The rising trends both in drug addiction and crime rates are of major public concern in Germany. Surprisingly, the economic theory of crime seems to ignore the drugs?crime nexus, whereas the criminological literature considers illicit drug use a main reason of criminal activities. This paper...

A supplier of multicast information services will often be faced with the following problem: Broadcasting to the whole customer base (including non-paying customers) is cheaper than multicasting only to the paying customers. However, broadcasting discourages potential customers from paying. The...

Consider the class of discrete time, general state space Markov chains which satisfy a "uniform ergodicity under sampling" condition. There are many ways to quantify the notion of "mixing time", i.e., time to approach stationarity from a worst initial state. We prove results asserting...

A popular argument states that most of the diversification in a portfolio can be obtained with a rather small number of securities. In this paper we present three algorithms to approach the underlying NP-hard problem of portfolio optimization with a cardinality constraint. All three of these...

Bank regulation is supposed to reduce the probability of bank failure and, if a failure occurs, to contain the damage so that system-wide problems are unlikely. The current regulatory framework, known as Basel II, is based, among other things, on risk-adjusted capital requirements. This...

It has been shown in the literature that the task of estimating the parameters of nonlinear models may be tackled with optimization heuristics. Thus, we attempt to carry these intuitions over to the estimation procedure of smooth transition autoregressive (STAR, Teräsvirta, 1994) models by...

Empirical distributions are often claimed to be superior to parametric distributions, yet to also increase the computational complexity and are therefore hard to apply in portfolio optimization. In this paper, we approach the portfolio optimization problem under constraints on the portfolio’s...