Banking Crisis Essay Example | Topics and Well Written Essays - 5000 words

Banking Crisis - Essay Example The crisis is thus perceived to have occurred as the result of exposure to Market Risks due to such risk transfer mechanisms (Banks normally are never exposed to market risks because they reply on internal systems in managing the credits) that caused many loopholes in the Credit Risk Management in management of lending to Sub-Prime customers. These customers are individuals or companies who do not have clean credit history or regular source of income. The Banks & Financial Institutions preferred to lend loans to Sub-Prime customers to avail the benefits of higher interest rates at a perceived calculated exposure of the investment capital to higher risks. To facilitate this in a secured and manageable manner, the banks & financial institutions used the mechanism of "Securitization" that essentially is the mechanism of distributing the risk of the lending to the investors outside the Banking system through a process. The process of "Securitization" resulted in the boom of Credit Deriva tive Market and was used extensively in the US Sub-Prime Mortgage Market by increasing the number of risky products but still reduce the liabilities on their balance sheets (thus shielding the same from external auditors). The money was shown to be flowing through so called "conduits" from investors to the borrowers through the SPV and SIV system. As described by experts the primary drawbacks that occurred in this process are poor valuations of assets acquired against the credit instruments thus resulting in uncertain asset valuation & high credit risk exposure that couldn't detect the imperfections in the Credit Markets. Even the external rating agencies got trapped in this mirage and couldn't predict the Sub-Prime crisis because the Securitization Process was extremely complex and the dependency was upon scattered and unreliable data outside the core banking system. Moreover, the Bank's risk assessment didn't demonstrate due diligence in screening the sub-prime borrowers and infor ming the investors about the associated risks in the so called securitized products. The overall system expanded uncontrollably and the competition became very stringent resulting in loans getting sanctioned at the flash of light and there was no time for adequate risk management. The actual risks ware completely covered under hyped data and analytics about the new credit instruments which, frankly no one understood correctly - not even the external auditors and the statutory & governance

Voicing difference Essay Example | Topics and Well Written Essays - 500 words

Voicing difference - Essay Example If the differences in gender were to be overcome, the whole process of how people think would have to be changed. If this were possible, then down the years, the word "gender" would no even be in usage! It is now vital here that we try to look at how this misconception was shaped in the minds of people in the first place. The disparity in gender generally starts with this accepted norm of delegating various roles according to sex. Even though it has been stated earlier that sex and gender are different, they are very much co-related. There are a set of rules accorded to women and likewise different ones for men. Women are usually seen as the care-givers while men, as the bread-winners. This process starts as soon as a person is born. Right from childhood a boy is expected to be inclined towards "manly" things that require exertion of strength that is derived from masculinity. On the contrary girls are supposed to be drawn towards activities and interests like cooking and dolls. If this distinction was somehow crossed, the wrong-doer would surely be chastised or at the very least warned like David is in "Go,Carolina", when he is told, "You don't want to be doing that, that's a girl thing."1.Therefore gender represses a person's natural reflexes. It makes one do something not because one wants to but b ecause one has to. Gender

Immanual Kant Ethical Contribution Essay Example for Free

Immanual Kant Ethical Contribution Essay Born in Konigsberg, East Prussia in 1724, Immanuel Kant began school at the early age of eight years. He studied at the Collegium Fridiricianum, a Latin school that focused on classicism. Later he attended the University of Konigsberg and his major studies were physics, mathematics and philosophy. After receiving his doctorate, Kant became a teacher at the University and focused on philosophy. He was well known for his unorthodox approaches to religion and religious text that many students admired. However his radical teachings caught the eye of King Frederich William II, who barred him from any further writings. Kant obeyed the king until after the king’s death, Kant continued to write and publish his views on religion. He is famous for his deontic philosophical approach which believed actions were morally right or wrong, without the regard to consequences. Kant argued being moral was also being rational. Kant wrote the book Critique of Pure Reason in 1781 in which he investigated the limits of human knowledge and the ability to reason. Kant argued that we act morally because that is what reason demands and he analyzed the nature of reason and what it means to be rational. In 1797 Kant furthered his writings in the Metaphysics of Ethics, where he writes that reason is the fundamental authority for morality. The European Graduate School dictates â€Å"Metaphysics describes a science concerned with this inquiry, a solution to unsolvable problems set by pure reason itself, namely the concepts of God, freedom and Immortality. † Kant believed that our sense of duty, approved by reason and rationality, is considered moral. Kant believed that consequences were not important, but the processes in which people think when they make their choices. Kant argued only one thing was inherently good, and that was good will. Good will is also doing the right thing, doing one’s duty and respecting moral law. (LaFave 2006) This good will is found only in humans, not material, gives us human’s dignity and is our power of rational moral choice. (Garrett 2006) According to Kant, when we respect moral law we are doing something because it makes us feel good and we are doing it out of duty, not inclinations. Kant argues we know what the moral law is by using Categorical Imperative. The Categorical Imperative states â€Å"Act only on those maxims (or rules of action) that you could, at the same time, will to be universal law. † (Garrett 2006) Three tests must pass to for an act to be considered moral, 1) it must be amenable to being made consistently universal, 2) it must respect rational beings as ends in themselves; and 3) it must stem from and respect the autonomy of rational beings. (DeGeorge p. 64) Immanuel Kant unknowingly created what is now called Kantian philosophy with his works and studies. Not only did he have a major impact on literature and the fine arts, his biggest contribution was to modern philosophy. Kant died in 1804. Works Cited DeGeorge, Richard. Business Ethics. 7th Ed. New Jersey: Prentice Hall, 2010. Print. Garret, Jan. â€Å"Kant’s Duty Ethics. † Wku. edu. Western Kentucky University, 2 October 2006. Web. 12 June 2012. â€Å"Immanuel Kant – Biography. † Eds. edu, European Graduate School, n. d. Web. 12 June 2012. LaFave, Sandra, â€Å"Kant’s Ethics. † Instruct. westvalley. edu. West Valley College, 16 August 2006. Web. 12 June 2012.

