EconStor Community:
http://hdl.handle.net/10419/280
2017-10-18T11:50:48ZEquilibria in infinite games of incomplete information
http://hdl.handle.net/10419/162935
Title: Equilibria in infinite games of incomplete information
Authors: Carbonell-Nicolau, Oriol
Abstract: The notion of communication equilibrium extends Aumann's [3] correlated equilibrium concept for complete information games to the case of incomplete information. This paper shows that this solution concept has the following property: for the class of incomplete information games with compact metric type and action spaces and payoff functions jointly measurable and continuous in actions, limits of Bayes-Nash equilibria of finite approximations to an infinite game are communication equilibria (and in general not Bayes-Nash equilibria) of the limit game. Another extension of Aumann's [3] solution concept to the case of incomplete information fails to satisfy this condition.2017-01-01T00:00:00ZRecursive differencing: Bias reduction with regular kernels
http://hdl.handle.net/10419/162934
Title: Recursive differencing: Bias reduction with regular kernels
Authors: Shen, Chan; Klein, Roger
Abstract: It is well known that it is important to control the bias in estimating conditional expectations in order to obtain asymptotic normality for quantities of interest (e.g. a finite dimensional parameter vector in semiparametric models or averages of marginal effects in the nonparametric case). For this purposes, higher order kernel methods are often employed in developing the theory. However such methods typically do not perform well at moderate sample sizes. Moreover, and perhaps related to their performance, non-optimal windows are selected with undersmoothing needed to ensure the appropriate bias order. We propose a recursive differencing approach to bias reduction for a nonparametric estimator of a conditional expectation, where the order of the bias depending on the stage of the recursion. It performs much better at moderate sample sizes than regular or higher order kernels while retaining a bias of any desired order and a convergence rate the same as that of higher order kernels. We also propose an approach to implement this estimator under optimal windows, which ensures asymptotic normality in semiparametric multiple index models of arbitrary dimension. This mechanism further contributes to its very good finite sample performance.2017-01-01T00:00:00ZPerfect equilibria in games of incomplete information
http://hdl.handle.net/10419/162936
Title: Perfect equilibria in games of incomplete information
Authors: Carbonell-Nicolau, Oriol
Abstract: We obtain conditions on the primitives of a Bayesian game with infinitely many types and/or strategies that ensure the existence of a perfect Bayes-Nash equilibrium. The main existence results are illustrated in the context of all-pay auctions.2017-01-01T00:00:00ZCapital regulation: Less really can be more when incentives are socially aligned. Comments on Richard J. Herring "The Evolving Complexity of Capital Regulation". "The Interplay of Financial Regulations, Resilience, and Growth", Federal Reserve Bank of Philadelphia June 16-17, 2016
http://hdl.handle.net/10419/162937
Title: Capital regulation: Less really can be more when incentives are socially aligned. Comments on Richard J. Herring "The Evolving Complexity of Capital Regulation". "The Interplay of Financial Regulations, Resilience, and Growth", Federal Reserve Bank of Philadelphia June 16-17, 2016
Authors: Hughes, Joseph P.
Abstract: Capital regulation has become increasingly complex as the largest financial institutions arbitrage differences in requirements across financial products to increase expected return for any given amount of regulatory capital, as financial regulators amend regulations to reduce arbitrage opportunities, and as financial institutions innovate to escape revised regulations - a regulatory dialectic. This increasing complexity makes monitoring bank risk-taking by markets and regulators more difficult and does not necessarily improve the risk sensitivity of measures of capital adequacy. Explaining the arbitrage incentive of some banks, several studies have found evidence of dichotomous capital strategies for maximizing value: a relatively low-risk strategy that minimizes the potential for financial distress to protect valuable investment opportunities and a relatively high-risk strategy that, in the absence distress costs due to valuable investment opportunities, "reaches for yield" to exploit the option value of implicit and explicit deposit insurance. In the latter case, market discipline rewards risk-taking and, in doing so, tends to undermine financial stability. The largest financial institutions, belonging to the latter category, maximize value by arbitraging capital regulations to "reach for yield." This incentive can be curtailed by imposing "pre-financial-distress" costs that make less risky capital strategies optimal for large institutions. Such potential costs can be created by requiring institutions to issue contingent convertible debt (COCOs) that converts to equity to recapitalize the institution well before insolvency. The conversion rate significantly dilutes existing shareholders and makes issuing new equity a better than than conversion. The trigger for conversion is a particular market-value capital ratio. Thus, the threat of conversion tends to reverse risk-taking incentives - in particular, the incentive to increase financial leverage and to arbitrage differences in capital requirement across investments.2017-01-01T00:00:00Z