Equilibrium Exchange Rate Hedging

In a one-period model where each investor consumes a single good, and where borrowing and lending are private and real, there is a universal constant that tells how much each investor hedges his foreign investments. The constant depends only on average risk tolerance across investors. The same constant applies to every real foreign investment held by every investor. Foreign investors are those with different consumption goods, not necessarily those who live in different countries. In equilibrium, the price of the world market portfolio will adjust so that the constant will be related to an average of world market risk premia, an average of world market volatilities, and an average of exchange rate volatilities, where we take the averages over all investors. The constant will not be related to exchange rate means or covariances. In the limiting case when exchange risk approaches zero, the constant will be equal to one minus the ratio of the variance of the world market return to its mean. Jensen's inequality, or "Siegel's paradox," makes investors want significant amounts of exchange rate risk in their portfolios. It also makes investors prefer a world with more exchange rate risk to a similar world with less exchange rate risk.

Fraud deterrence in dynamic Mirrleesian economies

Social and private insurance schemes rely on legal action to deter fraud and tax evasion. This observation guides the authors to introduce a random state verification technology in a dynamic economy with private information. With some probability, an agent's skill level becomes known to the planner, who prescribes a punishment if the agent is caught misreporting. The authors show how deferring consumption can ease the provision of incentives. As a result, the marginal benefit may be below the marginal cost of investment in the constrained-efficient allocation, suggesting a subsidy on savings. They characterize conditions such that the intertemporal wedge is negative in finite horizon economies. In an infinite horizon economy, the authors find that the constrained-efficient allocation converges to a high level of consumption, full insurance, and no labor distortions for any probability of state verification.Insurance ; Fraud

Nonintrusive tracing in the Internet

Intruders that log in through a series of machines when conducting an attack are hard to trace because of the complex architecture of the Internet. The thumbprinting method provides an efficient way of tracing such intruders by determining whether two connections are part of the same connection chain. Because many connections are transient and therefore short in length, choosing the best time interval to thumbprint over can be an issue. In this paper, we provide a way to shorten the time interval used for thumbprinting. We then study some special properties of the thumbprinting function. We also study another mechanism for tracing intruders in the Internet based on a timestamping approach, which passively monitors flows between source and destination pairs. Given a potentially suspicious source, we identify its true destination. We compute the error probability of our algorithm and show that its value decreases exponentially as the observation time increases. Our simulation results show that our approach performs well

The power-series algorithm:A numerical approach to Markov processes

Abstract: The development of computer and communication networks and flexible manufacturing systems has led to new and interesting multidimensional queueing models. The Power-Series Algorithm is a numerical method to analyze and optimize the performance of such models. In this thesis, the applicability of the algorithm is extended. This is illustrated by introducing and analyzing a wide class of queueing networks with very general dependencies between the different queues. The theoretical basis of the algorithm is strengthened by proving analyticity of the steady-state distribution in light traffic and finding remedies for previous imperfections of the method. Applying similar ideas to the transient distribution renders new analyticity results. Various aspects of Markov processes, analytic functions and extrapolation methods are reviewed, necessary for a thorough understanding and efficient implementation of the Power-Series Algorithm.

Problems related to the integration of fault tolerant aircraft electronic systems

Problems related to the design of the hardware for an integrated aircraft electronic system are considered. Taxonomies of concurrent systems are reviewed and a new taxonomy is proposed. An informal methodology intended to identify feasible regions of the taxonomic design space is described. Specific tools are recommended for use in the methodology. Based on the methodology, a preliminary strawman integrated fault tolerant aircraft electronic system is proposed. Next, problems related to the programming and control of inegrated aircraft electronic systems are discussed. Issues of system resource management, including the scheduling and allocation of real time periodic tasks in a multiprocessor environment, are treated in detail. The role of software design in integrated fault tolerant aircraft electronic systems is discussed. Conclusions and recommendations for further work are included

Lochner, Liquor, and Longshoremen: A Puzzle in Progressive Era Federalism

In 1890, the Supreme Court shocked and thrilled the civilized world with the announcement that dry states could not prohibit the sale of liquor shipped in from outside the state. So long as the out-of-state goods remained in their original packages, the Court held they retained their character as interstate commerce subject only to federal regulation. The consequences for the cause of local sobriety were, predictably, catastrophic. The proliferation in temperance territory of original package saloons, at which one could purchase liquor free from the superintendence of local liquor authorities, was appalling to dry eyes. Members of Congress immediately proposed bill to authorize the states again to regulate such sales. It was enacted only over strenuous objections that such legislation unconstitutionally delegated congressional authority to regulate interstate transactions and thereby authorized unconstitutional disuniformity in the regulation of interstate commerce. While the Court would consistently approve this and other similar congressional legislation, the debate over constitutional constraints on such congressional authorizations would persist over the course of the next half-century. It is only fairly recently that such measures became unexceptionable. A parallel debate unfolded in the more recondite domain of admiralty, with strikingly different results. In 1917, in the controversial case of Southern Pacific Co. v. Jensen, the Supreme Court held that New York’s workmen’s compensation statute could not constitutionally apply to workplace injury sustained over navigable waters. The Court relied upon its dormant Commerce Clause decisions in the liquor context in holding that such an application of the state statute would interfere with the uniformity of maritime law contemplated by Article III\u27s grant of admiralty jurisdiction to the federal courts. Yet when Congress enacted legislation authorizing the application of state workmen\u27s compensation statutes to maritime workplace injuries, the Court invalidated the statute on the ground that it delegated congressional authority to regulate maritime matters and thereby authorized unconstitutional disuniformity in the substantive law of admiralty. The contention that had failed in the Commerce Clause context prevailed in admiralty. This curious asymmetry in the Court\u27s federalism jurisprudence has never been satisfactorily explored. Admiralty scholars, content for the most part to explain Jensen and its progeny as manifestations of judicial hostility to worker-friendly Progressive legislation, have paid scant attention to cognate developments in Commerce Clause jurisprudence. Similarly, historians of constitutional federalism, perhaps viewing admiralty jurisprudence as an occult science, have largely neglected the field. Yet an excursion into interdoctrinal comparative law promises to shed new light on both subjects. This article challenges the traditional interpretation of the Jensen line of cases, while at the same time integrating these developments in admiralty law into the larger story of cooperative federalism and legal and social reform in the Progressive Era. In addition to offering a reinterpretation of these leading admiralty decisions, the article aims to identify the salient features of the political and constitutional landscape within which distinctive forms of cooperative federalism emerged in the Progressive Era, and to illuminate the manner in which those features helped to shape the asymmetric constitutional law of federal-state cooperation