Daily Exchange Rate Behaviour and Hedging of Currency Risk

Exchange rates typically exhibit time-varying patterns in both means and variances. The histograms of such series indicate heavy tails. In this paper we construct models which enable a decision-maker to analyze the implications of such time series patterns for currency risk management. Our approach is Bayesian where extensive use is made of Markov chain Monte Carlo methods. The effects of several model characteristics (unit roots, GARCH, stochastic volatility, heavy tailed disturbance densities) are investigated in relation to the hedging decision strategies. Consequently, we can make a distinction between statistical relevance of model specifications, and the economic consequences from a risk management point of view. The empirical results suggest that econometric modelling of heavy tails and time-varying means and variances pays off compared to a efficient markets model. The different ways to measure persistence and changing volatilities appear to strongly influence the hedging decision the investor faces.

Educació moral: la via (no només) aristotèlica

Quin és el plantejament essencial que Aristòtil fa de l"educació moral? Podem dir que manté la seva eventual vigència històrica, si més no com a proposta? Es tracta d"un plantejament isolat, o podem trobar-ne epígons (més enllà de la inspiració més o menys aristotèlica que aquests tinguin)? El text que segueix pretén donar una resposta esquemàtica a les anteriors preguntes, i, de retruc, plantejar un repte conceptual (i, al capdavall, també pràctic) a tots aquells que puguin desqualificar la proposta aristotèlica per considerar-la corruptora dels principis liberals

Generational Pension Plan Designs

We propose a generational plan for the occupational pension provision in which people from the same generation are pooled in a generational fund. Each fund can set its own policies independently. This plan provides the benefits of differentiation missing in the prevailing collective plan and the benefits of centralized management and risk sharing which are missing in the individual plan. We compare the generational plan and the collective plan by imposing the same investment and contribution rates, find that the generational plan provides a higher welfare to the new entrants. This better performanceis driven by the fact that the generational plan precludes any a-priori transfers while allowing for risk sharing via time diversification of long-term investment

Price Discovery on Foreign Exchange Markets

This paper uses Reuters exchange rate data to investigate the contributions to the price discovery process by individual banks in the foreign exchange market. We propose multivariate time series models as well as models in tick time to study the dynamic relations between the quotes of individual banks. We investigate the hypothesis that German banks are price leaders in the deutschmark/dollar market. Our empirical results suggest an important but not exclusive role for German banks in the price discovery process. There is also a group of banks, German and non-German, that lags behind the market and does not contribute to the price discovery process. We do not find evidence for stronger price leadership of Deutsche Bank on days with suspected Bundesbank interventions in the foreign exchange market.Exchange Rates; High Frequency Data; Microstructure; Moment Estimators