A General Equilibrium Financial Asset Economy with Transaction Costs and Trading Constraints

This paper presents a unified framework for examining the general equilibrium effects of transactions costs and trading constraints on security market trades and prices. The model uses a discrete time/state framework and Kuhn-Tucker theory to characterize the optimal decisions of consumers and financial intermediaries. Transaction costs and constraints give rise to regions of no trade and to bid-ask spreads: their existence frustrate the derivation of standard results in arbitrage-based pricing. Nevertheless, we are able to obtain as dual characterizations of our primal problems, one-sided arbitrage pricing results and a personalized martingale representation of asset pricing. These pricing results are identical to those derived by Jouini and Kallal (1995) using arbitrage arguments. The paper's framework incorporates a number of specialized existing models and results, proves new results and discusses new directions for research. In particular, we include characterizations of intermediaries who hold optimal portfolios; brokers who do not hold portfolios, and consumer-specific transactions costs and trading constraints. Furthermore we show that in the special case of equiproportional transaction costs and a sufficient number of assets, there is an analogue of the arbitrage pricing result for European derivatives where prices are interpreted as mid-prices between the bid-ask spread. We discuss the effects of non-convex transaction technologies on prices and trades.Financial Markets, Transaction Costs, Trading Constraints, Asset Pricing, General Equilibrium, Incomplete Markets

Policy-Induced Technology Adoption: Evidence from the U.S. Lead Phasedown

The theory of environmental regulation suggests that economic instruments, such as taxes and tradable permits, create more effective technology adoption incentives than conventional regulatory standards. We explore this issue for an important industry undergoing technological responses to a dramatic decrease in allowed pollution levels—the petroleum industry’s phasedown of lead in gasoline. Using a panel of refineries from 1971 to 1995, we provide some of the first direct evidence that alternative policies affect the pattern of adoption in expected ways. Importantly, we find that the tradable permit system used during the lead phasedown provided incentives for more efficient technology adoption decisions. Where environmentally appropriate, this suggests that flexible market-based regulation can achieve environmental goals while providing better incentives for technology diffusion.technology, adoption, diffusion, environment, regulation, lead, gasoline, tradable permit, incentive-based policy

Nutrient Trading in Lake Rotorua: Goals and Trading Caps

For a nutrient trading system to achieve the desired environmental outcome, or goal, this outcome needs to be translated into nutrient flows and allowances. To connect the nutrient loss provided for under the allowances with the environmental goal, a number of decisions need to be made. These decisions will shape the nutrient trading system. This paper looks at the information and analysis needed to ultimately define allowances and set trading caps for a nutrient trading system.Water quality, nutrients, trading, Lake Rotorua

Design of a middleware for QoS-aware distribution transparent content delivery

Developers of distributed multimedia applications face a diversity of multimedia formats, streaming platforms and streaming protocols. Furthermore, support for end-to-end quality-of-service (QoS) is a crucial factor for the development of future distributed multimedia systems. This paper discusses the architecture, design and implementation of a QoS-aware middleware platform for content delivery. The platform supports the development of distributed multimedia applications and can deliver content with QoS guarantees. QoS support is offered by means of an agent infrastructure for QoS negotiation and enforcement. Properties of content are represented using a generic content representation model described using the OMG Meta Object Facility (MOF) model. A content delivery framework manages stream paths for content delivery despite differences in streaming protocols and content encoding. The integration of the QoS support, content representation and content delivery framework results in a QoS-aware middleware that enables representation transparent and location transparent delivery of content

Credit derivatives: just-in-time provisioning for loan losses

Credit derivative contracts offer a new route for managing counterparty exposures. This article discusses two formats of these contracts. The contracts have potential for providing portfolio managers with a cost effective, just-in-time source of liquidity.Credit ; Derivative securities ; Contracts ; Risk

Offset Banking - A Way Ahead For Controlling Nonpoint Source Pollution In Urban Areas in Georgia

Nonpoint source discharges remain the major cause of non-attainment of water quality goals in urban areas within Georgia. Hence controlling nonpoint source discharges will be a critical part of achieving water quality goals within urban areas. Efforts to reduce nonpoint discharges are expected to intensify with implementation of Total Maximum Daily Loads (TMDLs) and changes to National Pollutant Discharge Elimination Program (NPDES) permits.Given the need to reduce existing nonpoint source discharges in many urban counties within Georgia, it is likely that regulatory authorities will become more circumspect about approving new developments with negative environmental impacts. Thus, given current policies, conflicts between environmental and developmental goals are expected to increase in future years.In this working paper we discuss the use of Offset Banking, which is flexible mechanism that can facilitate development, but with no net environmental impact. Indeed, it is possible to design an Offset Banking program that results in net environmental improvements from additional development. As well as benefits to the environment, offset banking can provide benefits to developers by enabling further development to occur, reducing overall nonpoint source discharge control costs and reducing uncertainty within the development process.Offset Banking is conceptually similar to wetland mitigation banking, except that it focuses on the control of nonpoint source discharges. In an Offset Banking program, an "Offset Bank" undertakes a series of projects to reduce nonpoint source discharges. In return for undertaking these projects, the bank receives offset credits. When new developments create net environmental impacts, they must offset these impacts by purchasing credits from an offset bank with credits available from a nearby project. In this way, development can proceed without there being an overall negative impact on environmental quality, and potentially an environmental improvement if developers are required to purchase more credits than the pollution generated. Offset Banking thus represents a pragmatic solution to future conflicts between developmental and environmental goals within urban areas. Working Paper #2002-00

Quality Distortions in Vertical Relations

This paper examines how delivery tariffs and private quality standards are determined in vertical relations that are subject to asymmetric information. We consider an infinitely repeated game where an upstream firm sells a product to a downstream firm. In each period, the firms negotiate a delivery contract comprising the quality of the good as well as a non-linear tariff. Assuming asymmetric information about the actual quality of the product and focusing on incentive compatible contracts, we show that delivery contracts are more efficient the lower the firms' outside options, i.e. the higher their mutual dependency. Buyer power driven by a reduced outside option of the upstream firm enhances the efficiency of vertical relations, while buyer power due to an improved outside option of the downstream firm implies less efficient outcomes.Quality Uncertainty, Private Standards, Vertical Relations, Buyer Power