Optimal Strategy Synthesis for Request-Response Games

We show the existence and effective computability of optimal winning strategies for request-response games in case the quality of a play is measured by the limit superior of the mean accumulated waiting times between requests and their responses.Comment: The present paper is a revised version with simplified proofs of results announced in the conference paper of the same name presented at ATVA 2008, which in turn extended results of the third author's dissertatio

Beyond payoff diagrams: how to present risk and return characteristics of structured products

The market for structured products in Germany and Switzerland experienced a decade of rapid growth before the financial crisis. When Lehman Brothers went bankrupt, however, it became apparent that many private investors had not been aware of the risks involved in these certificates. There is evidence that the success of some of the most popular products was due to behavioral biases of investors. There is also concern that the complexity and diversity of the products was accompanied by low transparency. In practice, the information provided to investors is still often focused on payoff diagrams. For the future development of the market, it is important to improve investors' information and understanding. To this end, this paper analyzes the information requirements and proposes a risk and return survey to provide relevant and comprehensive information on market risk. Specifically, we propose to (1)illustrate the return probability distribution in three different ways, in particular a rolling dice analogy, (2) apply the Leland model to specify the risk and return tradeoff, and (3)include a specific measure of active risk. We illustrate these measures and information tools for a sample of stylized product

Exit as Critique: Communes and Intentional Communities in the 1960s and Today

While social scientists have traditionally confined their attention to practices of critique modelled on collective, publicly visible speech acts, this article draws attention to practices of critique which take the form of individual, private, and mute acts of withdrawal. First, drawing on the pragmatic sociology of critique and its conceptualization of different “orders of worth,” it is argued that communards and inhabitants of intentional communities in the 1960s and today practice critique by withdrawing from conventional arenas of political participation and social interactions. Critique is performed through withdrawal because all legitimate channels towards the broad public appear blocked or useless. Second, this study points out differences within this “exit variety of critique” between the two time-periods. The transgressive withdrawal of communards in the 1960s was a radical critique of mainstream society and its values. In contrast, today’s communards withdraw from conventional arenas of social interactions to live in ways which more consistently put into practice their beliefs and hence practice a reformist critique of mainstream society’s unsustainability and individualism

Analysts' Earnings Forecasts for DAX100 Firms During the Stock Market Boom of the 1990s

This paper examines the reliability of financial analysts' consensus earnings forecasts in the 1990s. Analysts are often accused of having fuelled the stock market boom with exaggerated evaluations of firms' prospects. However, this criticism primarily refers to the analysts' buy recommendations rather than earnings forecasts. Although biases in earnings forecasts have been reported since the 1980s, a systematic study capturing the period of ‘irrational exuberance' until 2000 on the German stock market has not yet been published. Our data set consists of DAX100 firms, leaving out the peculiarities of forecasting earnings (or rather losses) of young technology firms. To evaluate the information content of analysts' forecasts, we confront them with five alternative forecasting models. The empirical results reveal that analysts' forecasts were too optimistic throughout the entire sample period. However, contrary to the increase in stock prices, the optimistic bias has declined over time. If the bias is removed, the analysts' consensus forecasts significantly outperform all other models considered. Thus, the forecasts seem to be informative with respect to earnings differences, even if the market level of earnings is optimistically overstate

How to invest over the life cycle: Insights from theory

We analyse the state of the art in the field of life cycle portfolio choice, a recent strand of the literature on intertemporal portfolio selection. Life cycle models are designed to identify optimal savings and portfolio policies over the lifetime of investors. They can help to improve pension schemes by showing how these could be specifically tailored to the individual employee's circumstances to overcome the ‘one-size-fits-all' philosophy still prevailing in parts of the mandatory retirement savings system. To facilitate comparison, we first describe set-up, solution method and characteristic results for a basic model and then derive a general framework to classify existing contributions. We highlight the models' strengths and weaknesses and assess their ability to resolve existing portfolio puzzles. Lessons from the literature are summarized and promising areas for further research identifie

