Klaus Spremann

Agent and Principal

In most general terms, agency theory focusses on cooperation in the presence of external effects as well as asymmetric information. To have a look on external effects first, consider two individuals. One of them, the agent, is decision making. He is thus affecting his own welfare and, in addition, that of the other individual called principal. These external effects of the agent’s decisions or actions are negative: modifications of the agent’s action which are preferred by the principal yield disutilities to the agent. A common example is a situation where the principal is assisted by the agent and the agent is deciding on level and kind of his effort. The principal is thus ready to pay some kind of reward to the agent in return for a certain decision/action/effort.

Implications of Constant Risk Aversion

The assumption of constant risk aversion often leads to a considerable simplification of decision theoretic analyses. It is shown that this restriction on constant risk aversion permits the description of a wide range of risk averse patterns between the extreme cases of risk neutrality and the exclusive orientation on the pessimistic maxmin criterion. In particular, a new axiomatic foundation of the constant risk aversion is given and a series of properties for the certainty equivalent are derived. Possible applications are shown by the treatment of risk premiums, values of information, portfolio selection, capital market theory and syndicates.ZusammenfassungDie Zugrundelegung einer konstanten Risikoaversion vereinfacht entscheidungstheoretische Analysen oft erheblich. In dieser Arbeit wird gezeigt, daß die Beschränkung auf konstante Risikoaversion ein großes Spektrum risikoaverser Verhaltensweisen zwischen den Extremfällen der Risikoneutralität und der alleinigen Orientierung am pessimistischen Maximin-Kriterium zu beschreiben gestattet. Insbesondere werden eine neue axiomatische Begründung der konstanten Risikoaversion vorgestellt und eine Reihe von Eigenschaften für das zugehörige Sicherheitsäquivalent hergeleitet. Zur Verdeutlichung der Anwendungsmöglichkeiten werden exemplarisch Risikoprämien, Informationswerte, Portfolio-Selektion und Kapitalmarkttheorie sowie Syndikate behandelt.