The Applications Of Arrow Debreu Model Economics Essay

The Applications Of Arrow Debreu Model Economics Essay According to Elroy Dimson and Massoud Mussavian (1999), Arrow-Debreu model was developed as a model of general equilibrium that has been fundamental to economics and finance. Compared to earlier models, the Arrow-Debreu model basically generalized the notion of a commodity, differentiating commodities by time and place of delivery. For example, apples in Malaysia in July and apples in Singapore in June are considered as different commodities. Kenneth J. Arrow (1951) and Gerard Debreu (1951) work together to produce the first rigorous proof of the existence of a market clearing equilibrium, given certain restrictive assumptions. This field of research has had a profound impact not only on economic science, but also on financial markets, institutions and businesses all over the world. It often used as a general reference for other microeconomic models. As Ramu Gopalan (2008) stated, the pioneering work of Arrow and Debreu has had an enduring effect on the study of financial aspects of the economy in a general equilibrium framework. One of their key contributions is to introduce time and uncertainty into general equilibrium models. The Arrow-Debreu model was established since 1950s, many researchers had extended this model to both economics and financial economics. Although this model is criticized by various eminent economists, the dedication of this model in the history is indestructible. In this assignment, we are going to discuss the applications of Arrow-Debreu model majoring in the financial economics. The purpose of this assignment is to find out and understand more about the contributions of this model to financial theory. The applications of Arrow-Debreu model will be listed out and discussed further. Journals will be shown and summarized out in order to support our discussion. Finally, the last section in this assignment is the conclusion. 2.0 Background studies In this assignment, the applications of Arrow-Debreu model in financial economics will be discussed. But before that we have to know what the Arrow-Debreu model is. 2.1 Arrow-Debreu Model Arrow-Debreu model, also referred as Arrow-Debreu-McKenzie model (ADM model), is the fundamental model used in the General (Economic) Equilibrium Theory. It is named after its originator who are Kenneth J. Arrow (b. 1921) and Gerard Debreu (1921-2004) on Existence of an Equilibrium for a Competitive Economy as well as Lionel W. McKenzie (b. 1919). As what stated in the Farlex Financial Dictionary (2009), it says that this model is one of the most general models of competitive economy and is a crucial part of general equilibrium theory, as it can be used to prove the existence of general equilibrium (or Walrasian equilibrium) of an economy. Once we can prove the existence of such an equilibrium, it is possible to show that it is unique under certain conditions, but not in general. Furthermore, Arrow went on to extend the model to deal with the issues relating to uncertainty, stability of the equilibrium, and whether a competitive equilibrium is efficient. 2.2 Applications of Arrow-Debreu Model Arrow-Debreu model leads to a huge impact on economics and financial economics. First of all, it solves the long-standing problem of proving the existence of equilibrium in a Walrasian (competitive) system. This model analyzes the exact situations of those markets that are very competitive. In economics, Arrow-Debreu model suggests that a set of prices such as aggregate supplies will equal to aggregate demands for every commodity under certain assumptions made about the economic conditions (i.e. perfect competition and demand independence). Formulated in a purely mathematical form, the Arrow-Debreu model can be easily modified into spatial or intertemporal models with proper definition of the commodities based on the commoditys location or time of delivery. When commodities are specified to be conditional on various states of the world, the Arrow-Debreu model can easily combine expectation and uncertainty into the analysis. Besides, theoretical extensions and applications have been made to analyze financial and monetary markets and international trade, as well as other subjects. With a general equilibrium structure, the model is applicable in evaluating the overall impact on resource allocation of policy changes in areas such as taxation, tariff, and price control. Moreover, it applies to all general equilibrium models that are heavily dependent upon accurate mathematical proofs. In the field of financial economics, Arrow Debreu represents a certain kind of securities product which named as Arrow-Debreu security. This distinguished concept is a good teaching tool to understand the pricing and hedging issues in derivatives analysis. On the other hand, the Arrow-Debreu Model is also used in areas like financial engineering. But it has turned out to be very limited, especially in the multi-period or continuous markets. The model has been subject to the criticism that many of the assumptions it makes do not fit the workings of the real economy. However, the truth is that the Arrow-Debreu Model is very important for the derivative industry and helps the industry to grow at a rapid pace. 3.0 Literature Review In previous section, we have mentioned some applications of the Arrow-Debreu model both in the field of economics and financial economics. Now, the applications of this model majoring in financial economics will be discussed further. The functions of Arrow-Debreu model can be divided into six categories, asset pricing model, equity risk premium, corporate finance, Modigliani and Miller Theorem, Arrow-Debreu security and others. 3.1 Asset-pricing model From the studies, most of the Arrow-Debreu models applications are commonly used in shaping the asset-pricing model. Arrow-Debreu model was acted as an origin which gives the insight that consumption in different future states could simply view as different consumption goods according to Elroy and Massoud (1999). This result is proved and can be seen through various researchers journals. It is undeniable that the Arrow-Debreu model plays an important role in constructing the asset-pricing model. The evidences are given in following paragraphs. Based on the journal of Asset Pricing at Millennium written by John Y. Campbell (2000), he stated that theoretical and empirical developments in asset-pricing has taken place within a well establish paradigm for the last twenty years. While the well establish paradigm that he mentioned here is referred to the Arrow-Debreu model. Same as Franklin Allen (2001), he indicated that asset-pricing models are typically special cases of neoclassical Arrow-Debreu model. In the traditional Arrow-Debreu model of resource allocation, firms and households interact through markets and financial intermediaries play no role. On the other hand, the key element of the analysis in the modern version is the stochastic discount factor, which incorporates the Arrow-Debreu state prices and allows the assets to be priced. He also commented that this approach and the focus on the risk-return trade-off have allowed a rich interplay between the empirical and theoretical work. The equity premium puzzle is given as an example of special cases within the Arrow-Debreu framework in order to support his statement. Moreover, Elroy and Massoud (1999) narrated the