Commodity option pricing efficiency before Black,Scholes, and Merton

It is often thought that the arrival of the Black–Scholes–Merton (BSM) model of option pricing in the early 1970s allowed traders to understand how to price and value options with greater precision. However, our study suggests that interwar commodity options traders may have been able to intuit ‘fair’ value and to adjust their prices to changes in the market environment well before the advent of this innovative model. A scarcity of historical price data has limited empirical tests of option price efficiency well before BSM to studies of stock options in the 1870s and the early twentieth century which revealed contrasting findings. This study deals with option pricing in a different market—commodities—during the interwar period. We conclude that option prices were closer to their BSM theoretical values than prior studies suggest. Institutional differences between interwar commodity options markets and stock options markets in the 1870s and the early twentieth century may partly account for this result. Furthermore, we find that interwar option prices were no more mispriced than in modern times, and were as sensitive to changes in volatility—the key valuation parameter in the BSM model.     

Black-Scholes公式中无风险利率常数假设的一种改进

Black-Scholes公式中无风险利率的常数假设与现实不符。本文假设无风险利率在一个区间中变动,讨论求期权价格区间问题。首先将此问题归结为一个随机最优控制问题,然后利用动态规划原理得到期权价格区间上下限满足的模型以及模型解法,并利用最优静态对冲缩小此价格区间,最后以BaiDu股票期权为例给出了模型在期权市场上的应用,提供了一种期权市场上的套利识别方法并与Black-Scholes公式的结果做了比较。     

US pressure on China: Silver flows, deflation, and the 1934 Shanghai credit crunch

US pressure for Chinese currency appreciation in the face of a weakening dollar was initially resisted in the post-2003 period. No such option was available in the 1930s, however, when dollar weakness was accompanied by silver purchases that automatically drove up the value of China's old silver-based currency. New empirical evidence suggests a significant link between the policy-induced driving up of US silver prices and Chinese exchange rate appreciation and price deflation. Moreover, the reversal of the silver flow into Shanghai as large-scale US purchases began in 1934 appears to have been met by a credit crunch in that city—as evidenced by bank failures, and real estate and stock market declines. The silver flow from the interior to Shanghai had previously insulated the financial center from the credit shortages faced elsewhere in China after deflation first emerged in 1932–1933.     

Should We Be Afraid of Friedman's Rule?

Should one think of zero nominal interest rates as an undesirable liquidity trap or as the desirable Friedman rule? I use three different frameworks to discuss this issue. First, I restate H. L. Cole and N. Kocherlakota's (1998, Fed. Res. Bank Minn. Quart. Rev., Spring, 2–10) analysis of Friedman's rule: short run increases in the money stock—whether through issuing spending coupons, open market operations, or foreign exchange intervention—change nothing as long as the money stock shrinks in the long run. Second, two simple Keynesian models of the inflationary process with a zero lower bound on nomianl interest rates imply either that deflationary spirals should be common or that a policy close to the Friedman rule and thus some deflation is optimal. Finally, a formal baby-sitting coop model implies multiple equilibria, but does not support the injection of liquidity to restore the good equilibrium, in contrast to P. Krugman (1998, Slate, August 13). J. Japan. Int. Econ., December 2000, 14(4), pp. 261–303. CenER, Tilburg University; Humboldt University, Berlin, Germany; and CEPR Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E31, E41, E50, E51, E52.     

Market supplanting versus market fostering interventions: China, East Asia and other developing countries

The paper investigates the relationship between growth and different types of government intervention by distinguishing “market supplanting” regimes from “market fostering” interventions. A lesson from the East Asian miracle was not that governments necessarily intervened less, but they intervened efficiently in a relatively transparent and flexible way that kept overall distortions in check. China's reforms can be considered a transition from a “market supplanting” regime where market signals are distorted over long periods, to “market fostering” interventions in which government acts like a gardener. Alternative measures of government interventions were used to construct two composite policy indexes. Preliminary analysis suggests that “market fostering” interventions seem to have facilitated growth in productivity, although the result is inconclusive due to data limitations. Compared with the East Asian NIEs, China still has a long way to go in reforming the role of government in the economy.     

Why People Pay Taxes: The Case of the Development Levy in Tanzania

This paper examines factors determining tax compliance behavior in local authorities in Tanzania. The case study is the poll tax—locally named “development levy.” The study finds support for the hypothesis that tax compliance is positively related to factors such as ability to pay, the (perceived) probability of being prosecuted, and the number of tax evaders known personally by the respondent. Oppressive tax enforcement, harassment of taxpayers, and discontent with public service delivery seem to increase tax resistance and may explain widespread tax evasion.     

