We present a multi-stage stochastic programming model for managing portfolios of stock and bond indices denominated in multiple currencies. The portfolios are exposed to market risks and currency risks. Uncertainty in asset returns and exchange rates is represented by means of discrete...

The accuracy of the solution of dynamic general equilibrium models has become a major issue. Recent papers, substituting second order for first order approximations, have shown to obtain significant differences in accuracy. Second order approximations have had some considerable success in...

This paper examines two numerical methods for pricing of American spread options in the case where both underlying assets follow the jump-diffusion process of Merton (1976). We extend the integral equation representation for the American spread option presented by Broadie and Detemple (1997) to...

Gross domestic product (GDP) and gross domestic income (GDI), though conceptually equivalent, differ by statistical discrepancy (SD). Currently, there are no estimates of SD by industry. Lack of such information hinders a proper understanding of the sources of inconsistency in the national...

Abstract: The robust permanent income model discussed in a number of works, see e.g. Hansen et al. (1999, 2002), is reformulated as a linear quadratic tracking problem with a time-varying intercept following a ‘Return to Normality’ model. The results in Tucci (2005), which...

The pricing problem of options with an early exercise feature, such as American options, is one of the important topics in mathematical finance. The pricing formulas for American options, however, have not been found in general and the numerical methods are required to derive the price of these...

In some real-life intertemporal decision problems, which include a country's central-bank interest-rate determination problem, optimisation might be an unsuitable solution procedure in that it suggests a unique ``optimal'' solution for problems where many solutions could be "satisficing". This...

In a one-state one-control variable Quadratic Linear Problem, I examine the effect of an increase in the multiplicative uncertainty on the use of the control variable. In contrast with previous studies, this model considers a stochastic constant term in the transition equation. I found that the...

We study the mechanism of inequality due to educational lock-in effects. Recent research on inequality such as Brock and Durlauf (2000a, b) and Durlauf (1999a, b, 2000) has emphasized the fact that the composition and behavior of groups to which a person belongs play an important role for...

Particle swarm optimization (PSO) is a population based stochastic optimization technique. PSO is similar to optimization with Genetic Algorithms (GA). In PSO, the potential solutions (particles) move through the problem space by following the current optimum particles. Experience shows that PSO...