historical development of asset pricing and derivative valuation on Three Centuries of Asst Pricing. He pointed out the success of conceptual framework that setting up the theory of asset pricing is down to Arrow (1953)s hard work. Dissatisfied with the current Arrow-Debreu framework, Arrow built up a series of contingent claims that follow the resolution of uncertainty to explain how one can achieve markets that are almost complete. Varian (1985) analyzed the impact of divergence of opinion on asset prices in an Arrow-Debreu economy. By considering the Arrow-Debreu model with agents who have different subjective probabilities, he compares and concludes the differences of opinion in an Arrow-Debreu contingent claim context. Based on his journal Divergence of Opinion in Complete Markets: A Note, three results were established. He concluded that in practice, increased dispersion of beliefs will generally be associated with the reduced asset prices in a given Arrow-Debreu equilibrium. Also, he uses this model to show that other things equal, if risk aversion does not decrease too rapidly, then assets with more dispersed opinion will have lower prices or vice versa. P. Bossaerts and C. Plott (2004) had done six financial markets experiments of testing two of the most basic propositions of modern asset pricing theory. The Arrow-Debreu model and the Sharpe-Lintner-Mossin Capital Asset Pricing Model (CAPM), these two theoretical models are used to be the framework of their experiments. In the end of their experiments, they discovered a swift convergence towards equilibrium prices of Arrow-Debreu model or the CAPM. This discovery is significant because they use the subjects that lacked of information to intentionally set the asset prices. Sometimes, the equilibrium is not found to be robust which clearly shows a result of deviations of subjective beliefs from objective probabilities. However, they still find the evidences that prove this does not destroy the tendency for markets to equilibrate as predicted by the theory. 3.2 Equity Risk Premium Next, the Arrow-Debreu model is applied to explain the equity risk premium. In an attempt to explain the equity risk premium, Rajnish Mehra and Edward C. Prescott (1985) developed an Arrow-Debreu asset pricing model. They found that historically the average return on equity has far exceeded the average return on short-term debt and Treasury bills. Thus, they try to use the Arrow-Debreu model to interpret this situation. In the end of the journal The Equity Premium: A Puzzle, they concluded that only those equilibrium model with friction (i.e. non-Arrow-Debreu models) will be the one that successfully explain both high equity risk premium and low risk-free returns. However, Rietz (1988) overthrew the conclusion of Mehra and Prescott (1985) in The Equity Risk Premium: A Puzzle. He mentioned that the reason for them to reject the Arrow-Debreu model is their specifications which cannot explain the high equity risk premium and low risk free returns that characterize the U.S. economy. Hence, he re-specified their model to include a low-probability, depression from a high return of compensation for the extreme losses during the market crashes, captured those possible effects from the market crashes and finally successfully proved that these crashes allow it to explain both high equity risk premium and low risk free returns without abounding the Arrow-Debreu paradigm as well as not altering their models attractive features. In the journal The Equity Risk Premium: A Solution, he explained further that it does so with reasonable degrees of time preference and risk aversion provided the crashes are apparently severe and not too unimaginable. 3.3 Corporate Finance According to Jean Tirole (2006), he specified that a substantial and important body of empirical work has provided a clearer picture of patterns of corporate financing and governance, and of their impact for firm behaviour and macroeconomic activity. One of them is the Arrow-Debreu model. During 1970s, the dominant Arrow-Debreu model of frictionless markets (presumed perfectly competitive and complete, unhampered by taxes, transaction costs, as well as informational irregularity) can prove to be a powerful tool for analyzing the pricing of claims in financial markets, but little about the firms financial choices and about their governance. Besides, in the complete market paradigm of Arrow (1951) and Debreu (1951), the financial claims returns depend on some choices such as investments, are assumed to be contractible and therefore are not affected by moral hazard. In Jean (2006)s opinion, financial markets were not plagued by problems of asymmetric information because investors agree on the distribution of a claims returns. Viewed through the Arrow-Debreu lens, he identified that the key issues for financial economists are the allocation of risk among investors and the pricing of redundant claims by arbitrage. Michael J. Brennan (1995) also clarified that the abstract simplicity of the Arrow-Debreu model yields few insights for corporate finance beyond the value additivity principle that was used to refute the conventional wisdom that conglomerate mergers will add value to the company through the corporate diversification. 3.4 Modigliani and Miller Theorem (M-M Theorem) Another application of Arrow-Debreu model is related to M-M theorem which devised by Franco Modigliani and Merton Miller (1958). This theorem explains that a firms financial structure is irrelevant under certain conditions, Arrow-Debreu environment. The value of a financial claim or a firm which equal to the sum of the values of the claims it issues is thus equal to the value of the random return of this claim or the firm computed at the Arrow-Debreu prices (the prices of state-contingent securities). Therefore, Arrow-Debreu model is used as a fundamental of economy in formulating M-M theorem. 3.5 Arrow-Debreu Security (State Contingent Claim) Mostly, Arrow-Debreu security will be the answer of the applications of this model majoring in financial economics if we searching it through the internet. Based on the journal A re-examination of the Modigliani-Miller theorem written by Joseph E. Stiglitz (1969), in a section entitled Arrow-Debreu securities, he not only showed the M-M theorem in a complete markets setting but also mentioned about the Arrow-Debreu model under uncertainty in which individual can buy or sell the promises to pay if a given state of the world occurs. This shows a direct relationship between the Arrow-Debreu model and the Arrow-Debreu security. Through the calculation, he observed that if he takes literally the Arrow-Debreu definition of a state of nature, there is undoubtedly will be more states of nature than firms and most of these states are similar with each other. An example, variation in the return on stocks can be explained by the business cycle, is given to support his statement. Robert E. Lucas (1984) analyzed the unified theories of money and finance on Money in the Theory of Finance. He examined and commented that financial and monetary theory have different objective, however, the desirable theoretical unity may be, one can identify strong forces that will continue to pull apart these two bodies of theory. He mentioned that the theory of finance is conducted almost entirely within the Arrow-Debreu contingent claim framework such as the three pillars of modern financial theory which have been reformulated in contingent claim terms. Besides, he wrote that the applications of the Arrow-Debreu contingent claim formulation of a competitive equilibrium for an economy operating through time is subjected to stochastic shocks. In the end, he concluded that the power in applications of the contingent claim point of view is obviously evident in finance, will be as usefully applied to monetary theory. One more thing that he suggested is the source of this power which is the ability of this framework to permit the reduction of the study of asset demands to the study of demands for the more fundamental attributes to which assets are claims. 