Overview

Along with the development of economic globalization, many countries have begun to relax their controls on their capital accounts. However, the recent financial crises in Latin American countries as well as the exchange rate crises in Southeast Asian countries have shown that there is major risk associated with capital account liberalization. This book details the benefits and risks of capital account liberalization and explains how to take an open-door policy at the appropriate time in order to reduce the risk to the lowest possible level. Supplying a complete mathematical analysis framework for the study of the problem of capital account liberalization, it presents a few important models that have been developed for the study of capital account liberalization. Next, the book examines the influence of capital account liberalization on the stability of financial markets by greatly expanding the scope of ordinary differential equation theory to the analysis of local stabilities. It conveys cutting-edge results while providing a general yet simple analysis framework, enriched with practical experiences from developing countries. This book applies the theory of limit cycles to the study of problems related to capital account liberalization and discusses the contagion of financial crises among different countries. Many problems related to capital account liberalization are formulated as optimization models, showing the fact that much broader economic issues can be solved by employing optimization methods. The book concludes by comparing the contagion effect of financial markets between nations with a relatively high degree of openness with those characterized by a moderate degree of openness. Explaining how to determine optimal capital inflows and outflows, this book provides you with the understanding required to accurately determine the characteristics, backgrounds, causes, and roles of capital account liberalization and relevant capital flows.

Full Product Details

Author:   Ying Yirong ,  Jeffrey Yi-Lin Forrest
Publisher:   Taylor & Francis Ebooks
Imprint:   CRC Press
ISBN:  

9781498712279

ISBN 10:   1498712274
Pages:   445
Publication Date:   07 May 2015
Audience:   General/trade ,  College/higher education ,  General ,  Tertiary & Higher Education
Format:   Electronic book text
Publisher's Status:   Active
Availability:   In stock  
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Table of Contents

