Utility based pricing of contingent claims

In a discrete setting, we develop a model for pricing a contingent claim. Since the presence of hedging opportunities influences the price of a contingent claim, first we introduce the optimal hedging strategy assuming a contingent claim has been issued: a strategy implemented by investing the budget plus the selling price is optimal if it maximizes the expected utility of the agent's revenue, which is the difference between the outcome of the hedging portfolio and the payoff of the claim. Next, we introduce the `reservation price' as a subjective valuation of a contingent claim. This is defined as the minimum price to be added to the initial budget that makes the issue of the claim more preferable than optimally investing in the available securities. We define the reservation price both for a short position (reservation selling price) and for a long position (reservation buying price) in the contingent claim. When the contingent claim is redundant, both the selling and the buying price collapse in the usual Arrow-Debreu price. We develop a numerical procedure to evaluate the reservation price and two applications are provided. Different utility functions are used and some qualitative properties of the reservation price are shown.Incomplete markets, reservation price, expected utility, optimization

A Dynamic Analysis of the Microstructure of Moving Average Rules in a Double Auction Market

Inspired by the theoretically oriented dynamic analysis of moving average rules in Chiarella, He and Hommes (CHH) (2006a) model, this paper conducts a dynamic analysis of a microstructure model of continuous double auctions in which the probability of heterogeneous agents to trade is determined by the rules of either fundamentalists mean-reverting to the fundamental or chartists choosing moving average rules based their relative performance. With such a realistic market microstructure, the model is able not only to obtain the results of the CHH model but also to characterise most of the stylized facts including the power-law behaviour of volatility. The results seem to suggest that a comprehensive explanation of several statistical properties of returns is possible in a framework where both behavioral traits and realistic microstructure have a role

Caracterização macroscópica dos anéis de crescimento de espécies arbóreas em floresta atlântica de tabuleiros no estado do Espírito Santo.

Editores técnicos: Marcílio José Thomazini, Elenice Fritzsons, Patrícia Raquel Silva, Guilherme Schnell e Schuhli, Denise Jeton Cardoso, Luziane Franciscon. EVINCI. Resumos

Progress in Artificial Economics

Artificial economics aims to provide a generative approach to understanding problems in economics and social sciences. It is based on the consistent use of agent-based models and computational techniques. It encompasses a rich variety of techniques that generalize numerical analysis, mathematical programming, and micro-simulations. The peer-reviewed contributions in this volume address applications of artificial economics to markets and trading, auctions, networks, management, industry sectors, macroeconomics, and demographics and culture

The Equity Premium Puzzle: An Application of an Agent-Based Evolutionary Model

We describe an agent-based model of a financial market with a stock and a bond. Agents compete in repeated rounds, decide whether to acquire costly information and can pick one of 16 strategies to allocate their investments, under evolutionary pressure driven by the comparison of the realized short-term revenues from trading. We show that, while in- formed traders survive in some cases, the equilibrium shares are strongly biased in favor of strategies that make little use of information and sys- tematically overestimate the riskiness of the stock. As a consequence, the majority of the population ends up in buying fewer stocks than would be otherwise expected or deemed rational. This evolutionary dynamics offers a novel way to explain the equity pre- mium puzzle first described by Mehra and Prescott (The equity pre- mium: A puzzle. Journal of Monetary Economics 1985), according to which it’s hard to find reasons for the widespread lack of investment in risky assets. Evolution based on a straightforward comparison of rev- enues is a simple and cognitively appealing avenue to reach a population of traders using (over-)cautious strategies to curb the risk of long-term “financial extinction”. Simulations run in NetLogo also demonstrate that very little information may be used in noisy markets or when the cost of information is substantial

The macro and asset pricing implications of rising Italian uncertainty: Evidence from a novel news-based macroeconomic policy uncertainty index

We develop a new monthly and daily index of economic policy uncertainty for Italy based on articles from the Sole 24 Ore (a popular Italian business daily newspaper). VAR investigations document that an unexpected rise in the Sole 24 Ore news-based EPU index (EPU24) has mild effects on the real economic activity. Cross-sectional asset pricing tests then show that both monthly and daily EPU24 shocks command a positive risk premium. A standard event study finally indicates the presence of statistically significant positive cumulative abnormal returns (CARs) in the energy sector following different categories of policy-related events. Negative and significant CARs in the financial sector are instead found to be generated by international-related events and political elections