3.6 Others Apart from those above categories, Arrow-Debreu Models can be used for other purpose. For instance, it acts as a fundamental to explain the pattern of trade, to formulate the fixed price equilibrium or to find out whether the financial markets are arrangements for risk-sharing. Furthermore, it is extended further to analyze the restrictions and developed further that include a sequential market model with the financial markets. One of the section in the journal Differences of opinion in financial markets written by Hal R. Varian (1989), an Arrow-Debreu contingent consumption model of the sort studied by Milgrom and Stokey (1982) was examined. Through the mathematical calculation and the analysis of the consequences for assets market equilibrium based on the Arrow-Debreu model, it ends with a similar result, prices are determined by information, but the pattern of trade is determined by differences in opinion. In order to establish the important difference for trade is the opinion, he analyzed some of its consequences for assets market equilibrium. At last, he stressed that the volume of trade in an Arrow-Debreu model is due primarily to the differences of opinion. Next is the Claus Weddepohl (1983). He discussed and addressed the development of the theory of general equilibrium during the last twenty-five years. Considering and analyzing the Arrow-Debreu model with futures markets, he showed the result that this model gives rise to temporary equilibrium models. He stated that the fixed price equilibrium models are formulated through the study of these models and the study of the stability of price adjustments. The simple fixed price equilibrium model as defined by Barro and Grossman (1971) and Malinvaud (1977) is what he emphasized in the journal Developments in the Theory of General Equilibrium. Ouattara (1994) applied the Arrow-Debreu model to the small villages in the McCarthy Island Division South (MID-South) of The Gambia to find out whether financial markets are arrangements for risk-sharing. The main objective of risk-sharing is to verify that observed consumption patterns are consistent with patterns predicted by insurance models. The Arrow-Debreu full insurance model focuses on consumption smoothing across different states of nature at each particular point in time through state-contingent contracts. In the end of his research, the results supported the hypothesis that state-contingent loans are accepted in rural Gambia and there is full risk-sharing among participants in the financial markets. Peter H. Friesen (1979) extended the Arrow-Debreu model to financial markets which include the sequential market model. It is done by dropping the contingent contracts from the Arrow Debreu model, leaving only a sequence of spot markets for commodities. This leads to an inefficient market structure but efficient for sequence of stock markets and option markets. The purpose of the journal The Arrow-Debreu Model Extended to Financial Markets is to develop further the Arrow-Debreu model. The method that he used is through the extension of Arrow (an equilibrium in one model was constructed from that of another). For example, financial securities, Arrow certificates can be constructed from options on common stock and the advantage in the general equilibrium theory of financial markets, are the proofs of using Arrows method. On the other hand, the sequential market model for which equilibrium are constructed from the Arrow-Debreu equilibrium derived in Debreu (1951). From the fact that Arrow-Debreu equilibrium exist, it follows by construction that equilibrium for this model exists. It also follows that the equilibrium is efficient. Peter (1979) stressed that such models are used both to study financial markets and to explore the effects of a gradual resolution of uncertainty. Lastly, he concluded that it not only shows the close relationship between these two models but also reminds us that the potential value of finite-horizon Arrow-Debreu models for the study of sequential economies. Investors in financial markets face several restrictions apart from wealth constraints. So, we have the right to understand the restrictions in a general competitive equilibrium. Based on the journal Contributions to Intertemporal Models in Financial Economics written by Ramu Gopala (2008), the Arrow-Debreu model was extended further for the usage of analyzing those restrictions. He indicated that the traditional Arrow-Debreu model can be extended to a more realistic setting. Following Angeloni and Cornet (2006), this extension of the Arrow-Debreu model in the multi-period setting with restricted participation is established. Arrow-Debreu model was used to elaborate, to compare, to extend and to emerge for shaping those important finance theories. 4.0 Supporting Theories In this section, the theories that are related to Arrow-Debreu model will be further discussed. Apart from that, in order to let us have a more complete picture about this model, the theories that we displayed previously will also be stated and explained, as well as deliberated further. 4.1 General Equilibrium Theory General equilibrium theory is the core of economic theory. Before the Arrow-Debreu model is established, this theory has been proposed by L. Walras (1874). As reported by Arrow and Debreu (1954), he was the one who first formulated the state of economic system at any point of time as the solution of a system of simultaneous equations representing the demand for goods by consumers, the supply of goods by producers, and the equilibrium condition that supply equal demand on every market. In other words, Walras (1874) is the pioneer who first attempts to model the price for a whole economy. Walras uses mathematics to construct a complete structure of general equilibrium theory. This research has lead to results in contribution to neoclassical economics. However, the mathematics that he used to set up the foundation of this theory was unstable due to the existence of general equilibrium does not solved in a satisfactory manner. Hence, theoretically, if he cannot prove this existence, then this theoretical system will become meaningless. General equilibrium theory is therefore developed and improved by Vilfredo Pareto (1897), John R. Hicks (1939), John Von Neumann (1937), Paul A. Samuelson (1941), Kenneth J. Arrow (1954), Gerard Debreu (1954), Lionel W. McKenzie (1954) and others, which becomes an integral part of economics. 