat trade liberalization, reflecting the move to the MFN tariff as a result of accession, was simulated using the global simulation model (GSIM). The KRU region’s increased market accessibility as a result of successful accession to the WTO has the potential to foster important re-alignments in world wheat trade flows, prices and changes in welfare among major wheat trading countries. The simulation results suggest that the change to MFN tariffs leads to KRU countries trading more with now freer markets such as Turkey, the EU and China. Major traditional wheat exporters such as Australia, Canada, the EU, and the US do not seem to be negatively impacted to any important degree. Their relative market access conditions, however, erode in Turkish, Middle Eastern, and North African markets with their exports being diverted and broadly distributed among other countries and regions at marginally reduced prices. Trade liberalization is not uniform across regions and, hence, leads to different net welfare changes across countries. Those welfare changes, however, appear to be modest.
    Keywords: accession, Kazakhstan, MFN, Russia, tariff reduction, Ukraine, wheat, Agribusiness, Agricultural and Food Policy, Demand and Price Analysis, International Development, International Relations/Trade,
    Date: 2013–09
  5. By: Carla Canelas (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); François Gardes (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Silvia Salazar (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: In this article, we propose a new method to estimate price effects on micro cross-sectional data using full prices that take into account household domestic production. We use behavioral microsimulations by subpopulations to analyze the redistributive impact of changes on Value Added Tax (VAT) rates in Ecuador and Guatemala. Utility analysis is used to evaluate the consequences on households welfare caused by these tax reforms. The proposed model solves the crucial problem of price data availability in developing countries. The estimates of the full price elasticities highlight the importance of the substitution between time and monetary expenditures within the households domestic production function and show that traditional approaches only tell half of the story. In general, the utility estimates seem to be consistent as they have the expected sign and follow the same pattern of changes in consumption.
    Keywords: Consumer demand; full prices; microsimulation; taxes; time-use; welfare
    Date: 2013–07
  6. By: Lofgren, Hans
    Abstract: This paper presents simulations for the period 2013-2030 of measures that permit increased spending on infrastructure and human development, the priority areas in Liberia's 2013-2017"Agenda for Transformation"and for its national vision, Liberia Rising 2030. The simulations are carried out with a Liberian version of MAMS (Maquette for Millennium Development Goals Simulations), a Computable General Equilibrium model. According to the results, among the key sources of fiscal space, foreign grants generate the best outcomes followed by improved government allocative efficiency. Taxes tend to involve trade-offs since they reduce resources for private consumption and investment, both of which tend to contribute to stronger macro and Millennium Development Goals performance. Increased foreign borrowing is less attractive since, in order to make a substantial difference, it would quickly add to the foreign debt, making the economy more crisis-prone and less flexible. The preferred balance between different uses of fiscal space depends on payoffs from different government functions, typically unknown or only appearing with a lag. Under the parameters used in the simulations, determined in light of fragmentary evidence, the outcomes were marginally stronger under a balanced approach with scaling up of both infrastructure and human development services. Balanced expansion may also contribute to efficiency and be easier for political reasons. A final finding is that it is possible to consider fiscal space issues in isolation from the mining sector: simulations suggest that the marginal effects of creating additional fiscal space are very similar irrespective of the level of mining export prices.
    Keywords: Economic Theory&Research,Debt Markets,Banks&Banking Reform,Emerging Markets,Access to Finance
    Date: 2013–10–01
  7. By: Belik, Ivan (Dept. of Business and Management Science, Norwegian School of Economics); Hexmoor, Henry (Dept. of Computer Science, Southern Illinois University at Carbondale)
    Abstract: The analysis of social reasoning is at the core of understanding how to manage social networks. Since interpersonal relations are composed of multiple factors with different nature (i.e., structural and social factors), we explore their influence on the strategizing processes in social networks. We formalize interpersonal relations using the methods of structural and social analysis. As a part of the research, we develop the soft-ware application for the numerical visualization of the social network functioning based on the proposed mechanism.
    Keywords: Agent’s power; social networks; structural centrality; trust
    JEL: Z13
    Date: 2013–10–25
  8. By: Ledenyov, Dimitri O.; Ledenyov, Viktor O.
    Abstract: The hedge fund represents a unique investment opportunity for the institutional and private investors in the diffusion-type financial systems. The main objective of this condensed article is to research the hedge fund’s optimal investment portfolio strategies selection in the global capital markets with the nonlinearities. We provide a definition for the hedge fund, describe the hedge fund’s organization structures and characteristics, discuss the hedge fund’s optimal investment portfolio strategies and review the appropriate hedge fund’s risk assessment models for investing in the global capital markets in time of high volatilities. We analyze the advanced techniques for the hedge fund’s optimal investment portfolio strategies replication, based on both the Stratonovich – Kalman - Bucy filtering algorithm and the particle filtering algorithm. We developed the software program with the embedded Stratonovich – Kalman - Bucy filtering algorithm and the particle filtering algorithm, aiming to track and replicate the hedge funds optimal investment portfolio strategies in the practical cases of the non-Gaussian non-linear chaotic distributions.
    Keywords: hedge fund, investment portfolio, investment strategy, global tactical asset allocation investment strategy, investment decision making, return on investments, value at risk, arbitrage pricing theory, Sharpe ratio, separation theorem, Sortino ratio, Sterling ratio, Calmar ratio, Gini coefficient, value at risk (VaR), Ledenyov investment portfolio theorem, stability of investment portfolio, Kolmogorov chaos theory, Sharkovsky chaos theory, Lyapunov stability criteria, bifurcation diagram, nonlinearities, stochastic volatility, stochastic probability, Markov chain, Bayesian estimation, Bayesian filters, Wiener filtering theory, Stratonovich optimal non-linear filtering theory, Stratonovich – Kalman – Bucy filtering algorithm, Hodrick-Prescott filter, Hirose - Kamada filter, particle filtering methods, particle filters, multivariate filters, Gaussian linear distribution, non-Gaussian nonlinear distribution, Monte-Carlo simulation, Brownian motion, diffusion process, econophysics, econometrics, global capital markets.
    JEL: C11 C13 C16 C3 C32 C35 C38 C4 C46 C5 C51 C53 C58 C61 C63 C8 C87 D8 D84
    Date: 2013–10–29

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