Admissible strategies in semimartingale portfolio selection

The choice of admissible trading strategies in mathematical modelling of financial markets is a delicate issue, going back to Harrison and Kreps [HK79]. In the context of optimal portfolio selection with expected utility preferences this question has been the focus of considerable attention over the last twenty years. We propose a novel notion of admissibility that has many pleasant features - admissibility is characterized purely under the objective measure P; each admissible strategy can be approximated by simple strategies using finite number of trading dates; the wealth of any admissible strategy is a supermartingale under all pricing measures; local boundedness of the price process is not required; neither strict monotonicity, strict concavity nor differentiability of the utility function are necessary; the definition encompasses both the classical mean-variance preferences and the monotone expected utility. For utility functions finite on R, our class represents a minimal set containing simple strategies which also contains the optimizer, under conditions that are milder than the celebrated reasonable asymptotic elasticity condition on the utility function.utility maximization; non locally bounded semimartingale; incomplete market; sigma-localization and I-localization; sigma-martingale measure; Orlicz space; convex duality

Risk, Return and Portfolio Allocation under Alternative Pension Arrangements with Imperfect Financial Markets

This paper uses stochastic simulations on calibrated models to assess the steady state impact of different pension arrangements in an environment where financial markets are less than perfect. Surprisingly little is known about the optimal split between funded and unfunded systems when there are sources of uninsurable risk that are allocated in different ways by different types of pension system and where there are imperfections in financial markets (eg transactions costs or adverse selection) . This paper calculates the expected welfare of agents in different economies where in the steady state the importance of unfunded, state pensions differs. We estimate how the optimal level of unfunded, state pensions depends on rate of return and income risks and also upon the actuarial fairness of annuity contracts. We focus on the case of Japan where aging is rapid and unfunded pensions are currently generous.Pensions; portfolio allocation, demographics; annuities; risk-sharing

Dynamic programming and mean-variance hedging in discrete time

In this paper the general discrete time mean-variance hedging problem is solved by dynamic programming. Thanks to its simple recursive structure the solution is well suited to computer implementation. On the theoretical side, it is shown how the variance-optimal measure arises in the dynamic programming solution and how one can define conditional expectations under this (generally non-equivalent) measure. The result is then related to the results of previous studies in continuous time.mean-variance hedging, discrete time, dynamic programming, incomplete market, arbitrage,

Risk Return and Portfolio Allocation under Alternative Pension Systems with Imperfect Financial Markets

This Paper uses stochastic simulations on calibrated models to assess the steady state impact of different pension arrangements in an environment where financial markets are less than perfect. Surprisingly little is known about the optimal split between funded and unfunded systems when there are sources of uninsurable risk that are allocated in different ways by different types of pension system and where there are imperfections in financial markets (eg transaction costs or adverse selection). This Paper calculates the expected welfare of agents in different economies where in the steady state the importance of unfunded state pensions differs. We estimate how the optimal level of unfunded state pensions depends on rate of return and income risks and also upon the actuarial fairness of annuity contracts. We focus on the case of Japan where ageing is rapid and unfunded pensions are currently generous.Annuities; Demographics; Pensions; Portfolio Allocation; Risk-Sharing

The Impact of Changing Demographics and Pensions on The Demand for Housing and Financial Assets

Using a calibrated OLG model with several sources of uncertainty we find that the impact of ageing and of reform of social security upon the demand for housing and the level of owner occupation is substantial. The overall structure of household asset holdings – in particular the split between real and financial assets – is sensitive to demographics and to the generosity of state run, pay-as-you-go pensions. The interaction between social security reform and housing market conditions is significant and suggests that any changes in pension rules will have substantial knock on effects on the housing market.housing; OLG model; pension reform; portfolio allocation

The LILI Motif of M3-S2 Linkers Is a Component of the NMDA Receptor Channel Gate

N-methyl-D-aspartate receptors (NMDARs) mediate excitatory synaptic transmission in the central nervous system, underlie the induction of synaptic plasticity, and their malfunction is associated with human diseases. Native NMDARs are tetramers composed of two obligatory GluN1 subunits and various combinations of GluN2A-D or, more rarely, GluN3A-B subunits. Each subunit consists of an amino-terminal, ligand-binding, transmembrane and carboxyl-terminal domain. The ligand-binding and transmembrane domains are interconnected via polypeptide chains (linkers). Upon glutamate and glycine binding, these receptors undergo a series of conformational changes leading to the opening of the Ca2+-permeable ion channel. Here we report that different deletions and mutations of amino acids in the M3-S2 linkers of the GluN1 and GluN2B subunits lead to constitutively open channels. Irrespective of whether alterations were introduced in the GluN1 or the GluN2B subunit, application of glutamate or glycine promoted receptor channel activity; however, responses induced by the GluN1 agonist glycine were larger, on average, than those induced by glutamate. We observed the most prominent effect when residues GluN1(L657) and GluN2B(I655) were deleted or altered to glycine. In parallel, molecular modeling revealed that two interacting pairs of residues, the LILI motif (GluN1(L657) and GluN2B(I655)), form a functional unit with the TTTT ring (GluN1(T648) and GluN2B(T647)), described earlier to control NMDAR channel gating. These results provide new insight into the structural organization and functional interplay of the LILI and the TTTT ring during the course of NMDAR channel opening and closing