Optimal investments in volatility

Volatility has evolved as an attractive new asset class of its own. The most common instruments for trading volatility are variance swaps. Mean returns of DAX and ESX variance swaps over the time period of 1995 to 2004 are strongly negative, and only part of the negative premium can be explained by the negative correlation of variance swap returns with stock market indices. We analyze the implications of this observation for optimal portfolio composition. Mean-variance efficient portfolios are characterized by sizable short positions in variance swaps. Typically, the stock index is also sold short to achieve a better portfolio diversification. To capture heterogeneous preferences for higher moments, we use a variant of the polynomial goal programming method. We assume that investors strive for a high Sharpe ratio, high skewness, and low kurtosis. Our analysis reveals that it is often not possible to achieve a balanced tradeoff between Sharpe ratio and skewness. Investors are advised to hold the extreme portfolios (Sharpe ratio driven, skewness driven, or kurtosis driven) and avoid the middle ground. This "all-or-nothing” characteristic is reflected in jumps of asset weights when certain thresholds of preference parameters are crossed. These empirical findings can explain why many investors are so reluctant to implement option-based short-selling strategie

Self-motion facilitates echo-acoustic orientation in humans

The ability of blind humans to navigate complex environments through echolocation has received rapidly increasing scientific interest. However, technical limitations have precluded a formal quantification of the interplay between echolocation and self-motion. Here, we use a novel virtual echo-acoustic space technique to formally quantify the influence of self-motion on echo-acoustic orientation. We show that both the vestibular and proprioceptive components of self-motion contribute significantly to successful echo-acoustic orientation in humans: specifically, our results show that vestibular input induced by whole-body self-motion resolves orientation-dependent biases in echo-acoustic cues. Fast head motions, relative to the body, provide additional proprioceptive cues which allow subjects to effectively assess echo-acoustic space referenced against the body orientation. These psychophysical findings clearly demonstrate that human echolocation is well suited to drive precise locomotor adjustments. Our data shed new light on the sensory-motor interactions, and on possible optimization strategies underlying echolocation in humans

Self-motion facilitates echo-acoustic orientation in humans

The ability of blind humans to navigate complex environments through echolocation has received rapidly increasing scientific interest. However, technical limitations have precluded a formal quantification of the interplay between echolocation and self-motion. Here, we use a novel virtual echo-acoustic space technique to formally quantify the influence of self-motion on echo-acoustic orientation. We show that both the vestibular and proprioceptive components of self-motion contribute significantly to successful echo-acoustic orientation in humans: specifically, our results show that vestibular input induced by whole-body self-motion resolves orientation-dependent biases in echo-acoustic cues. Fast head motions, relative to the body, provide additional proprioceptive cues which allow subjects to effectively assess echo-acoustic space referenced against the body orientation. These psychophysical findings clearly demonstrate that human echolocation is well suited to drive precise locomotor adjustments. Our data shed new light on the sensory-motor interactions, and on possible optimization strategies underlying echolocation in humans

Ranging in Human Sonar: Effects of Additional Early Reflections and Exploratory Head Movements

Many blind people rely on echoes from self-produced sounds to assess their environment. It has been shown that human subjects can use echolocation for directional localization and orientation in a room, but echo-acoustic distance perception - e.g. to determine one's position in a room - has received little scientific attention, and systematic studies on the influence of additional early reflections and exploratory head movements are lacking. This study investigates echo-acoustic distance discrimination in virtual echo-acoustic space, using the impulse responses of a real corridor. Six blindfolded sighted subjects and a blind echolocation expert had to discriminate between two positions in the virtual corridor, which differed by their distance to the front wall, but not to the lateral walls. To solve this task, participants evaluated echoes that were generated in real time from self-produced vocalizations. Across experimental conditions, we systematically varied the restrictions for head rotations, the subjects' orientation in virtual space and the reference position. Three key results were observed. First, all participants successfully solved the task with discrimination thresholds below 1 m for all reference distances (0.75-4 m). Performance was best for the smallest reference distance of 0.75 m, with thresholds around 20 cm. Second, distance discrimination performance was relatively robust against additional early reflections, compared to other echolocation tasks like directional localization. Third, free head rotations during echolocation can improve distance discrimination performance in complex environmental settings. However, head movements do not necessarily provide a benefit over static echolocation from an optimal single orientation. These results show that accurate distance discrimination through echolocation is possible over a wide range of reference distances and environmental conditions. This is an important functional benefit of human echolocation, which may also play a major role in the calibration of auditory space representations