Stochastic target hitting time and the problem of early retirement

We consider a problem of optimal control of a “retirement investment fund” over a finite time horizon with a target hitting time criteria. That is, we wish to decide, at each stage, what percentage of the current retirement fund to allocate into the limited number of investment options so that a decision maker can maximize the probability that his or her wealth exceeds a target prior to his or her retirement. We use Markov decision processes with probability criteria to model this problem and give an example based on data from certain options available in an Australian retirement fund

Fifty years of the CERN Proton Synchrotron : Volume 2

This report sums up in two volumes the first 50 years of operation of the CERN Proton Synchrotron. After an introduction on the genesis of the machine, and a description of its magnet and powering systems, the first volume focuses on some of the many innovations in accelerator physics and instrumentation that it has pioneered, such as transition crossing, RF gymnastics, extractions, phase space tomography, or transverse emittance measurement by wire scanners. The second volume describes the other machines in the PS complex: the proton linear accelerators, the PS Booster, the LEP pre-injector, the heavy-ion linac and accumulator, and the antiproton rings.Comment: 58 pages, published as CERN Yellow Report https://cds.cern.ch/record/1597087?ln=e

The valuation of employee stock options : how good is the standard?

This study contributes to the valuation of employee stock options (ESO) in two ways: First, a new pricing model is presented, admitting a major part of calculations to be solved in closed form. Designed with a focus on good replication of empirics, the model fits with publicly observable exercise characteristics better than earlier models. In particular, it is able to account for the correlation of the time of exercise and the stock price at exercise, suspected of being crucial for the option value. The impact of correlation is weak, however, whereas cancellations play a central role. The second contribution of this paper is an examination to what extent the ESO pricing method of SFAS 123 is subject to discretion of the accountant. Given my model were true, the SFAS price would be a good proxy. Yet, outside shareholders usually cannot observe one of the SFAS input parameters. On behalf of an example I show that there is wide latitude left to the accountant

Beyond inflation targeting: should central banks target the price level?

Over the last two decades, many central banks have adopted formal inflation targets to guide the conduct of monetary policy. During this period, inflation has come down in many countries and been relatively stable by historical standards. This favorable performance to date, however, has not stopped economists and policymakers from considering other approaches to the conduct of policy. One idea that has gained considerable attention is price-level targeting. Under a price-level target, a central bank would adjust its policy instrument—typically a short-term interest rate—in an effort to achieve a pre-announced level of a particular price index over the medium term. In contrast, under an inflation target, a central bank tries to achieve a pre-announced rate of inflation—that is, the change in the price level—over the medium term. ; Kahn examines price-level targeting and discusses why policymakers may be reluctant to adopt such a strategy. Price-level targeting offers a number of potential benefits over inflation targeting. While inflation targets have helped stabilize inflation, the future level of prices remains uncertain. Price-level targets would by definition remove much of this uncertainty. Price-level targeting also has the advantage of potentially generating greater stability of both output and inflation. Particularly in the current low-inflation environment, where nominal policy rates have fallen near zero, price-level targeting may help support expectations of a positive inflation rate. These inflation expectations, in turn, would keep real interest rates negative, thereby stimulating interest-sensitive spending and contributing to economic recovery. ; Yet the benefits of price-level targeting may be relatively small and uncertain. In addition, this strategy is untested in practice (except for Sweden in the 1930s) and would present challenges for policymakers in communicating with the public regarding the objectives and direction of policy over the medium run. As a result, price level targeting will not likely be adopted by central bankers without considerable further research or a dramatic deterioration in economic performance that leads policymakers to fundamentally reconsider how they conduct monetary policy.