Central Economics and Mathematics Institute

About: Central Economics and Mathematics Institute is a facility organization based out in Moscow, Russia. It is known for research contribution in the topics: Population & Foreign-exchange reserves. The organization has 297 authors who have published 580 publications receiving 6449 citations. The organization is also known as: Federal State Institution of Science Central Economics and Mathematics Institute of the Russian Academy of Sciences.

On the Optimal Portfolio for the Exponential Utility Maximization: Remarks to the Six-Author Paper

Abstract: This note contains ramifications of results of Delbaen et al (2002) Assuming that the price process is locally bounded and admits an equivalent local martingale measure with finite entropy, we show, without further assumption, that in the case of exponential utility the optimal portfolio process is a martingale with respect to each local martingale measure with finite entropy Moreover, the optimal value always can be attained on a sequence of uniformly bounded portfolios

On the optimal portfolio for the exponential utility maximization: remarks to the six-author paper

Abstract: This note contains ramifications of results of Delbaen et al. (2002). Assuming that the price process is locally bounded and admits an equivalent local martingale measure with finite entropy, we show, without further assumption, that in the case of exponential utility the optimal portfolio process is a martingale with respect to each local martingale measure with finite entropy. Moreover, the optimal value always can be attained on a sequence of uniformly bounded portfolios.

In the insurance business risky investments are dangerous

Abstract: We find an exact asymptotics of the ruin probability $\Psi (u)$ when the capital of insurance company is invested in a risky asset whose price follows a geometric Brownian motion with mean return a and volatility $\sigma>0$ . In contrast to the classical case of non-risky investments where the ruin probability decays exponentially as the initial endowment u tends to infinity, in this model we have, if $\rho:=2a/\sigma^2>1$ , that $\Psi(u)\sim Ku^{1-\rho}$ for some $K>0$ . If $\rho<1$ , then $\Psi(u)=1$ .

Accumulation of Foreign Exchange Reserves and Long Term Growth

Abstract: Cross-country regressions, reported in this paper for 1960-99 period, seem to suggest that the accumulation of foreign exchange reserves (FER) contributes to economic growth of a developing economy by increasing both the investment/GDP ratio and capital productivity. We offer the following interpretation of these stylized facts: (1) FER accumulation causes real exchange rate (RER) undervaluation that is expansionary in the short run and may have long term effects, if such devaluations are carried out periodically and unexpectedly; (2) RER undervaluation allows to take full advantages of export externality and triggers export-led growth; (3) FER build up attracts foreign direct investment because it increases the credibility of the government of a recipient country and lowers the dollar price of real assets. A three-sector model of endogenous economic growth (including a consumer good sector, investment good sector and an export trade sector) is suggested to demonstrate how undervaluation may improve social welfare. Concepts of FER accumulation trajectories and equilibrium trajectories are introduced. It is demonstrated that small udervaluation of the equilibrium exchange rate may be wealth improving.