4,663 research outputs found
Modeling financial assets without semimartingales
This paper does not suppose a priori that the evolution of the price of a
financial asset is a semimartingale. Since possible strategies of investors are
self-financing, previous prices are forced to be finite quadratic variation
processes. The non-arbitrage property is not excluded if the class
of admissible strategies is restricted. The classical notion of martingale is
replaced with the notion of -martingale. A calculus related to -martingales with some examples is developed. Some applications to the
maximization of the utility of an insider are expanded.Comment: 53 page
Nonsemimartingales: Stochastic differential equations and weak Dirichlet processes
In this paper we discuss existence and uniqueness for a one-dimensional time
inhomogeneous stochastic differential equation directed by an
-semimartingale and a finite cubic variation process
which has the structure , where is a finite quadratic variation
process and is strongly predictable in some technical sense: that condition
implies, in particular, that is weak Dirichlet, and it is fulfilled, for
instance, when is independent of . The method is based on a
transformation which reduces the diffusion coefficient multiplying to 1.
We use generalized It\^{o} and It\^{o}--Wentzell type formulae. A similar
method allows us to discuss existence and uniqueness theorem when is a
H\"{o}lder continuous process and is only H\"{o}lder in space. Using
an It\^{o} formula for reversible semimartingales, we also show existence of a
solution when is a Brownian motion and is only continuous.Comment: Published at http://dx.doi.org/10.1214/009117906000000566 in the
Annals of Probability (http://www.imstat.org/aop/) by the Institute of
Mathematical Statistics (http://www.imstat.org
Does aid help improve economic institutions ?
Aid is expected to promote better living standards by raising investment and growth. But aid may also affect institutions directly. In theory, these effects may or may not work in the same direction as those on investment. The authors examine the effect of aid on economic institutions and find that aid has neither a positive nor a negative impact on existing measures of economic institutions. They find the results using pooled data for non-overlapping five-year periods, confirmed by pooled annual regressions for a large panel of countries and by pure cross-section regressions. The authors explicitly allow for time invariant effects that are country specific and find the results to be robust to model specifications, estimation methods, and different data sets.Development Economics&Aid Effectiveness,Public Institution Analysis&Assessment,Economic Theory&Research,Economic Policy, Institutions and Governance,School Health
Does Publicity Affect Competition? Evidence from Discontinuities in Public Procurement Auctions?
Calls for tenders are the natural devices to inform bidders, thus to enlarge the pool of potential participants. We exploit discontinuities generated by the Italian Law on tender's publicity to identify the effect of enlarging the pool of potential participants on competition in public procurement auctions. We show that most of the effects of publicity are at regional and European level. Increasing tenders' publicity from local to regional determines an increase in the number of bidders by 50% and an extra reduction of 5% in the price paid by the contracting authority; increasing publicity from national to European has no effect on the number of bidders but it determines an extra reduction of 10% in the price paid by the contracting authority. No effect is observed when publicity is increased from regional to national. Finally, we relate measures of competition to ex-post duration of the works finding a negative correlation between duration and the number of bidders or the winning rebate.Public Procurement Auctions, Publicity, Regression Discontinuity, Duration Analysis.
Weak Instruments and Weak Identification in Estimating the Effects of Education on Democracy
Is there any relation between education and democracy? Once we correct for weak instruments and identify education as `weakly exogenous` we find new evidence that education systematically predicts democracy. Our results are robust across model specification, instrumentation strategies, and samples.
Building Political Collusion: Evidence from Procurement Auctions
We investigate the relationship between the time politicians stay in office and the functioning of public procurement. To this purpose, we collect a data set on the Italian municipal governments and all the procurement auctions they administered between 2000 and 2005. Identification is achieved through the introduction of a two-term limit for the mayor in March 1993: since elections were not coordinated across cities, and previous terms were not counted in the limit, mayors appointed right before the reform could be reelected for two additional terms, while the others for one only. Our primary finding is that one extra term in office deteriorates public spending. In fact, it decreases the number of bidders and, most importantly, the winning rebate. Interestingly, we also find that the probability that the same firm is awarded more auctions, or that the winning firm is local, increases with time in office. These results are compatible with the predictions of a model of favoritism in repeated procurement auctions, where time reveals collusive types, thus increasing the value of illegal connections at the expense of higher procurement costs.procurement auction, collusion, public works, time in office
Does Publicity Affect Competition? Evidence from Discontinuities in Public Procurement Auctions
Calls for tenders are the natural devices to inform bidders, thus to enlarge the pool of potential participants. We exploit discontinuities generated by the Italian Law on tenderâs publicity to identify the effect of enlarging the pool of potential participants on competition in public procurement auctions. We show that most of the effects of publicity are at regional and European level. Increasing tendersâ publicity from local to regional determines an increase in the number of bidders by 50% and an extra reduction of 5% in the price paid by the contracting authority; increasing publicity from national to European has no effect on the number of bidders but it determines an extra reduction of 10% in the price paid by the contracting authority. No effect is observed when publicity is increased from regional to national. Finally, we relate measures of competition to ex-post duration of the works finding a negative correlation between duration and the number of bidders or the winning rebate.Public Procurement Auctions, Publicity, Regression Discontinuity, Duration Analysis
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