4.2 Fundamental Theorems of Welfare Economics Before the Arrow and Debreu began their famous collaboration, both of them had proved the same theorem which is the Fundamental Theorems of Welfare Economics or First and Second Welfare Theorems. There are two fundamental theorems of welfare economics. The first theorem states that every general equilibrium involves a Pareto efficient allocation of resources under the three assumptions. The three assumptions are if there are no externalities, all agents are price-taker, and prices for each good are known to each agent. While the Pareto efficient named after Vilfredo Pareto (1897), is a type of efficiency that results if one person cannot be made better off without making someone else worse off. The First Welfare Theorem is viewed by many economists as the formalization of Smiths Invisible Hand. As Makowski and Ostroy (1995) stated, it provided a set of sufficient conditions for a price system to efficiently coordinate the economic activity. Besides, this theorem supports the case for non-intervention in ideal conditions. For instance, the outcome is said to be Pareto efficient if we let the markets to do the work. The Second Welfare Theorem says that if preferences are well-behaved (especially convex) then every Pareto efficient allocation can be supported by a general equilibrium set of prices, given a suitable reallocation of the endowment. Referring to Varian (1985), this theorem effectively said that if you think an equilibrium is unfair, just move the endowment of the economy and a different general equilibrium will be obtained. Due to the convexity, the second theorem is stronger than the first theorem. The difference between these two theorems is the second theorem requires existence of general equilibrium from all endowment points, whereas the first theorem required only that if a general equilibrium existed it was efficient. According to Michael A. S. Guth (1994), Arrow (1951) provided a rigorous proof of the connection between competitive equilibrium and Pareto optimal. Gerard Debreu (1951) introduced convex analysis methods into welfare theory and independently proved the same theorems. As a result, these theorems have an important relation to Arrow-Debreu model; the existence of solutions to a competitive equilibrium is finally solved. 4. 3 Theories in relation to the Restriction of General Competitive Equilibrium Previously, the Arrow-Debreu model was used to analyze the restrictions. In order to understand those restrictions in the general competitive equilibrium framework, tracing back those following theories is necessary for us to know how the Arrow-Debreu model was used to be compared and proved other economic theory. 4.3.1 Radner Equilibrium Roy Radner said that the Arrow-Debreu model is not originally put forward for the case of uncertainty, but a powerful device introduced by Arrow (1953), and further elaborated by Debreu (1953), enabled the theory to be reinterpreted to cover the case of uncertainty about the availability of resources and about consumption and production possibilities. Hence, he extends the Arrow-Debreu equilibrium and forms an economic concept-Radner Equilibrium. Radner (1972) is the first who considers the general equilibrium with incomplete markets. He shows that unlike the Arrow-Debreu models, the possibility of trading commodity futures for every contingency is sufficient to enable income transfers across all spots. In addition, the assumption that he made, short-sales of these contracts are limited for every agent, is a driving force in his proof of the existence of a general financial equilibrium. This can be seen as the first attempt to incorporate this idea in their asset market participation. 4.3.2 Concept of Constrained Pareto Optimality Radner Equilibrium, however, is imperfect. Oliver D. Hart (1975) uses some disturbing but perceptive counter-examples to display some of the weaknesses of Radners concept of equilibrium. He showed that existence of such an equilibrium cannot be proved under the standard Arrow-Debreu assumptions. He specified that when the asset returns are price dependent, the market sub-space may not be continuous in the spot prices which may lead to discontinuous demand functions. This reason causes a failure of the existence of Radner equilibrium. In other words, an equilibrium may not be Pareto efficient in the case of incomplete markets which shapes the concept of Constrained Pareto Optimality. 4.4 Limitations of Arrow-Debreu Model Although the Arrow-Debreu model has many influences on either economics or finance, however, there are the limitations. There are three limitations of Arrow-Debreu model. In this model, it excludes the trade in shares of firms because the stock certificate is not an Arrow-Debreu commodity. When the descriptions are so precise that further refinements cannot yield imaginable allocations which increase the satisfaction of the agents in the economy, then the commodities are called Arrow-Debreu commodity. Trading in shares of firms cannot be classified as Arrow-Debreu commodity due to its possession entitles the owner to additional commodity which he need not obtain through exchange. Bankruptcy is not allowed in Arrow-Debreu equilibrium. All agents must meet their budget constraints. In a game theoretic formulation of equilibrium, it is achieved by enforcing an infinite bankruptcy penalty. Since every Arrow-Debreu equilibrium is Pareto efficient, there would be no benefit in reducing the bankruptcy penalty to the point where someone might choose to go bankrupt. Money does not appear in this model. Although the reasons for the existence of money in real life are already taken care of in the Arrow-Debreu model, money does not affect the allocations of commodities. Therefore, there is no point in making the role of money explicit in the Arrow-Debreu model. 5.0 Conclusion In fact, Arrow-Debreu model is not simultaneously created by K.J. Arrow and Gerard Debreu. Debreu is the one who extends further the Arrows pure exchange model in several important ways. Their contribution in formulating Arrow-Debreu model has laid a foundation for economic theory. The application of Arrow-Debreu model emphasizes more on the general competitive equilibrium framework of the economics. From the studies, we notice that most of its application majoring in the financial economics is act as a fundamental theory or economy in shaping the asset pricing model. Other functions like analyzing the market structure, risk and etc, also show that the usefulness of this model. Besides, it is applicable in evaluating the impact of all uncertainties with a general equilibrium structure. The analyzers use a series of mathematical equation to prove their statements. The pioneering contributions of Arrow and Debreu have forever changed the way economic theorists formulate uncertainty models.   After more than forty years of analysis and extensions, their general equilibrium framework and approach continues to be the starting point for new theories on the operation of competitive markets under uncertainty. As a conclusion, it is undeniable that the Arrow-Debreu model had turn on a new leaf in the history of economics. It is the modern concept of general equilibrium in economics which indirectly set up several important theories. Nothing is perfect in this world. Of course, Arrow-Debreu model as well. Some assumptions have to be made. Criticism also may happen. However, those brilliant economists or researchers still can use this model to formulate their own theory and then ends up with a perfect ultimate theory in both economics and finance. Lastly, mistakes, problems, and weaknesses should be pointed out, corrected and improved so that Arrow-Debreu model can be applied and developed effectively.

