Optimal Bond Trading with Personal Taxes: Implications for Bond Prices and Estimated Tax Brackets and Yield Curves

The assumption that bondholders follow either a buy-and-hold or a continuous realization trading policy, rather than the optimal trading policy,is at variance with reality and, as we demonstrate, may seriously bias the estimation of the yield curve and the implied tax bracket of the marginal investor. Tax considerations which govern a bondholder's optimal trading policy include the following: realization of capital losses, short term if possible; deferment of the realization of capital gains, especially if they are short term; changing the holding period status from long term to short term by sale of the bond and repurchase, so that future capital losses may be realized short term; and raising the basis through sale of the bond and repurchase in order to deduct from ordinary income the amortized premium. Because of the interaction of these factors, no simple characterization of the optimal trading policy is possible. We can say, however, that it differs substantially from the buy-and-hold policy irrespective of whether the bondholder is a bank, a bond dealer, or an individual. We obtain these strong results even when we allow for transactions costs and explicitly consider numerous IRS regulations designed to curtail tax avoidance.

Realization Utility with Reference-Dependent Preferences

We develop a tractable model of realization utility that studies the role of reference-dependent S-shaped preferences in a dynamic investment setting with reinvestment. Our model generates both voluntarily realized gains and losses. It makes specific predictions about the volume of gains and losses, the holding periods, and the sizes of both realized and paper gains and losses that can be calibrated to a variety of statistics, including the Odean measure of the disposition effect. Our model also predicts several anomalies including, among others, the flattening of the capital market line and a negative price for idiosyncratic risk.Comment: appears in The Review of Financial Studies (2013

Valuing reload options

Abstract Over the past quarter century, the use of stock options as pay for performance has grown enormously. Option grants now account for 32% of CEO pay-more than twice that of salaries. In addition options are now being granted to many more employees than before. During this same time period, there have been numerous innovations in the features on compensation options. One of these features is the reload-the grant of new options to replace shares tendered in the payment of the exercise. Within the past year, the long-delayed FASB requirement that options be expensed for financial reporting has finally become a fact. It is incumbent upon financial researchers to provide methods to achieve the goal of valuing options, not only to serve the accounting needs, but also to provide ways of determining their true costs and incentive effects. This paper analyzes the various forms of reload options and provides simple BlackScholes like formulas for evaluating them

The Saturn Ring Skimmer Mission Concept: The next step to explore Saturn's rings, atmosphere, interior, and inner magnetosphere

The innovative Saturn Ring Skimmer mission concept enables a wide range of investigations that address fundamental questions about Saturn and its rings, as well as giant planets and astrophysical disk systems in general. This mission would provide new insights into the dynamical processes that operate in astrophysical disk systems by observing individual particles in Saturn's rings for the first time. The Ring Skimmer would also constrain the origin, history, and fate of Saturn's rings by determining their compositional evolution and material transport rates. In addition, the Ring Skimmer would reveal how the rings, magnetosphere, and planet operate as an inter-connected system by making direct measurements of the ring's atmosphere, Saturn's inner magnetosphere and the material owing from the rings into the planet. At the same time, this mission would clarify the dynamical processes operating in the planet's visible atmosphere and deep interior by making extensive high-resolution observations of cloud features and repeated measurements of the planet's extremely dynamic gravitational field. Given the scientific potential of this basic mission concept, we advocate that it be studied in depth as a potential option for the New Frontiers program.Comment: White paper submitted to the Planetary Science and Astrobiology Decadal Survey (submission #420

The Saturn Ring Skimmer Mission Concept: The next step to explore Saturn's rings, atmosphere, interior and inner magnetosphere

The innovative Saturn Ring Skimmer mission concept enables a wide range of investigations that address fundamental questions about Saturn and its rings, as well as giant planets and astrophysical disk systems in general. This mission would provide new insights into the dynamical processes that operate in astrophysical disk systems by observing individual particles in Saturn's rings for the first time. The Ring Skimmer would also constrain the origin, history, and fate of Saturn's rings by determining their compositional evolution and material transport rates. In addition, the Ring Skimmer would reveal how the rings, magnetosphere, and planet operate as an inter-connected system by making direct measurements of the ring's atmosphere, Saturn's inner magnetosphere and the material owing from the rings into the planet. At the same time, this mission would clarify the dynamical processes operating in the planet's visible atmosphere and deep interior by making extensive high-resolution observations of cloud features and repeated measurements of the planet's extremely dynamic gravitational field. Given the scientific potential of this basic mission concept, we advocate that it be studied in depth as a potential option for the New Frontiers program

Telomerase mutations in families with idiopathic pulmonary fibrosis

BACKGROUND: Idiopathic pulmonary fibrosis is progressive and often fatal; causes of familial clustering of the disease are unknown. Germ-line mutations in the genes hTERT and hTR, encoding telomerase reverse transcriptase and telomerase RNA, respectively, cause autosomal dominant dyskeratosis congenita, a rare hereditary disorder associated with premature death from aplastic anemia and pulmonary fibrosis. METHODS: To test the hypothesis that familial idiopathic pulmonary fibrosis may be caused by short telomeres, we screened 73 probands from the Vanderbilt Familial Pulmonary Fibrosis Registry for mutations in hTERT and hTR. RESULTS: Six probands (8%) had heterozygous mutations in hTERT or hTR; mutant telomerase resulted in short telomeres. Asymptomatic subjects with mutant telomerase also had short telomeres, suggesting that they may be at risk for the disease. We did not identify any of the classic features of dyskeratosis congenita in five of the six families. CONCLUSIONS: Mutations in the genes encoding telomerase components can appear as familial idiopathic pulmonary fibrosis. Our findings support the idea that pathways leading to telomere shortening are involved in the pathogenesis of this disease

Regulation of LRRK2 Expression Points to a Functional Role in Human Monocyte Maturation

Genetic variants of Leucine-Rich Repeat Kinase 2 (LRRK2) are associated with a significantly enhanced risk for Parkinson disease, the second most common human neurodegenerative disorder. Despite major efforts, our understanding of LRRK2 biological function and regulation remains rudimentary. In the present study we analyze LRRK2 mRNA and protein expression in sub-populations of human peripheral blood mononuclear cells (PBMCs). LRRK2 mRNA and protein was found in circulating CD19+ B cells and in CD14+ monocytes, whereas CD4+ and CD8+ T cells were devoid of LRRK2 mRNA. Within CD14+ cells the CD14+CD16+ sub-population of monocytes exhibited high levels of LRRK2 protein, in contrast to CD14+CD16- cells. However both populations expressed LRRK2 mRNA. As CD14+CD16+ cells represent a more mature subset of monocytes, we monitored LRRK2 expression after in vitro treatment with various stress factors known to induce monocyte activation. We found that IFN-γ in particular robustly increased LRRK2 mRNA and protein levels in monocytes concomitant with a shift of CD14+CD16− cells towards CD14+CD16+cells. Interestingly, the recently described LRRK2 inhibitor IN-1 attenuated this shift towards CD14+CD16+ after IFN-γ stimulation. Based on these findings we speculate that LRRK2 might have a role in monocyte maturation. Our results provide further evidence for the emerging role of LRRK2 in immune cells and regulation at the transcriptional and translational level. Our data might also reflect an involvement of peripheral and brain immune cells in the disease course of PD, in line with increasing awareness of the role of the immune system in PD