Integration of financial markets and national price levels: the role of exchange rate volatility

How does international financial integration affect national price levels? To analyze this question, this paper formulates a two-country open economy sticky-price model under either segmented or complete asset markets. It is shown that the effect of financial integration, i.e. moving from segmented to complete asset markets, is regime-dependent. Under managed exchange rates, financial integration raises the national price level. Under floating exchange rates, however, financial integration lowers national price levels. Thus, the paper proposes a novel argument to rationalize systematic deviations from PPP. Panel evidence for 54 countries supports the main findings. A 10% larger ratio of foreign assets and liabilities to GDP, our measure of international financial integration, increases the national price level by 0.27 percentage points under fixed and intermediate exchange rate regimes and lowers the price level by 0.3 percentage points under floating exchange rates. --International financial integration,exchange rate regime,national price level,PPP,foreign asset position

Is the minimum value of an option on variance generated by local volatility?

We discuss the possibility of obtaining model-free bounds on volatility derivatives, given present market data in the form of a calibrated local volatility model. A counter-example to a wide-spread conjecture is given

Small is Successful!?

This paper provides experimental evidence on exit behavior of asymmetrically sized firms in a duopoly with declining demand. We conduct three treatments: (a) The basic model with indivisible real capital. The structure of this treatment represents the main findings of Ghemawat and Nalebuff (1985); (b) an extension of the basic model by introducing a bankruptcy constraint; (c) here we allow for divisible real capital (Ghemawat and Nalebuff (1990)). In all three treatments we find behavior that is, by and large, in line with subgame perfect Nash Equilibrium. However, there is a problem of multiplicity of equilibria in (b) and we find an anchor effect as well as learning effects in (c).Exit, duopoly, declining market, experimental economics

Extracting SUSY parameters from LHC measurements using Fittino

We show that presently available precision data are in good agreement with supersymmetry at a mass scale below 1 TeV. Using a SUSY point close to the best fit to present data, we give a projection of the capabilities of the LHC to constrain SUSY models and their parameters as function of the accumulated luminosity.Comment: 4 pages, contribution to the proceedings of the 17th International Conference on Supersymmetry and the Unification of Fundamental Interactions (SUSY09), Northeastern University, Boston, MA, USA, June 200

Dimensional crossover and cold-atom realization of topological Mott insulators

We propose a cold-atom setup which allows for a dimensional crossover from a two-dimensional quantum spin Hall insulating phase to a three-dimensional strong topological insulator by tuning the hopping between the layers. We further show that additional Hubbard onsite interactions can give rise to spin liquid-like phases: weak and strong topological Mott insulators. They represent the celebrated paradigm of a quantum state of matter which merely exists because of the interplay of the non-trivial topology of the band structure and strong interactions. While the theoretical understanding of this phase has remained elusive, our proposal shall help to shed some light on this exotic state of matter by paving the way for a controlled experimental investigation in optical lattices.Comment: 4+ pages, 3 figures; includes Supplemental Material (3 pages, 1 figure

Vincia for Hadron Colliders

We present the first public implementation of antenna-based QCD initial- and final-state showers. The shower kernels are $2\to 3$ antenna functions, which capture not only the collinear dynamics but also the leading soft (coherent) singularities of QCD matrix elements. We define the evolution measure to be inversely proportional to the leading poles, hence gluon emissions are evolved in a $p_\perp$ measure inversely proportional to the eikonal, while processes that only contain a single pole (e.g., $g\to q\bar{q}$) are evolved in virtuality. Non-ordered emissions are allowed, suppressed by an additional power of $1/Q^2$. Recoils and kinematics are governed by exact on-shell $2\to 3$ phase-space factorisations. This first implementation is limited to massless QCD partons and colourless resonances. Tree-level matrix-element corrections are included for QCD up to $\mathcal{O}(\alpha_s^4)$ (4 jets), and for Drell-Yan and Higgs production up to $\mathcal{O}(\alpha_s^3)$ ($V/H$ + 3 jets). The resulting algorithm has been made publicly available in Vincia 2.0