Implementing fisher Black's simple discounting rule

We propose a simple implementation of Black’s (1988) elegant rule for discounting uncertain future cash flows. Black’s rule avoids the thorny problem of estimating an appropriate risk-adjusted discount rate. Instead, the rule calls for discounting conditional mean cash flows at appropriate riskless interest rates. Our contribution in this article is to describe and illustrate a method of estimating the conditional mean cash flows called for in Black’s rule. The method is quite flexible with respect to the types of information available concerning the distributions of future cash flows. We argue that this approach to computing present values offers a theoretically sound and generally feasible addition to the toolbox of financial managers.

Risk adjustment in aging societies

Background In Switzerland, age is the predominant driver of solidarity transfers in risk adjustment (RA). Concerns have been voiced regarding growing imbalances in cost sharing between young and old insured due to demographic changes (larger fraction of elderly >65 years and rise in average age). Particularly young adults aged 19–25 with limited incomes have to shoulder increasing solidarity burdens. Between 1996 and 2011, monthly intergenerational solidarity payments for young adults have doubled from CHF 87 to CHF 182, which corresponds to the highest absolute transfer increase of all age groups. Results By constructing models for age-specific RA growth and for calculating the lifetime sum of RA transfers we investigated the causes and consequences of demographic changes on RA payments. The models suggest that the main driver for RA increases in the past was below average health care expenditure (HCE) growth in young adults, which was only half as high (average 2% per year) compared with older adults (average 4% per year). Shifts in age group distributions were only accountable for 2% of the CHF 95 rise in RA payments. Despite rising risk adjustment debts for young insured the balance of lifetime transfers remains positive as long as HCE growth rates are greater than the discount rate used in this model (3%). Moreover, the life-cycle model predicts that the lifetime rate of return on RA payments may even be further increased by demographic changes. Nevertheless, continued growth of RA contributions may overwhelm vulnerable age groups such as young adults. We therefore propose methods to limit the burden of social health insurance for specific age groups (e.g. young adults in Switzerland) by capping solidarity payments. Conclusions Taken together, our mathematical modelling framework helps to gain a better understanding of how demographic changes interact with risk adjustment and how redistribution of funds between age groups can be controlled without inducing further selection incentives. Those methods can help to construct more equitable systems of health financing in light of population aging.

The effect of periodontal therapy on the survival rate and incidence of complications of multirooted teeth with furcation involvement after an observation period of at least 5 years: a systematic review

OBJECTIVE: To systematically review the survival rate and incidence of complications of furcation-involved multirooted teeth following periodontal therapy after at least 5 years. MATERIAL AND METHODS: Electronic and manual searches were performed up to and including January 2008. Publication selection, data extraction and validity assessment were performed independently by three reviewers. RESULTS: Twenty-two publications met the inclusion criteria. Because of the heterogeneity of the data, a meta-analysis could not be performed. The survival rate of molars treated non-surgically was >90% after 5-9 years. The corresponding values for the different surgical procedures were: Surgical therapy: 43.1% to 96%, observation period: 5-53 years. Tunnelling procedures: 42.9% to 92.9%, observation period: 5-8 years. Surgical resective procedures including amputation(s) and hemisections: 62% to 100%, observation period: 5-13 years. Guided tissue regeneration (GTR): 83.3% to 100%, observation period: 5-12 years. The most frequent complications included caries in the furcation area after tunnelling procedures and root fractures after root-resective procedures. CONCLUSIONS: Good long-term survival rates (up to 100%) of multirooted teeth with furcation involvement were obtained following various therapeutic approaches. Initial furcation involvement (Degree I) could be successfully managed by non-surgical mechanical debridement. Vertical root fractures and endodontic failures were the most frequent complications observed following resective procedures.

Natural Hedging of Exchange Rate Risk: The Role of Imported Input Prices

In this paper, we estimate ERPT into imported input prices and export prices using disaggregated quarterly trade data for Switzerland over 2004–2011. We find evidence for high pass-through rates into imported input prices. This demonstrates the effectiveness of natural hedging. On the export side, ERPT exhibits substantial sectoral heterogeneity and changes in imported input costs are not transmitted to foreign consumers in most cases. This suggests the use of cheaper imported inputs to offset adverse effects of currency appreciation on export profit margins.