Deferred Annuities and Strategic Asset Allocation

We derive the optimal portfolio choice and consumption pattern over the lifecycle for households facing labor income, capital market, and mortality risk. In addition to stocks and bonds, households also have access to deferred annuities. Deferred annuities offer a hedge against mortality risk and provide similar benefits as Social Security. We show that a considerable fraction of wealth should be annuitized to skim the return enhancing mortality credit. The remaining liquid wealth (stocks and bonds) is used to hedge labor income risk during work life and to earn the equity premium. We find a marginal difference between a strategy involving deferred annuities and one where the investor can purchase immediate life annuities.

Intrinsic motivation in open source software development

This papers sheds light on the puzzling evidence that even though open source software (OSS) is a public good, it is developed for free by highly qualified, young and motivated individuals, and evolves at a rapid pace. We show that once OSS development is understood as the private provision of a public good, these features emerge quite naturally. We adapt a dynamic private-provision-of-public-goods model to reflect key aspects of the OSS phenomenon. In particular, instead of relying on extrinsic motives for programmers (e.g. signaling) the present model is driven by intrinsic motives of OSS programmers, such as user-programmers, play value or homo ludens payoff, and gift culture benefits. Such intrinsic motives feature extensively in the wider OSS literature and contribute new insights to the economic analysis. --open source software,public goods,homo ludens,war of attrition

Euler-Lagrange correspondence of generalized Burgers cellular automaton

Recently, we have proposed a {\em Euler-Lagrange transformation} for cellular automata(CA) by developing new transformation formulas. Applying this method to the Burgers CA(BCA), we have succeeded in obtaining the Lagrange representation of the BCA. In this paper, we apply this method to multi-value generalized Burgers CA(GBCA) which include the Fukui-Ishibashi model and the quick-start model associated with traffic flow. As a result, we have succeeded in clarifying the Euler-Lagrange correspondence of these models. It turns out, moreover that the GBCA can naturally be considered as a simple model of a multi-lane traffic flow.Comment: 11 pages, 6 figures; accepted for publication in Int. J. Mod. Phys.

Integrability of a Generalized Ito System: the Painleve Test

It is shown that a generalized Ito system of four coupled nonlinear evolution equations passes the Painleve test for integrability in five distinct cases, of which two were introduced recently by Tam, Hu and Wang. A conjecture is formulated on integrability of a vector generalization of the Ito system.Comment: LaTeX, 5 page

Cellular automaton rules conserving the number of active sites

This paper shows how to determine all the unidimensional two-state cellular automaton rules of a given number of inputs which conserve the number of active sites. These rules have to satisfy a necessary and sufficient condition. If the active sites are viewed as cells occupied by identical particles, these cellular automaton rules represent evolution operators of systems of identical interacting particles whose total number is conserved. Some of these rules, which allow motion in both directions, mimic ensembles of one-dimensional pseudo-random walkers. Numerical evidence indicates that the corresponding stochastic processes might be non-Gaussian.Comment: 14 pages, 5 figure

Max-plus analysis on some binary particle systems

We concern with a special class of binary cellular automata, i.e., the so-called particle cellular automata (PCA) in the present paper. We first propose max-plus expressions to PCA of 4 neighbors. Then, by utilizing basic operations of the max-plus algebra and appropriate transformations, PCA4-1, 4-2 and 4-3 are solved exactly and their general solutions are found in terms of max-plus expressions. Finally, we analyze the asymptotic behaviors of general solutions and prove the fundamental diagrams exactly.Comment: 24 pages, 5 figures, submitted to J. Phys.

Money in Motion: Dynamic Portfolio Choice in Retirement

Retirees confront the difficult problem of how to manage their money in retirement so as to not outlive their funds while continuing to invest in capital markets. We posit a dynamic utility maximizer who makes both asset location and allocation decisions when managing her retirement financial wealth and annuities, and we prove that she can benefit from both the equity premium and longevity insurance in her retirement portfolio. Even without bequests, she will not fully annuitize; rather, her optimal stock allocation amounts initially to more than half of her financial wealth and declines with age. Welfare gains from this strategy can amount to 40 percent of financial wealth (depending on risk parameters and other resources). In practice, it turns out that many retirees will do almost as well by purchasing a variable annuity invested 60/40 in stocks/bonds.

Asset Allocation and Location over the Life Cycle with Survival-Contingent Payouts

This paper shows how lifelong survival-contingent payouts can enhance investor wellbeing in the context of a portfolio choice model which integrates uninsurable labor income and asymmetric mortality expectations. Our model generates optimal asset location patterns indicating how much to hold in liquid versus illiquid survival-contingent payouts over the lifetime, and also asset allocation paths, showing how to invest in stocks versus bonds. We conrm that the investor will gradually move money out of her liquid saving into survivalcontingent assets to retirement and beyond, thereby enhancing her welfare by as much as 50 percent. The results are also robust to the introduction of uninsurable consumption shocks in housing expenses, income flows during the worklife and retirement, sudden changes in health status, and medical expenses.

Optimal flexibility for conformational transitions in macromolecules

Conformational transitions in macromolecular complexes often involve the reorientation of lever-like structures. Using a simple theoretical model, we show that the rate of such transitions is drastically enhanced if the lever is bendable, e.g. at a localized "hinge''. Surprisingly, the transition is fastest with an intermediate flexibility of the hinge. In this intermediate regime, the transition rate is also least sensitive to the amount of "cargo'' attached to the lever arm, which could be exploited by molecular motors. To explain this effect, we generalize the Kramers-Langer theory for multi-dimensional barrier crossing to configuration dependent mobility matrices.Comment: 4 pages, 4 figure

Wither the sliding Luttinger liquid phase in the planar pyrochlore

Using series expansion based on the flow equation method we study the zero temperature properties of the spin-1/2 planar pyrochlore antiferromagnet in the limit of strong diagonal coupling. Starting from the limit of decoupled crossed dimers we analyze the evolution of the ground state energy and the elementary triplet excitations in terms of two coupling constants describing the inter dimer exchange. In the limit of weakly coupled spin-1/2 chains we find that the fully frustrated inter chain coupling is critical, forcing a dimer phase which adiabatically connects to the state of isolated dimers. This result is consistent with findings by O. Starykh, A. Furusaki and L. Balents (Phys. Rev. B 72, 094416 (2005)) which is inconsistent with a two-dimensional sliding Luttinger liquid phase at finite inter chain coupling.Comment: 6 pages, 4 Postscript figures, 1 tabl