Capital market equilibria

Prologue.- 1. Equilibrium versus Market Imperfections.- 2. Questions and Answers.- The Hybrid Model and Related Approaches to Capital Market Equilibria.- 1. Introduction.- 2. Portfolio Models Based on Different Sets of Parameters.- 2.1 One-Parameter Models.- 2.2 Two-Parameter Models: Mean-Semivariance Approach.- 2.3 Other Two-Parameter Approaches.- 2.4 Extensions to Three or More Parameters.- 3. Rationale of the Hybrid Model.- 3.1 Consistency of the Mean-Variance Approach with Expected Utility and Stochastic Dominance.- 3.2 Explicit Solutions of the Portfolio Problem.- 3.3 Explicit Solutions of the Equilibrium Conditions.- 3.4 Which Mean-Variance Approaches Provide Explicit Solutions?.- 4. Applications of the Hybrid Model.- 4.1 Consideration of Income Taxation.- 4.2 Heterogeneous Expectations.- 4.3 Restrictions on Short Sales.- 4.4 Some Other Market Imperfections.- 5. Appendix.- 5.1 Proof of Theorem 4.- 5.2 Solution of Partial Differential Equation (31).- References.- Portfolio Decisions and Capital Market Equilibria Under Incomplete Information.- 1. Introduction.- 2. Risk Situation with Regard to the Prior Parameters: A Two-Level Bayes Approach.- 3. Risk Situation with Regard to the Prior Parameters: Lins Approach.- 4. Partial Uncertainty with Regard to the Prior Parameters.- 5. Asset Pricing under Uncertainty.- References.- Option Valuation: Theory and Empirical Evidence.- 1. Introduction.- 2. Option Valuation Theory.- 2.1 Preference and Distribution-Free Results.- 2.1.1 Call Options.- 2.1.2 Put Options.- 2.1.3 Relations Between Puts and Calls.- 2.1.4 Additional Arbitrage Restrictions.- 2.2 Distributional Assumptions and Hedging Models.- 2.2.1 Hedge Portfolios.- 2.2.2 The Classical Black-Scholes Model.- 2.2.3 A Brief Description of Other Option Valuation Models.- 2.2.4 Analytic Models For American Calls and Puts.- 2.3 Preference Assumptions and Non-Hedging Models.- 2.4 New Option Instruments.- 2.5 Applications of Option Theory.- 3. Empirical Tests of Option Valuation.- 3.1 Test of Boundary Conditions Among an Individual Equity Option and the Underlying Stock.- 3.2 Test of Boundary Conditions Among Different Equity Options and the Underlying Stock.- 3.3 Tests of Equity Option Pricing Models.- 3.3.1 Results of Robustness Tests.- 3.3.2 Results of Predictability Tests.- 3.3.3 Results of Unbiasedness Tests.- 3.3.4 Results of Hedge Return Behavior Tests.- 3.4 Tests of New Option Instruments.- 3.5 Estimation Problems.- 4. Appendix: Formulae for the Evaluation of European Calls.- References.- The Value of Security Agreements.- 1. A Survey of Credit Support Decision Models.- 1.1 Credit Decisions in a Restricted Capital Market.- 1.2 Market Uncertainty.- 1.3 Credit Support Decisions with Event Uncertainty.- 2. Neoclassical Theory and Secured Debt.- 2.1 The Basic Approach.- 2.2 Secured Debt and Capital Market Equilibrium.- 2.3 Collateral Policy and Non-Market-Value Debt Claims.- 3. The Theory of Credit Support Decisions in the Light of the Economics of Information.- 3.1 Collaterals as a Tool to Limit the Creditability Risk.- 3.2 Contemporaneous Examination of Credit Standing Risk and Credit Reliability Risk.- 3.2.1 Changing the Dividend Policy.- 3.2.2 Changing the Credit Policy.- 3.2.3 Changing the Investment Policy.- 4. A Scheme of Credit Contract Covenants.- 4.1 Credit Contract Covenants.- 4.2 Covenants Referring Indirectly to Means of Payment.- 4.2.1 Special Obligations of the Debtors.- 4.2.2 Special Rights of the Creditors.- 4.3 Claims of Creditors which Refer to Means of Payment.- 5. The Efficiency of Securing Debt.- 6. Appendix: Secured Debt and Uncertainty.- 6.1 The Firms Position.- 6.2 Derivation of the Value of Secured Debt.- 6.3 Market Value of the Debt in Dependence of its Collateral Policy.- 6.4 The Maximization of the Market Value with Total Collateral Policy.- References.- Asset Pricing in a Small Economy: A Test of the Omitted Assets Model.- 1. Introduction.- 2. Portfolio Based Tests of Efficiency.- 3. Omitted Assets.- 3.1 The Model.- 3.2 Integrated and Segmented Capital Markets.- 4. The Data.- 5. Efficiency of the Canadian Market Index.- 5.1 Beta Estimation under Thin Trading.- 5.2 Preliminary Estimates.- 5.3 Maximum Likelihood Estimation.- 6. Tests of the Omitted Assets Hypothesis.- Appendix: Iterative Maximum Likelihood Procedure.- References.- The Simple Analytics of Arbitrage.- 1. General Equilibrium, Modern Finance, and Arbitrage Theory.- 1.1 General Equilibrium.- 1.2 Modern Finance.- 1.3 Arbitrage.- 2. An Example, its Generalization, and the Question.- 2.1 A Portfolio of Savings Bonds and Term Deposits.- 2.2 Is a Free Lunch Possible?.- 2.3 Events and Futures.- 2.4 The Question: Should the Original Portfolio be Revised?.- 3. Arbitrage versus Equilibrium.- 3.1 Some Borrowing from Production Theory.- 3.2 Either Arbitrage is Possible or Equilibrium Prices Exist.- 3.3 The Lemma of Minkowski-Farkas as Mathematical Background.- 3.4 The Derivation of an Issue Price.- 3.5 Summing up the Results.- 4. Derivative Contracts in Complete Capital Markets.- 4.1 Complete Capital Market.- 4.2 One-Period Option Pricing.- References.- About Contributors.- Author Index.

The Simple Analytics of Arbitrage

Arbitrage theory becomes particularly transparent if a finite discrete framework is taken as basis. The simple structure and mathematical background are shown and connections to other topics such as production theory are pointed out. Arbitrage techniques are applied to construct free lunches, to determine issue prices, and to derive the classical one-period call-price formula.

The aggregation problem of logistic processes

Several growth systems are based on the logistic differential equation. The control of such macrosystems, however, presupposes the aggregation over models of individual decisions on a microeconomic level. Here the logistic function is explained as the mean of a semi-Markov process. Individual decisions in a risky environment as well as external learning effects are shown to be the determinant factors of logistic growth. Consequently, information and insurance policies are the appropriate control variables rather than other exogenous parameters.

