The affine arbitrage-free class of Nelson-Siegel term structure models

We derive the class of affine arbitrage-free dynamic term structure models that approximate the widely used Nelson-Siegel yield curve specification. These arbitrage-free Nelson-Siegel (AFNS) models can be expressed as slightly restricted versions of the canonical representation of the three-factor affine arbitrage-free model. Imposing the Nelson-Siegel structure on the canonical model greatly facilitates estimation and can improve predictive performance. In the future, AFNS models appear likely to be a useful workhorse representation for term structure research.     

Minimum-cost portfolio insurance

Minimum-cost portfolio insurance is an investment strategy that enables an investor to avoid losses while still capturing gains of a payoff of a portfolio at minimum cost. If derivative markets are complete, then holding a put option in conjunction with the reference portfolio provides minimum-cost insurance at arbitrary arbitrage-free security prices. We derive a characterization of incomplete derivative markets in which the minimum-cost portfolio insurance is independent of arbitrage-free security prices. Our characterization relies on the theory of lattice-subspaces. We establish that a necessary and sufficient condition for price-independent minimum-cost portfolio insurance is that the asset span is a lattice-subspace of the space of contingent claims. If the asset span is a lattice-subspace, then the minimum-cost portfolio insurance can be easily calculated as a portfolio that replicates the targeted payoff in a subset of states which is the same for every reference portfolio.     

Equal risk pricing under convex trading constraints

In an incomplete market model where convex trading constraints are imposed upon the underlying assets, it is no longer possible to obtain unique arbitrage-free prices for derivatives using standard replication arguments. Most existing derivative pricing approaches involve the selection of a suitable martingale measure or the optimisation of utility functions as well as risk measures from the perspective of a single trader.We propose a new and effective derivative pricing method, referred to as the equal risk pricing approach, for markets with convex trading constraints. The approach analyses the risk exposure of both the buyer and seller of the derivative, and seeks an equal risk price which evenly distributes the expected loss for both parties under optimal hedging. The existence and uniqueness of the equal risk price are established for both European and American options. Furthermore, if the trading constraints are removed, the equal risk price agrees with the standard arbitrage-free price.Finally, the equal risk pricing approach is applied to a constrained Black–Scholes market model where short-selling is banned. In particular, simple pricing formulas are derived for European calls, European puts and American puts.     

Model-free stochastic collocation for an arbitrage-free implied volatility: Part I

This paper explains how to calibrate a stochastic collocation polynomial against market option prices directly. The method is first applied to the interpolation of short-maturity equity option prices in a fully arbitrage-free manner and then to the joint calibration of the constant maturity swap convexity adjustments with the interest rate swaptions smile. To conclude, we explore some limitations of the stochastic collocation technique.

     

To sigmoid-based functional description of the volatility smile

We propose a new static parameterization of the implied volatility surface which is constructed by using polynomials of sigmoid functions combined with some other terms. This parameterization is flexible enough to fit market implied volatilities which demonstrate smile or skew. An arbitrage-free calibration algorithm is considered that constructs the implied volatility surface as a grid in the strike-expiration space and guarantees a lack of arbitrage at every node of this grid. We also demonstrate how to construct an arbitrage-free interpolation and extrapolation in time, as well as build a local volatility and implied pdf surfaces. Asymptotic behavior of this parameterization is discussed, as well as results on stability of the calibrated parameters are presented. Numerical examples show robustness of the proposed approach in building all these surfaces as well as demonstrate a better quality of the fit as compared with some known models.     

Bond immunization for additive interest rate shocks

This paper explores bond immunization for additive term structure models. This class of term structures contains many models that are commonly used in the duration and immunization literature. We establish the necessary and sufficient conditions for immunization and prove the existence of a bond portfolio that satisfies the immunization condition. Based upon the immunization condition, we develop a general definition of duration that applies to any additives term structure model.     

Road to recovery: Managing an epidemic

Without widespread immunization, the road to recovery from the current COVID-19 lockdowns will optimally follow a path that finds the difficult balance between the social and economic benefits of liberty and the toll from the disease. We provide an approach that combines epidemiology and economic models, taking as given that the maximum capacity of the healthcare system imposes a constraint that must not be exceeded. Treating the transmission rate as a decreasing function of the severity of the lockdown, we first determine the minimal lockdown that satisfies this constraint using an epidemiology model with a homogeneous population to predict future demand for healthcare. Allowing for a heterogeneous population, we then derive the optimal lockdown policy under the assumption of homogeneous mixing and show that it is characterized by a bang–bang solution. Possibilities such as the capacity of the healthcare system increasing or a vaccine arriving at some point in the future do not substantively impact the dynamically optimal policy until such an event actually occurs.     

