Economic Implications of Extreme and Rare Events

.Endogenous Probabilities; Extreme Events; Financial Environment; Informational Costs; Regime Shifts

Informational Accuracy and the Optimal Monetary Regime

King (1997) develops a framework for assessing four monetary regimes: an optimal state-contingent rule; a non-contingent rule; pure discretion; and a Rogoffian conservative central banker. Using this framework we show (a) that King is wrong to claim that it implies that an optimally-conservative central banker always dominates a fixed-rule monetary regime; (b) that if the private sector has a signal of the shock to which monetary policy responds - the accuracy of which is exogenously fixed - then either the optimal state-contingent rule or the optimally-conservative central bank can dominate; and (c) that if the private sector optimally chooses the accuracy of its signal then any regime can dominate.Monetary policy, expectations, Rogoffian central banker.

Improving market-based forecasts of short-term interest rates: time-varying stationarity and the predictive content of switching regime-expectations

Modeling short-term interest rates as following regime-switching processes has become increasingly popular. Theoretically, regime-switching models are able to capture rational expectations of infrequently occurring discrete events. Technically, they allow for potential time-varying stationarity. After discussing both aspects with reference to the recent literature, this paper provides estimations of various univariate regime-switching specifications for the German three-month money market rate and bivariate specifications additionally including the term spread. However, the main contribution is a multi-step out-of-sample forecasting competition. It turns out that forecasts are improved substantially when allowing for state-dependence. Particularly, the informational content of the term spread for future short rate changes can be exploited optimally within a multivariate regime-switching framework

Standard Breach Remedies, Quality Thresholds, and Cooperative Investments

When investments are non-verifiable, inducing cooperative investments with simple contracts may not be as difficult as previously thought. Indeed, modeling 'expectation damages' close to legal practice, we show that the default remedy of contract law induces the first best. Yet, in order to lower informational requirements of courts, parties may opt for a 'specific performance' regime which grants the breached-against buyer an option to choose 'restitution' if the tender's value falls below some (exogenously given) quality threshold. In order to implement this regime, no more information needs to be verifiable than is implicitly assumed in Che and Hausch (1999)

IMPLEMENTING A LOGISTICAL MANAGEMENT WITH THE HELP OF ELECTRONIC COMMERCE

The firm, considered to be a unitary system, disposes of a functioning mechanism defined by a few characteristics, which include: - it is a unitary ensemble with an established juridical regime and a certain functional autonomy; - it has specific in and out parameters; - it is capable of self-adjusting its activity through its own management of informational links. To do so, an important role is held by the analises of the logistical system, which implies the component of logistics, and the physics and informational flow."

New Scaling Relation for Information Transfer in Biological Networks

Living systems are often described utilizing informational analogies. An important open question is whether information is merely a useful conceptual metaphor, or intrinsic to the operation of biological systems. To address this question, we provide a rigorous case study of the informational architecture of two representative biological networks: the Boolean network model for the cell-cycle regulatory network of the fission yeast S. pombe and that of the budding yeast S. cerevisiae. We compare our results for these biological networks to the same analysis performed on ensembles of two different types of random networks. We show that both biological networks share features in common that are not shared by either ensemble. In particular, the biological networks in our study, on average, process more information than the random networks. They also exhibit a scaling relation in information transferred between nodes that distinguishes them from either ensemble: even when compared to the ensemble of random networks that shares important topological properties, such as a scale-free structure. We show that the most biologically distinct regime of this scaling relation is associated with the dynamics and function of the biological networks. Information processing in biological networks is therefore interpreted as an emergent property of topology (causal structure) and dynamics (function). These results demonstrate quantitatively how the informational architecture of biologically evolved networks can distinguish them from other classes of network architecture that do not share the same informational properties

Fine-tuning the Color-Glass Condensate with the nuclear configurational entropy

The dipole-nucleus forward scattering amplitude rules the onset of the gluon anomalous dimension, in the Color-Glass Condensate regime. In this model, the onset of quantum regime is here derived as a critical stable point in the nuclear configurational entropy, matching the fitted experimental data in the literature with accuracy of 1%. It corroborates with the informational entropy paradigm in high energy nuclear physics.Comment: 4 pages, 1 figure, EPL style, matches the published versio

Standard Breach Remedies, Quality Thresholds, and Cooperative Investments

When investments are non-verifiable, inducing cooperative investments with simple contracts may not be as difficult as previously thought. Indeed, modeling “expectation damages” close to legal practice, we show that the default remedy of contract law induces the ?rst best. Yet, in order to lower informational requirements of courts, parties may opt for a "specific performance" regime which grants the breached-against buyer an option to choose "restitution" if the tender’s value falls below some (arbitrarily chosen) quality threshold. In order to implement this regime, no more information needs to be verifiable than is implicitly assumed in Che and Hausch (1999).breach remedies, incomplete contracts, cooperative investments.

Herd Behaviors in Financial Markets

We investigate the herd behavior of returns for the yen-dollar exchange rate in the Japanese financial market. It is obtained that the probability distribution $P(R)$ of returns $R$ satisfies the power-law behavior $P(R) \simeq R^{-\beta}$ with the exponents $\beta=3.11$(the time interval $\tau=$ one minute) and 3.36($\tau=$ one day). The informational cascade regime appears in the herding parameter $H\ge 2.33$ at $\tau=$ one minute, while it occurs no herding at $\tau=$ one day. Especially, we find that the distribution of normalized returns shows a crossover to a Gaussian distribution at one time step $\Delta t=1$ day.Comment: 15 pages, 6 figure