The Big Experience on the Golf Course :: essays research papers

The Big Experience On the Golf Course   Ã‚  Ã‚  Ã‚  Ã‚  Golf is a big experience for me in the first place. Three reasons why this certain tournament was such an experience was because I was the leader of our team. It was for pride against the other players we were playing, and it just was not for the pride it was also for the money and that played a big role in it also. Golf has brought me a long way like going to college and the way I look at certain things now.   Ã‚  Ã‚  Ã‚  Ã‚  Being the captain of our team was a big privilege but it also made me very nervous. I knew that I had to do my part and carry our team because they were counting on me more than anybody else. This was the first time I was ever the leader of the group or the captain as most people call it. Before we started I had a lot of bad thoughts rushing through my head like what if you don’t play good or your team mates get mad because you don’t hit a good shot or that I am not as good as they think I am. This was really a lot of pressure to me, believe it or not. We stepped on the first tee and all my teammates teed off and it was my turn. I teed my ball up took a deep breathe, stepped up to the ball and hit it straight down the middle. My teammates told me â€Å"great shot Dell.† That really relaxed me and I played so good. I was on my game all day long and nothing was going to get my way, not even a tree. I just felt like I could not do anything wrong that day. I kind of felt like I was a machine because everything was just so nice and smooth like a routine would be. Anybody that plays golf on a regular basis knows what I am talking about whenever I say â€Å"my swing just felt so good and smooth.† My teammates were really impressed with my skills. After we were through they were bragging to all the other teams about how good I was and how far I could hit a golf ball. That made me feel good and that I did everything that I could to help out my team. They were really a great team The Big Experience on the Golf Course :: essays research papers The Big Experience On the Golf Course   Ã‚  Ã‚  Ã‚  Ã‚  Golf is a big experience for me in the first place. Three reasons why this certain tournament was such an experience was because I was the leader of our team. It was for pride against the other players we were playing, and it just was not for the pride it was also for the money and that played a big role in it also. Golf has brought me a long way like going to college and the way I look at certain things now.   Ã‚  Ã‚  Ã‚  Ã‚  Being the captain of our team was a big privilege but it also made me very nervous. I knew that I had to do my part and carry our team because they were counting on me more than anybody else. This was the first time I was ever the leader of the group or the captain as most people call it. Before we started I had a lot of bad thoughts rushing through my head like what if you don’t play good or your team mates get mad because you don’t hit a good shot or that I am not as good as they think I am. This was really a lot of pressure to me, believe it or not. We stepped on the first tee and all my teammates teed off and it was my turn. I teed my ball up took a deep breathe, stepped up to the ball and hit it straight down the middle. My teammates told me â€Å"great shot Dell.† That really relaxed me and I played so good. I was on my game all day long and nothing was going to get my way, not even a tree. I just felt like I could not do anything wrong that day. I kind of felt like I was a machine because everything was just so nice and smooth like a routine would be. Anybody that plays golf on a regular basis knows what I am talking about whenever I say â€Å"my swing just felt so good and smooth.† My teammates were really impressed with my skills. After we were through they were bragging to all the other teams about how good I was and how far I could hit a golf ball. That made me feel good and that I did everything that I could to help out my team. They were really a great team

Failure of Parliamentary Democracy in Germany and Hitler’s Rise to Powe

Failure of Parliamentary Democracy in Germany and Hitler’s Rise to Power German history is seen as a ‘painful issue for thousands of Germans and other Europeans’ . However it has interested many historians over the years into inquiring how and why Hitler came to power and how much of this was to do with the failure of parliamentary democracy in Germany. To fully ascertain to what extent these events have in common and what reasons led to the fall of democracy and rise of the Nazis, each have to be looked at individually. Also it seems beneficial, to be able to evaluate these in the relevant context, to look at the situation in Germany was in prior to 1920. In 1919, the treaty of Versailles was signed marking the end of World War One. Soon after, the Weimar republic was established. It was hoped that this democratic constitution would mark a turning point for Germany. Turning the people of Germany away from the authoritarian style of government they were used to, towards a more stable democracy. Since the German nation was used to being ruled, rather than ruling itself, it was a hard transition to accomplish. Democracy was a new concept within Germany and many people were willing to look to the left and right wings for political leadership. Also World War One had created an unsettling influence on the people of Germany and the establishment of Weimar, with its wish for freedom and democracy hoped to settle this. In essence Weimar faced many problems from the outset; it had to cope with not only political challenges, but economic problems, structural weaknesses and the legacy of World War One. Weimar had also inherited the ruins of a con quered autocracy, a ruined economy and two ruthlessly anti-democratic political extremes The Weimar Republic did not start on a good footing, since the first president was not democratically elected; instead Friedrich Ebert took the first oath of constitution on Prince Max’s command. Some believe that the structure of Weimar was the main reason for its failure. There were many flaws in the constitution, which prohibited it from becoming a western style of democracy. The first thing to look at is how the constitution was established. After World War One, the German people were divided, those to the left believed that they had been lied to and deceived into fighting a war for the upper class. The Right believed th... ...2. Between the July and November elections the Nazi party lost 34 seats. However the implementation of Schleicher, to attract trade unionists and members of the NSDAP, only succeeded in making Hitler’s position in the Nazi party stronger. This was because Schleicher’s ‘policy of diagonal’ only attracted Strasser, for which he was ousted from the Nazi party. This was Hitler’s main opponent in the quest for leadership of the nazi party. The Weimar Republic's demise and Hitler’s rise to power are very inter-linked. This can be shown by the static enrolment for the Nazi party when Stresseman brought Germany into the era of the ‘golden years’. It could be said that opposition to democracy rose and fell in harmony with movements in prosperity.’ Hitler exploited this with his political astuteness of knowing what and when to promise things in the ‘new’ Germany. Many reasons for the fall of democracy also link to Hitler’s rise of power. It could be argued that if Weimar had been a stronger constitution then Hitler would not have come to power. However Hitler was an opportunist and I believe that if Weimar had survived Hitler would have found another way to rise to Germany’s dictator.

