Optimal Portfolio Allocation under Asset and Surplus VaR Constraints

In this paper we propose an approach to Asset Liability Management of various institutions, in particular insurance companies, based on a dual VaR constraint for the asset and the surplus. A key ingredient of this approach is a flexible modelling of the term structure of interest rates leading to an explicit formula for the returns of bonds. VaR constraints on the asset and on the surplus also take tractable forms, and graphical illustrations of the impact and of the sensitivity of these constraints are easily explicited in terms of various parameters: share of stocks, duration and convexity of the bonds on the asset and liability sides, expected return and volatility of the asset...Asset Liability Management, interest rates, Asset VaR constraint, Surplus VaR constraint, Optimal Portfolio.

DYNAMIC-SPATIAL MANAGEMENT OF COASTAL AQUIFERS

We analyze the management of a coastal aquifer under seawater intrusion using distributed control methods. The aquifer's state is taken as the water head elevation, which varies with time and in space since extraction, natural recharge and lateral water flows vary with time and in space. The water head, in turn, induces a temporal-spatial seawater intrusion process, which changes the volume of fresh water in the aquifer. Under reasonable conditions we show that the optimal state converges to a steady state process that is constant in time. We characterize the optimal steady state process in terms of a standard control problem (in space) and offer a tractable algorithm to solve for it.distributed control, groundwater, optimal exploitation, seawater intrusion, Resource /Energy Economics and Policy, C61, C62, Q25,

Stochastic Dominance Efficiency Tests under Diversification

This paper focuses on Stochastic Dominance (SD) efficiency in a finite empirical panel data. We analytically characterize the sets of unsorted time series that dominate a given evaluated distribution by the First, Second, and Third order SD. Using these insights, we develop simple Linear Programming and 0-1 Mixed Integer Linear Programming tests of SD efficiency. The advantage to the earlier efficiency tests is that the proposed approach explicitly accounts for diversification. Allowing for diversification can both improve the power of the empirical SD tests, and enable SD based portfolio optimization. A simple numerical example illustrates the SD efficiency tests. Discussion on the application potential and the future research directions concludes.Stochastic Dominance, Protfolio Choice, Efficiency, Diversification, Mathematical Programming

Forecasting the term structure of government bond yields

Despite powerful advances in yield curve modeling in the last twenty years, comparatively little attention has been paid to the key practical problem of forecasting the yield curve. In this paper we do so. We use neither the no-arbitrage approach, which focuses on accurately fitting the cross section of interest rates at any given time but neglects time-series dynamics, nor the equilibrium approach, which focuses on time-series dynamics (primarily those of the instantaneous rate) but pays comparatively little attention to fitting the entire cross section at any given time and has been shown to forecast poorly. Instead, we use variations on the Nelson-Siegel exponential components framework to model the entire yield curve, period-by-period, as a three-dimensional parameter evolving dynamically. We show that the three time-varying parameters may be interpreted as factors corresponding to level, slope and curvature, and that they may be estimated with high efficiency. We propose and estimate autoregressive models for the factors, and we show that our models are consistent with a variety of stylized facts regarding the yield curve. We use our models to produce term-structure forecasts at both short and long horizons, with encouraging results. In particular, our forecasts appear much more accurate at long horizons than various standard benchmark forecasts. JEL Code: G1, E4, C

IRRIGATION PRODUCTION FUNCTIONS WITH WATER-CAPITAL SUBSTITUTION

The dynamics of biomass growth implies that the yield of irrigated crops depends, in addition to the total amount of water applied, on irrigation scheduling during the growing period. Advanced irrigation technologies relax constraints on irrigation rates and timing, allowing to better adjust irrigation scheduling to the varying needs of the plants along the growing period. Irrigation production functions, then, should include capital (or expenditures on irrigation equipment) in addition to aggregate water. We derive such functions and study their water-capital substitution properties. Implications for water demand and adoption of irrigation technologies are investigated. An empirical application confirms these properties.Resource /Energy Economics and Policy,

A Zariski-local notion of F-total acyclicity for complexes of sheaves

We study a notion of total acyclicity for complexes of flat sheaves over a scheme. It is Zariski-local - i.e. it can be verified on any open affine covering of the scheme - and it agrees, in their setting, with the notion studied by Murfet and Salarian for sheaves over a noetherian semi-separated scheme. As part of the study we recover, and in several cases extend the validity of, recent theorems on existence of covers and precovers in categories of sheaves. One consequence is the existence of an adjoint to the inclusion of these totally acyclic complexes into the homotopy category of complexes of flat sheaves

Immigration and the Dutch economy

For some time now, immigration has been high on the national and international agenda. In addition to the legal, humanitarian and social aspects, the economic impact of immigration is receiving increasing attention. Read also the accompanying press release .What costs and benefits of immigration accrue to the host country? How can immigration and integration policies be modified so as to improve the balance? Is immigration an effective instrument in alleviating the burden of ageing? What can we learn from traditional immigration countries like Australia, Canada and the United States? The international economic literature is not always conclusive in answering the questions raised. Much depends on the specific circumstances and institutions in the host country. This study focuses on the Netherlands as a host country for immigrants. Employing methods extracted from the literature, in combination with data on the Dutch economy, we assess the impact of immigration on the labour market, the public sector and the physical environment. The results may contribute to the debate on immigration and integration policy both in the Netherlands and at the European level.