Decoherence in Ion Trap Quantum Computers

The {\it intrinsic} decoherence from vibrational coupling of the ions in the Cirac-Zoller quantum computer [Phys. Rev. Lett. {\bf 74}, 4091 (1995)] is considered. Starting from a state in which the vibrational modes are at a temperature $T$, and each ion is in a superposition of an excited and a ground state, an adiabatic approximation is used to find the inclusive probability $P(t)$ for the ions to evolve as they would without the vibrations, and for the vibrational modes to evolve into any final state. An analytic form is found for $P(t)$ at $T=0$, and the decoherence time is found for all $T$. The decoherence is found to be quite small, even for 1000 ions.Comment: 11 pages, no figures, uses revte

On the coincidence of system optimum and user equilibrium for a widely used family of cost functions

In a simple two-node, one origin-destination network with multiple links, we characterize the coincidence of system optimum, that minimizes the total cost of agents with user equilibrium, that equalizes the cost in each (used) link. If cost functions are, up to a constant, homogeneous of the same degree then the system optimum and the user equilibrium are the same if and only if the freeflows are costant. Some examples show that the hypotheses are not redundant

ON THE IDENTITY OF THE GENUS LECANOPSIS TARGIONI TOZZETTI

ON THE IDENTITY OF THE GENUS LECANOPSIS TARGIONI TOZZETTI The genus Lecanopsis Targioni Tozzetti was generally accepted by coccidologists until 1994. In that year, on the basis that the exact facies of the genus was not known and that there was no type material, it was proposed that all the species previously included in Lecanopsis be transferred to the genus Paralecanopsis (synonymised with Lecanopsis in 1980) and that only the type species, L. rhyzophila Targioni Tozzetti, be retained in Lecanopsis, thus allowing a proper diagnosis of this group. In order to clarify the identity of the genus Lecanopsis, we have carefully checked the original descriptions of the genus and of its type species by Targioni Tozzetti and by Signoret. This work has highlighted some small mistakes in the translation of the original description from Italian or Latin to French and also some omissions, and these could have led to the conclusion that the real facies of this genus was not known and that the type species, L. rhyzophila, could not be congeneric with the other species currently included in Lecanopsis. However, some original drawings of Lecanopsis by Targioni Tozzetti, which he sent to Signoret in 1872, have been discovered in the Museum Nationale d’Histoire Naturelle, Paris. On the basis of this new information, and with the support of the authoritative opinion of two members of the International Commission of Zoological Nomenclature, we consider that (i) the genus Lecanopsis is a valid genus and propose (ii) that the species of Lecanopsis recently transferred to the genus Paralecanopsis Bodenheimer be re-assigned to the genus Lecanopsis Targioni Tozzetti. Key words: host plants, Asperula, Rhizobium, Rhyzobium, Agropyrum, Aclerda subterranea, Paralecanopsis turcica, Lecanopsis formicarum, history, illustrations, behaviour

A Multi-Agent Model of Tax Evasion with Public Expenditure

We develop a model where heterogeneous agents maximize their individual utility based on (after tax) income and on the level of public expenditure (as in Cowell, Gordon, 1988). Agents are different in risk aversion and in the relative preference for public expenditure with respect to personal income. In each period, an agent can optimally conceal some income based on conjectures on the perceived probability of being subject to audits, the perceived level of public expenditure and the perceived amount of tax paid by other individuals. As far as the agent-based model is concerned, we assume that the Government sets the tax rate and the penalties, uses all the revenue to finance public expenditure (with no inefficiency) and fights evasion by controlling a (random) fraction of agents. We show that, through computational experiments based on micro-simulations, stable configurations of tax rates and public expenditure endogenously form in this case as well. In such equilibrium-like situations we find: • a positive relationship between the tax rate and evasion still arises. • tax compliance mainly depends on the distribution of personal features like risk-aversion and the degree of preference for public expenditure. • an endogenous level of tax evasion that is almost not affected by reasonable rates of control. A proper choice of the tax rate results instead in voluntary partial compliance. • the enforcement of higher compliance rates requires unrealistic and costly large-scale audits