Ons Maximale Inkomen

We schrijven het begin van een nieuw millennium. Een Amsterdamse, Maastrichtse en Rotterdamse hoogleraar economie zitten in de skybox van het Tinbergen Instituut voor fundamenteel economisch onderzoek naar Feyenoord-Ajax te kijken en bespreken onderwijl het inburgeringsprogramma van de toekomstige prinses. Hen is door Kok gevraagd een salaris vast te stellen passend bij haar status en toekomstige werkzaamheden, maar tevens te letten op de bodem van de schatkist die al weer in zicht is door de komende ambtelijke loonronde. Dit doet de temperatuur in de skybox flink stijgen

Inflation, Endogenous Market Segmentation and the Term Structure of Interest Rates

__Abstract__ The term structure of interest rates does not adhere to the expectations hypothesis, possibly due to a risk premium. We consider the implications of a risk premium that arises from endogenous market segmentation driven by variable inflation rates. In the absence of autocorrelation in inflation, the risk premium is constant. If inflation is correlated, however, the risk premium becomes time varying and we can rationalize the failure of the expectations hypothesis. Indirect empirical tests of the model’s implications are provided

Extreme value theory and statistics for heavy tail data

A scientific way of looking beyond the worst-case return is to employ statistical extreme value methods. Extreme Value Theory (EVT) shows that the probability on very large losses is eventually governed by a simple function, regardless the specific distribution that underlies the return process. This limit result can be exploited to construct semi-parametric portfolio Value at Risk (VaR) estimates around and beyond the largest observed loss. Such extreme VaR estimates can be useful inputs for scenario analysis and stress testing. The aim of this chapter is to introduce the reader to extreme value theory and the statistics of extremes

Auctions with Numerous Bidders

We study auctions in which the number of potential bidders is large, such as in Internet auctions. With numerous bidders, the expected revenue and the optimal bid function in a first price auction result in complicated expressions, except for a few simple distribution function for the bidders' valuations. We show that these expressions can be well approximated using extreme value theory without assuming a particular distribution function. The theory is applied to data from Internet auctions

The Forex Regime and EMU Expansion

This paper provides empirical evidence that, irrespective of the foreign exchange rate regime, countries with high monetary volatility have lower relative output growth rates. It is argued that due to the forward looking nature of the foreign exchange market, exchange rate stability hinges on the stability of the institutional structure within which monetary and fiscal policies are formulated. Subsequently, the likely endogenous response in the accession countries upon entry into EU and EMU is examined. This provides arguments for a rapid transition phase, possibly complemented by a one sided euroisation as a commitment devic

Optimal Confidence Intervals for the Tail Index and High Quantiles

The aim of the paper is to obtain confidence intervals for the tail index and high quantiles taking into account the optimal rate of convergence of the estimator. The common approach to obtaining confidence intervals presented in the literature is to use the normal distribution approximation at a non-optima1 rate. Instead, we propose to use the optimal rate, but then a bias term with unknown sign has to be estimated. We provide an estimator for this sign and the full programme to obtain the optimal confidence intervals. Moreover, we demonstrate the gain in coverage, and show the relevance of these confidence intervals by calculating the reduction in capital requirements in a financia1 Value at Risk exercise. Simulation results are also presented. It is weIl known that extreme value parameter estimators which balance the asymptotic bias squared and variance yield the lower asymptotic mean square error. Here we demonstrate the relevance of using the confidence bands for the quantiles using the optima1 number of order statistics on simulated and actua1 data. It appears that if one does not correct for the sign factor the confidence bands are considerably larger. In the financia1 application for the determination of appropriate capita1 buffers usage of the optima1 confidence band implies considerable reduction in capital provisioning. The band without the correction term sometimes requires about 10% more capital vis á vis the optimal band. Since investment banks nowadays have to provision against such losses by holding capital, .reduction in capital requirements in the order of 10% gives quite a significant reduction in operating costs

Micropremie en macroparadox

Het nieuwe financiële toetsingskader voor de pensioensector heeft een procyclische uitwerking. Om dit ongewenste effect te voorkomen, moet het toetsingskader beter aansluiten bij de moderne beleggingstheorie

De endogene financiele structuur

De vrees dat verschillen in financiële structuur de transmissie van het Europese monetair beleid zullen bemoeilijken is overdreven. De financiële structuur in Europa zal door de komst van de euro harmoniseren

Generational Accounting, Solidarity and Pension Losses

The creeping stock market collapse eroded the wealth of funded pension systems. This led to political tensions between generations due to the fuzzy definition of property rights on the pension funds wealth. We argue that this problem can best be resolved by the introduction of generational accounts. Using modern portfolio and consumption planning theory we show that the younger generations should have the higher equity exposure due to their human capital. Capital losses should be distributed smoothly over lifetime consumption. When stock markets are depressed equity should be bought, savings and consumption should be scaled down equiproportionally, and retirement should be postponed. Portfolio investment restrictions are quite costly