Gays Adopting Children Essay

Society is a flexible structure. Only this way it can serve the best way for its members. Democratic process is aimed to increase the rights of its citizens. Nowadays the theme of sexuality becomes an important social issue. Recognition of rights of homosexuals is an important process, which signifies that a lot of people are ready to express freely their sexual preferences and are ready to fight for their rights. Legalization of homosexual marriages and the right of such couples to adopt children is an important and controversial issue of our time. â€Å"Researchers estimate that the total number of children nationwide living with at least one gay parent ranges from six to 14 million† (Gottman, 105). At the present moment many countries legalized the right of lesbian and gay couples to adapt children. Such countries as Andorra, Belgium, Guam, Iceland, the Netherlands, Sweden, South Africa, Spain, the United Kingdom. It is also legal in some separate parts of the Australia, Canada and the United States. In the United States of America 22 states allow lesbian and gay couples to adopt children. The issue is so burning because for homosexual parents adopting becomes the only way to have a child. Even the artificial insemination can not be applied in all cases. First of all this method can be used only for lesbian couples. In addition another spouse form the couple has to adopt a child in order to become his legal parent. For gay couples this method can not be applied. In addition, adopting is a right of each person. That is the reason the question is more important than just an opportunity for homosexual couples to have children. In April 2001 Holland enlarged the definition of marriage and enabled the people of the same sex to get married. Same did Belgium in 2003. The next was Canada. Same sex couples can get married in San Francisco since February 12 of the 2004, because of an action by their mayor. The question of the legislation of homosexual marriages becomes more and more burning and needs a deep survey. There are a lot of reasons against same sex marriages. One of the reasons is that homosexual marriages contradict the tradition. The idea of homosexual marriages threats the very idea of the sanctity of the marriage. The term â€Å"marriage† should refer to a loving relationship between man and woman. The institution of marriage considers the union of two adults of different sex living together. For centuries the marriage was considered just between the people of the opposite sex and by now the marriage of the people of the same sex can be wrong on an evolutionary scale (Coolidge, 1997). People don’t have much faith in the marriage institutions now and the legislation of the heterosexual marriages can weaken this faith. In addition, if the homosexual marriages are legalized to protect the freedom of human why there should be other restrictions for the marriages such as marring the relative or the age of getting married? So called domino effect can cause the demand to cancel all kinds of restrictions on the marriages. If the marriages between the people of the same sex can be accepted like a demonstration of the free will of the individuals, why can’t be accepted the marriage between the brother and the sister or other close relatives? In the case of legalization of homosexual marriages we speak only about the rights of homosexual people. The issue becomes much more complicated when it comes to adopting children. In this case the rights of both, homosexual parents and the rights of adopted children should be considered. Since children are not able to express their own will during the process of adoption, the society must make an important choice deciding on the rights of children. From the other hand it is necessary to mind the right of homosexual couples, who also have their rights and desires. There are many arguments pro and contra adopting children by homosexual couples. Those who stand for giving homosexual couples this right state that all people must have rights to adopt children. If both parents are able to give their child all normal conditions for living, there is no reason to ban homosexual parents to adopt children. Those, who are against this right, state that homosexual couple will not be able to provide normal life conditions for children. In this case the question about â€Å"normality† arises. Social norms are expanded with each year. Homosexual relations, which were considered sinful and even criminal several centuries ago, become a social norm nowadays. This means that the meaning of â€Å"normal† family structure and â€Å"normal† life conditions can also be transformed with the flow of time. Those, who support an idea to give the right of adopting to homosexual couples state that many children wait for adoption and giving this right to homosexual couple would help to improve the situation. In addition specialists, who stand for the legalization of the right of homosexual couples to adopt children state that only small number of children from heterosexual families have normal life conditions. â€Å"Most children in the United States do not live with two married parents. In fact, according to the 2000 census, only 24% homes were composed of a married mother and father with children living at home. † (Green,1978, p. 19) In the case with homosexual family the children will have two parents, even if they are of the same sex. In â€Å"normal† families children often have only one parent. The proponents of legalization of adoption give data, which proves that children, grown up in one-parent and homosexual families, have same level of emotional and social adaptation as children from heterosexual families. This means that homosexuality of parents has little effect on the development of a child. As state specialists, children are more influenced by their relations with their parents and social surrounding than by the sexual orientation of their parents. Even the American Association of Paediatrics agreed with this opinion and supported the legalization of adoption. In addition, if we turn to legal issues, there is no official reasons to ban homosexual couples to adapt children. There is no special amendment in the Constitution, which would deny gay and lesbian couples their rights to adopt children. Most courts, which should make a decision concerning adopting, are be driven by the interests of a child. It is evident that for children having non-traditional family with loving parents is much better than not have any. If sexual orientation of parents has little impact on the living conditions of their children, homosexuality of parents should not be an obstacle for adopting of a child. There are no serious objections, which would prove that gay and lesbian couples will make bad parents. â€Å"Home environments with lesbian and gay parents are as likely to successfully support a child’s development as those with heterosexual parents† (Schelberg, Mitnick 2006) Specialists state that here is not connection between sexual orientation and parenting skills. This means that homosexual people can be perfect parents, same as heterosexual people can be bad ones. In addition there is a legal controversy, concerning the right to adoption. Legally, even single parents have right to adopt children. Here arises a kind of controversy since one person can adopt a child but he or she can not do the same thing if he has a spouse of the same sex. Those, who stand against the legalization of homosexual’s right to adopt a child give their arguments in order to support their position. They state that homosexual environment can have an extremely negative effect on child’s development. Some