No-Arbitrage ROM simulation

Ledermann et al. (2011) propose random orthogonal matrix (ROM) simulation for generating multivariate samples matching means and covariances exactly. Its computational efficiency compared to standard Monte Carlo methods makes it an interesting alternative. In this paper we enhance this method׳s attractiveness by focusing on applications in finance. Many financial applications require simulated asset returns to be free of arbitrage opportunities. We analytically derive no-arbitrage bounds for expected excess returns to be used in the context of ROM simulation, and we establish the theoretical relation between the number of states (i.e., the sample size) and the size of (no-)arbitrage regions. Based on these results, we present a No-Arbitrage ROM simulation algorithm, which generates arbitrage-free random samples by purposefully rotating a simplex. Hence, the proposed algorithm completely avoids any need for checking samples for arbitrage. Compared to the alternative of (potentially frequent) re-sampling followed by arbitrage checks, it is considerably more efficient. As a by-product, we provide interesting geometrical insights into affine transformations associated with the No-Arbitrage ROM simulation algorithm.     

多渠道环境下产品分销及协调策略

文中构建了由一个制造商与一个零售商组成的双渠道供应链模型,提出了三种不同条件下的决策模型。研究了双渠道环境下产品分销及协调结构中的利益分享。研究发现品牌差异化并不是协调渠道冲突的主导分销策略。制造商采用协调结构并进行利益分享可以最大化整个供应链的利益,同时对于每个渠道成员都是双赢的。     

Frequentist model averaging for multinomial and ordered logit models

Multinomial and ordered Logit models are quantitative techniques which are used in a range of disciplines nowadays. When applying these techniques, practitioners usually select a single model using either information-based criteria or pretesting. In this paper, we consider the alternative strategy of combining models rather than selecting a single model. Our strategy of weight choice for the candidate models is based on the minimization of a plug-in estimator of the asymptotic squared error risk of the model average estimator. Theoretical justifications of this model averaging strategy are provided, and a Monte Carlo study shows that the forecasts produced by the proposed strategy are often more accurate than those produced by other common model selection and model averaging strategies, especially when the regressors are only mildly to moderately correlated and the true model contains few zero coefficients. An empirical example based on credit rating data is used to illustrate the proposed method. To reduce the computational burden, we also consider a model screening step that eliminates some of the very poor models before averaging.     

资源视角下的企业法律战略选择——以雅芳为例

本文从资源基础理论的视角出发对已有理论难以解释的外国公司法律行为进行了探索性研究,构建战略选择模型,将企业法律战略的选择分为防御型、机会型和参与型三种,认为企业可以根据不同的内部资源和法律环境选择单独的某种法律战略或者多种法律战略的组合。     

Sustainability among Norwegian maritime firms: Green strategy and innovation as mediators of long-term orientation and emission reduction

This study investigates the relationships between emission reduction, long-term orientation, green strategy, and green innovation among maritime vessel-owning firms of various sizes in the Norwegian maritime sector. A change from the utilization of fossil fuels and move toward more sustainable sources of energy demand substantial financial investments and behavioral changes but are fundamental to preventing further climate change. This study examines the greening of the Norwegian fleet through a structural equation model based upon 246 survey responses. Although our model does not show a significant direct relationship between long-term orientation and emission reductions, we do find that long-term orientation is indirectly related to emission reductions because of its relationships with green strategy and green innovation. Moreover, as mediators, green innovation and green strategy share direct associations with firms' reductions of greenhouse gases and environmentally harmful emissions. Implications for practitioners and policy makers are proposed.     

供应链环境下基于服务水平约束的联合库存模型

联合库存(JMI)是供应链库存管理研究的一个热点,近年来引起了不少学者的注意。联合生产库存模型是研究联合库存策略的主要模型之一。考虑一个典型的单一产品的二级供应链系统:单供货商(卖方)-单销售商(买方),假定企业不允许缺货以及外部对买方的需求量是一个服从正态分布的随机变量,建立了基于服务水平约束的联合生产库存模型;利用文献[6]中的数值例子验证了模型的有效性,文章同时也为联合库存策略的实施提供了一种简单易于控制的思路和方法。     

Bayesian smooth-and-match inference for ordinary differential equations models linear in the parameters

Dynamic processes are crucial in many empirical fields, such as in oceanography, climate science, and engineering. Processes that evolve through time are often well described by systems of ordinary differential equations (ODEs). Fitting ODEs to data has long been a bottleneck because the analytical solution of general systems of ODEs is often not explicitly available. We focus on a class of inference techniques that uses smoothing to avoid direct integration. In particular, we develop a Bayesian smooth-and-match strategy that approximates the ODE solution while performing Bayesian inference on the model parameters. We incorporate in the strategy two main sources of uncertainty: the noise level of the measured observations and the model approximation error. We assess the performance of the proposed approach in an extensive simulation study and on a canonical data set of neuronal electrical activity.     