From Theory to Visualization: General Analysis Framework in Finance Mathematical Applications in Finance Synergetic Approach Mathematical Models in Finance Mathematical Principles in Finance Financial Balances Equation A Model in Canonical Form Rationality of Behavior Rational Expectations Principle Model of the Russian Economy in the Crisis Period Model of the Japanese Economy in the Crisis Period Mathematical Estimations in Finance Introduction Estimation Conclusions Mathematical Approximations in Finance Introduction Main Results Conclusions Game Theory in Finance Model Assumptions Evolutionary Game Model Stability Analysis Model Summary Visualization Technology in Finance Introduction Self-Organizing Maps Clustering of the SOM Identifying Systemic Financial Crises From Micheal to Heckscher-Ohlin: ODE for Capital Account Liberation General Theory of Ordinary Differential Equations Basic Concepts of Ordinary Differential Equations Systems with Constant Coefficients Dynamic Path of Nonperforming Loans: First-Order ODE Introduction Hypothesis The Model Analysis Conclusions Stock Market's Liquidity Risk: Second-Order ODE Introduction The Model Exogenous Shocks Numerical Example Stability of Michael Model under Capital Control: Two-Dimensional Systems (I) Introduction The Model Stability Analysis Conclusions Exchange Rate Fluctuations under Capital Control: Two-Dimensional Systems (II) Introduction Stability Analysis Conclusions Dynamic Optimization of Competitive Agents: Three-Dimensional Systems Introduction The Model Analysis Conclusions Dynamic Heckscher-Ohlin Model: Four-Dimensional Systems Introduction The Model Local Stability Analysis Conclusions Instability: Risk of Capital Flow Introduction Instability sigma Empirical Examples Conclusion From European to Asian Option: PDE for Capital Account Liberation General Method of Parabolic Partial Differential Equations of Second Order Pricing of Carbon Emission Cost: Linear Parabolic PDEs (I) Introduction The Model The Calculation Conclusions Pricing of Foreign Currency Option: Linear Parabolic PDEs (II) Introduction The Model The Solution Pricing of Credit Default Swaps: Linear Parabolic PDEs (III) Introduction The Model The Solution Pricing of Forward Exchange Rate: Linear Parabolic PDEs (IV) Pricing of Arithmetic Average Asian Option: Nonlinear Parabolic PDEs(I) Introduction The Lemma Decomposition of the Solution Estimation for Error Estimation of the Error Term Conclusions Pricing of European Exchange Options: Nonlinear Parabolic PDEs (II) Introduction Foreign Exchange Option with Fractional Brownian Motion Conclusions From Financial Crises to Currency Substitution: Limit Cycle Theory for Capital Account Liberation General Theory of Limit Cycles Poincare Problem: Quadratic Polynomial Differential Systems (I) Introduction Foreign Assets and Foreign Liabilities: Quadratic Polynomial Differential Systems (II) Introduction Macroeconomic Model Dynamics Analysis Conclusion Dynamics of Employment: Cubic Polynomial Differential Systems (I) Introduction Model Calculation Conclusions Contagion of Financial Crisis: Cubic Polynomial Differential Systems (II) Introduction Model Analysis Conclusions Contagion of Currency Crises: Fractional Differential Systems (I) Introduction Model and Analysis Conclusions Contagion of Currency Crises with Extra-Absorption: Fractional Differential Systems (II). Introduction Dynamic Model between Two Countries Stability Analysis Conclusions Thomas Constraint in Currency Substitutions General Theory Extended Thomas Model Conclusions Relative Risk Aversion Coefficient Introduction Analysis of Relative Risk Aversion Coefficients Conclusions From Normal to Abnormal Flow of Capital: Optimizations for Capital Account Liberation Optimization Models in Finance Hot Money and Serial Financial Crises: Objectives with Recursively Defined Variables Dutch Disease and Optimal Taxation: Objectives with Linear Multivariable Optimal Growth Rate of Consumable Resource: Objectives with Discrete Variables Dynamics of Ecosystem Service Provision: Objectives with Bivariate Factors Illiquid Markets with Discrete Order Flows: Objectives Double Integrals Optimal Time of Removing Quarantine Bans: Objectives with Infinite Integrals Risk Premium and Exchange Rates: Objectives with Utility Function Endowment Risk and Monetary Policy: Objectives with Integrals of Utility Functions Optimal Asset Allocation: Continuous Objective Functions Verdier Equation: Differential Constraint Conditions Introduction Solution of Verdier Equation Asset Pricing Based on Quadric Programming: Discrete Objective Function Introduction Modeling Solutions of (P1) Example Conclusions Abnormal Flows of Capital: Discrete Constraint Conditions Introduction Model Visualization Numerical Example Conclusions From Underground Economics to Financial Contagion: Regressions for Capital Account Liberation General Methods of Regression Analysis Sample Mean Linear Regression Model Mean of Least-Squares Estimator Variance of Least-Squares Estimator Gauss-Markov Theorem Residuals Estimation of Error Variance Mean-Square Forecast Error Covariance Matrix Estimation under Homoskedasticity Covariance Matrix Estimation under Heteroskedasticity Measures of Fit Who Controls the Future? Presidential Election and Economic Policy in America Background Model Data Regression Results Gone with the Wind: Cigarette Taxes in the State Background Data Linear Regression Model Conclusions Undercurrents: The Underground Economy and Financial Development Background Linear Model Data Conclusions Who Cares about My Health? The Baumol Model Background Nonlinear Model Regression Results Conclusions Sail against the Current: Held Currencies in Own Hands Background Model Data Conclusions Nowhere to Hide: Financial Contagion Effects Background SVAR Modeling Regression Financial Contagion Effect between Markets with High Capital Account Openness Financial Contagion Effect between Markets with At Least Moderate Capital Account Liberation References Index

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Author Information

Ying Yirong is professor of finance and is associate chair of the Department of Finance, College of Economics, Shanghai University, Shanghai, China. He earned his BSc in mathematics in 1982 from the Mathematics Department of Northwest University (China) and his PhD in mathematics in 2000 from the Mathematics Department of Xidian University. In 2002, Dr. Yirong did one year of postdoctoral study at the Institute of Contemporary Finance, Shanghai Jiao-Tong University. Professor Yirong has taught many different courses in the areas of economics and finance, such as econometrics, financial economics, financial physics, applied statistics, financial engineering, economic cybernetics, and low carbon economy. His research interests include financial engineering, financial mathematics, securities pricing, and risk management. Jeffrey Yi-Lin Forrest holds all his educational degrees (BSc, MS, and PhD) in pure mathematics, respectively, from Northwest University (China), Auburn University (United States), and Carnegie Mellon University (United States), where he has one-year postdoctoral experience in statistics. Currently, he is a guest or specially appointed professor in economics, finance, systems science, and mathematics at several major universities in China, including Huazhong University of Science and Technology, the National University of Defense Technology, and Nanjing University of Aeronautics and Astronautics, and a tenured professor of mathematics at the Pennsylvania State System of Higher Education (Slippery Rock campus). Since 1993, Dr. Forrest has been serving as the president of the International Institute for General Systems Studies, Inc. Along with various professional endeavors he has organized, Dr. Forrest has had the honor to mobilize scholars from more than 80 countries representing more than 50 different scientific disciplines.

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