Least-Squares Index Numbers

A price index formula is derived from a least-squares principle. The approach is closely related to Theil’s construction of best linear index numbers. The restriction on a base period and a current period yields an explicit representation of the index number and does not require more data than Laspeyres’ index. This least-squares index number will be compared with Laspeyres’ index. The consideration of both indices could prevent from overestimating the accuracy of the Laspeyres index number and from jumping to irrelevant conclusions of price trends.

Das Aggregationsproblem der logistischen Funktion

ZusammenfassungDie logistische Funktion wird häufig zur Beschreibung von Wachstumsvorgängen mit Sättigungsniveau verwendet. Die Auszeichnung einer bestimmten Funktion zur Beschreibung derartiger Makrophänomene bzw. eine Antwort auf die Frage nach geeigneten Steuervariablen für solche Systeme erfordern ein erzeugendes Modell. Die logistische Funktion wird hier in einem Mikromodell als Mittelwert eines stochastischen Prozesses gewonnen und ist damit das Ergebnis einer Aggregation über individuelles Verhalten. Es zeigt sich, daß individuelle Entscheidungen unter Unsicherheit, Risiko- und Lernverhalten der Individuen die wesentlichen Bestimmungsfaktoren logistischen Wachstums sind. Folglich sind Information und Versicherung geeignete exogene Parameter zur Steuerung logistischer Systeme.SummaryThe logistic function often serves to describe growth systems involving saturation. The selection of a particular function for the description of such macro phenomena — or respectively an answer to the question of appropriate control variables for such systems — requires a generating model. Here the logistic function is attained as the mean of a stochastic process in a micro model and thus is the result of aggregated individual behavior. As it turns out, individual decisions under uncertainty and risk- and learning behavior of the individuals are the main determinants of logistic growth. Consequently information and insurance are appropriate exogeneous parameters for the control of logistic systems.

Zur Ökonomie des Heldentums

„Kein Ding ist so wenig wert, das es nicht wert ware, okonomisch untersucht zu werden“sagt ein von wirtschaftswissenschaftlicher Denkweise gepragter Forscher wie Martin Beckmann. So verwundert es, das ausgerechnet das, was einem Volk am wertvollsten sein sollte, seine Helden namlich, auf der okonomischen Landkarte noch weis ist. Zugegebenermasen hat seit dem Germanen Siegfried, der noch einen Drachen besiegen muste, um als Held zu gelten, eine gewisse Inflation eingesetzt. Im Sektor Unterhaltungsguterindustrie begegnen uns haufenweise Manner und Frauen, die von den Film- und Werbestudios als Helden geradezu aufgebaut werden: heis ersehnt als Muster fur den Konsum.

Sind die Renten sicher

Vor wenigen Jahren hat eine Materie, die bis dahin selbst von wissenschaftlicher Seite fast unbeachet geblieben war, plotzlich das Interesse der Offentlichkeit gefunden: die Altersversorgung. Jedermann wurde sich der geanderten demographischen Entwicklung in Deutschland bewust. Angesichts niedrigerer Geburtenraten sowie der zunehmend hoheren Lebenserwartung sah man die Finanzierung der Renten in Gefahr.

Repräsentative Informationen in linearen Systemen

ZusammenfassungEine Zielsetzung dieses Beitrags ist die übersichtsartige Darstellung der Methoden zur optimalen und operationalen Vereinfachung von großen linearen Systemen. Die Methoden wurden teils im Rahmen der Faktorenanalyse und teils im Rahmen der ökonometrisch orientierten Aggregationstheorie entwickelt. Die Anwendungsmöglichkeiten wurden bisher vorwiegend auf makroökonomischem Gebiet gesehen. Eine zweite Zielsetzung der Arbeit besteht deshalb in der Erschließung betriebswirtschaftlicher Anwendungsmöglichkeiten dieses Instrumentariums.SummaryThe paper provides a survey on methods to simplify big linear systems in an optimal and operational manner. The methods were developed both in the frame-work of factor analysis and aggregation theory. So far they were mainly applied to problems on the borderline between economics and econometric theory. We point osut that these methods are suitable to tackle a lot of managerial problems too.