Less is more: A theory of minimalist luxury

We show theoretically that when high-quality, low-price counterfeits exist and are visibly indistinguishable from authentic products, the status-seeking wealthy may embrace a “less is more” purchasing strategy or what we refer to as the minimalist luxury strategy, to signal their status. These are the wealthy who have a high disutility of shopping for counterfeits. Specifically, in our model, only buyers know the authenticity of their own purchases. Because of this information asymmetry, these wealthy buyers may purposefully restrain from consuming luxury goods as a sacrifice of functional utility to stand out, a signaling strategy that the rest are not willing to mimic. Thus, “less” functional utility allows those status-seeking wealthy to enjoy “more” symbolic utility that the society bestows on their perceived status. This minimalist luxury strategy is in sharp contrast to Veblen's conspicuous consumption strategy, as well as to the maximalist luxury strategy proposed by Liu et al. We derive this minimalist luxury equilibrium, discuss how signaling in our context can differ from that of Veblen and Liu et al., and explore its managerial implications for the luxury goods industry.     

A much robust and updated evidences of the alternative real-estate based asset pricing

To response Harvey, Liu and Zhu’s and Gospodinov, Kan and Robotti’s criticism for an empirical study, we develop an alternative real-estate based model in asset pricing for an updated robustness. We make an innovation for the perspective of practitioners: the real-estate pricing factor is an alternative excess return of real estate portfolio. The results suggest that an updated and much robust role of the real-estate based asset pricing model: for example, the t-statistic of the real-estate pricing factor is higher than 3.00, suggesting that one is not derived from a data mining strategy. Moreover, we examine the performance of our alternative real-estate based model in a series of various portfolios (sorted in some vital anomalies); eventually, the results statistically support the real-estate based model.     

需求受库存水平影响三级供应链协调策略研究

在一个由制造商、分销商、零售商组成的三层供应链系统．研究需求受库存水平影响的供应链协调问题。首先在非合作的情况下确定各个参与者的利润和零售商的最优订购量;然后用收益共享契约来对供应链系统进行协调。得出一个协调策略．研究结果证明该模型不仅能提高零售商的利润．还能提高分销商和制造商的利润。通过研究分析给出各个协调参数的有效值域;最后。给出一个数值算例。     

Increasing Corporate Social Responsibility Through an Employee-centered Approach

As the Corporate Social Responsibility (CSR) literature has developed, it appears that a dominant paradigm has emerged. Both scholars who study CSR and those who write about its organizational application have largely converged on CSR as an organizational strategy issue. Viewing CSR as a matter of top-level strategy unwittingly links it to a particular conceptualization of organizational change—a top-down perspective. We suggest that the dominance of this traditional view of organizational change is limiting the study of CSR. Thus, we seek to increase awareness of an alternative model, one that complements the strategic view. Specifically, we describe a model of CSR organizational change that suggests two things. First we assert that significant change can be initiated at lower organizational levels as well as from the top. And second, we suggest that the change can be accomplished in small steps and involve only a portion of the organization, as opposed to an overarching organizational strategy. We present our employee-centered approach to CSR change as an addition to the traditional top-down view.     

Semiparametric estimation of consumer demand systems in real expenditure

Microdata concerning consumer demand typically show considerable variation in real expenditures, but very little variation in prices. We propose a semiparametric strategy for the consumer demand problem in which expenditure share equations are estimated nonparametrically in the real expenditure direction and estimated parametrically (with fixed or varying coefficients) in price directions. In our model, Engel curves are unrestricted: demands may have any rank. Because the demand model is derived from a cost function, it may be restricted to satisfy integrability and used for consumer surplus calculations. Since real expenditure is unobserved, but rather estimated under the model, we face a semiparametric model with a nonparametrically generated regressor. We show efficient convergence rates for parametric and nonparametric components. We illustrate the feasibility of our proposed strategy using Canadian expenditure and price data: Engel curves display curvature which cannot be encompassed by standard parametric models. We also find that the rationality restriction of Slutsky symmetry is rejected in the fixed‐coefficients model, but not in the varying‐coefficients model. Copyright © 2009 John Wiley & Sons, Ltd.     

First-price auctions where one of the bidders’ valuations is common knowledge

We analyze a private and independent valuation first-price auction under the assumption that one of the bidders’ valuations is common knowledge. We show that no pure strategy equilibrium exists and we characterize a mixed strategy equilibrium in which the bidder whose valuation is common knowledge randomizes her bid while the other bidders play pure strategies. In an example with the uniform distribution, we compare the expected profits of seller and buyers in this auction with those in a standard symmetric private valuation model.