researches (Golombok, Tasker) state that children, raised by homosexual parents, are more likely to adopt same patterns of sexual behaviour. In other words children, raised in homosexual families have more chances to become homosexuals as well. As Golombok and Tasker state: â€Å"by creating a climate of acceptance or rejection of homosexuality within the family, parents may have some impact on their children’s sexual experimentation as heterosexual, lesbian or gay† (Golombok, Tasker, 1993, p. 124). According to their opinion homosexual couples should not be giving a right to adoption. Sexuality is not only personal affair. It’s also social phenomenon society has to deal with. Woodhorse talks about the fortification of gender roles and restrictions to this roles brought to the social culture by transvestites. He believes that cross-dressing and transvestites make a potential danger for the society as it can lead to the displacement of gender categories and gender roles. â€Å"On a social and cultural level the two groups (male and female) are equally restricted. † (Woodhouse,1996, p. 117). The marriage is an institution aiming to create a family first of all and the family presumes giving birth to children. Homosexual marriage create no opportunities for natural reproduction. Modern science gave people opportunities to have children even in the same sex marriage but a number of problems appear. It’s commonly known that men and women are equal creatures and have same rights and obligations but they are not identical and usually presume different models of behavior, models of reactions and thinking. A lot of research made by scientists proves that the child needs both – a mother and a father to become a full personality (Donovan, 2001). There are some things during the upbringing which can be taken only from women’s or only from men’s behavior patters. The children raised in the homosexual families will not have the opportunity to see both –female and male behavioral patters, which can cause serious problems for their future life. In addition the children raised in a homosexual surrounding are more probably to pick up same lifestyle in the future and to copy the model of homosexual relationship. Another problem the children from the homosexual families can and most probably will come across is an attitude of the surrounding. The children can meet a social hostility from the very beginning of their social interaction due to their family background which can make more difficult the social adaptation in the future (Stone 2006). A lot of homosexual couples meet social and religious disapproval but they have chosen their type of behavior themselves and must be responsible for their decisions. The children raised in the homosexual families do not have this choice. Negative attitude of the church to same sex marriages can create additional problems for children. Another problem appears with the children, adopted by gay couples. The patters of family behavior, which are presented in homosexual families, are very different from patterns, peculiar to heterosexual families. This issue is very important since children most probably will adapt the type of relations they see in their family. Homosexual relations usually are thought to be not traditional ones and talking about sexuality in this type of relations is difficult due to the multiple variations of these relations. There are a lot of distinctions between homosexual and heterosexual relationships. Complementary nature of the most heterosexual relations is not so evident in homosexual ones. In most of the homosexual relations there is a division, which is expressed more directly in heterosexual relations. In homosexual relations two people take different roles. Usually, in both, female and male homosexual relationship there are active and passive partners. The roles may change but usually the division to active and passive partner is saved and this relation is usually transmitted to other spheres of life of the couple. Passive partner usually takes female roles in sex and everyday behaviour. An active partner plays the role of the man accordingly. There are derivations in the models of homosexual relations. Tapinc (1992) distinguishes four additional models of homosexual relations. In the first model both males are homosexual. This is one of traditional homosexual models. â€Å"The homosexual mail pair consists of the erastes and the eromenos, ‘lover’ and ‘beloved’; we can infer an active/passive division, but strictly speaking these are not examples of inserter/receptor terminology. (Norton, p. 2002 5) Homosexual male relations are rarely monogamous. Journal of Sex Research made a study of the sexual profiles of 2,583 older homosexuals. â€Å"Research found that only 2. 7 percent claimed to have had sex with one partner only. Research elsewhere indicated that only a few homosexual relationships last longer than two years, with many men reporting hundreds of lifetime partners† (Bozett 1993, p. 112). This way if homosexual parents get an opportunity to adopt children, this most probably will result in the transformation of the role and functions of family. Children, grown up in such untraditional families with untraditional family values, will use this model in their future families. This may result in the increase of the families with untraditional family values. Possible consequences of this phenomenon are very hard to predict. To sum up, there are many reasons for and against adopting children by gay and lesbian couples, There is no one definite opinion concerning this issue. The debates concerning this subject are hold in several spheres, such as religions, social and political ones. A lot of important factors should be considered in order to take a right decision concerning this issue. Adopting concerns the rights of both – children and homosexual couples and decision should the best way serve to the interests of both sides. References 1. Atlanta Journal-Constitution, (2002, Oct 4). NA. Retrieved February 19, 2008, from Database. Gale Power Search. 2 . Bailey, J. M. , Bobrow, D. , Wolfe, M. & Mikach, S. (1995), Sexual orientation of adult sons of gay fathers, Developmental Psychology, 31, 124-129; 3. Bozett, F. W. (1987). Children of gay fathers, F. W. Bozett (Ed. ), Gay and Lesbian Parents (pp. 39-57), New York: Praeger; 4. Coolidge, David Orgon, (March 1997). â€Å"Same-Sex Marriage? Baehr v. Miike and the Meaning of Marriage,† South Texas Law Review, 38:1-119 5. Davidson, Arnold (1987) ‘Sex and the emergence of sexuality’, Critical Inquiry, 14 (Autumn), 16-48, reprinted in 6. Stein, Edward (ed. ), Forms of desire (1992, 1990), 89-132. 7. Donovan, (2001,Sept 14). Judge upholds Florida ban on gay adoption. National Catholic Reporter, p. 37, 39. 8. Gay rights. The Advocate, (2002, April 30). p. 18(1). 9. Gottman, J. S. (1991), Children of gay and lesbian parents, F. W. Bozett & M. B. Sussman, (Eds. ), Homosexuality and Family Relations (pp. 177-196), New York: Harrington Park Press; 10. Golombok, S. , Spencer, A. , & Rutter, M. (1983), Children in lesbian and single-parent households: psychosexual and psychiatric appraisal, Journal of Child Psychology and Psychiatry, 24, 551-572; 11. Green, R. (1978), Sexual identity of 37 children raised by homosexual or transsexual parents, American Journal of Psychiatry, 135, 692-697; Huggins, S. L. 12. Lewin, Tamar (2001, August 31). Court backs Florida ban on adoption by gays. The New York Times, p. A14 13. Stone, Andrea (2006, Feb 21). Drives to ban gay adoption heat up. USA Today, p. 01A. 14. Schelberg, Neal S. and Carrie L. Mitnick, (2004). â€Å"Same-Sex Marriage: the Evolving Landscape for Employee Benefits,†