Questioning the Relationship between Participation and Development: A case study of the Vale do Ribeira, Brazil

Through the analysis of two participatory forums active in the Vale do Ribeira (Brazil)—the Committee for the Management of Water Resources (CGRH) and the Consortium of Food Safety and Local Development (Consad)—this article discusses the argument that “well designed” institutions enable the inclusion of a broader spectrum of actors in political debates, as well as reduce the asymmetries between them thereby facilitating the negotiation and agreement of politically and economically viable projects that would help to encourage development in the region. The two forums were observed in terms of how they dealt with two polemical regional issues: the proposal to build a big dam, a process which has been going on for more than a decade and the definition of a program of sustainable development capable of reconciling environmental conservation and growth in the local economy. The analysis suggests that during the period of research, these forums recreated in the participatory sphere coalitions that were already present in the regional political scene, thereby acting as an extension of the party political game rather than as arenas where new arrangements of actors could agree on alternative projects. From a theoretical perspective, this result raises again the question of the origin and the change of institutions, in that it questions the mechanisms necessary for the creation of institutions explicitly designed to alter the status quo.     

Invoerrechten en het actieve veredelingsverkeer in de E.E.G.

Summary An exporting manufacturer may incorporate in his product imported raw materials or semi-finished products that are subject to an import duty. It will depend on the regulations of his country whether he automatically gets his import duty refunded or has ro apply for a licence to that end. In the latter case the granting of such a licence will depend on the kind of product, and on the economic and political conditions in his country. The author of this article attempts to show:(1) that in the majority of cases an import duty on a product which is going to be reexported, is detrimental to the economy of the country itself, both a short and at long term; and(2) that both methods of refund may work in a community administered by a single, objective and efficient government.If no central government exists, as for example, in the case of the European Common Market, each country will retain jurisducton over refund of import duties at export to countries outside the E.C.M.-area, unless — which is preferable — refund on exports to countries outside the common market is made automatic by common consent.     

Thinking About the Liquidity Trap

The phenomenon of the liquidity trap—defined as a situation in which even a zero interest rate is insufficiently low to produce full employment—has taken on new importance with the persistent slump in Japan. This paper restates recent theoretical work on liquidity traps, drawing a link between “intertemporal” models that are mainly concerned with demonstrating the underlying logic, and more ad hoc models that bear directly on policy; it then reexamines policy alternatives, including fiscal stimulus and inflation targeting. J. Japan. Int. Econ., December 2000, 14(4), pp. 221–237. Woodrow Wilson School, Princeton University, Princeton, New Jersey 08544-1013 Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E52, E58, E31, F31.     

我国董事的专业性与政府背景分析

文章以1995-2009年沪深两市13815个A股上市公司样本为研究对象,实证研究了公司所有权类型、所在地区市场化的程度与董事的专业性、政府背景的关系。研究发现,当上市公司是国有企业,尤其是地方控股企业时,董事会中有专业知识的董事较少,但有政府背景的董事较多。当上市公司处在市场化程度较高的地区时,董事会成员中有专业知识的董事较多,有政府背景的董事较少。当董事会中有专业背景但没有政府背景的董事人数较多时,公司经营业绩越好;当有政府背景但不具有专业背景的人数较多时,公司经营业绩越差。本文的研究在丰富了公司治理文献的同时,对于了解我国董事会的构成以及决定因素提供重要的实证证据。     

Why India is mainly engaged in offshore service activities,while China is disproportionately engaged in manufacturing?

We extend the model of Antràs and Helpman (Antràs, P., Helpman, E., 2004. Global Sourcing. Journal of Political Economy 112(3), 552–580) by incorporating the merits of Zhang and Markusen (Zhang, K.H., Markusen, J.R., 1999. Vertical Multinationals and Host-country Characteristics. Journal of Development Economics 59(2), 233–252.) to demonstrate why China has been so successful in disproportionately attracting foreign offshore manufacturing activities, while India has been engaged mainly in offshore service activities. We argue that the host country's industry-specific technology capabilities make the difference in FDI composition between China and India. In addition to incomplete contract frictions, the host country's technological capabilities, which affect technology transfer costs, are essential to FDI inflows. We also find that, after excluding overseas Chinese investment, India is almost on par with China in terms of the market size it offers to marketing-seeking FDI.     

Unemployment, Well-Being, and Wage Curves in Eastern and Central Europe

The paper studies the labor markets of 23 transition countries from eastern and central Europe—Albania, Armenia, Belarus, Bulgaria, Croatia, Czech Republic, East Germany, Estonia, Georgia, Hungary, Kazakhstan, Kyrgyzstan, Latvia, Lithuania Macedonia, Moldova, Poland, Romania, Russia, Slovakia, Slovenia, Ukraine, and Yugoslavia. It uses new micro-data from a large number of surveys on over 200,000 randomly sampled individuals from these countries for the years 1990–1997. The microeconometric structure of unemployment regression equations in the nations of eastern Europe appears to be similar to the industrialised west. Estimation of east European wage curves produces a local unemployment elasticity of between –0.1 and –0.3. This is somewhat larger in absolute terms than has been found elsewhere. On a variety of attitudinal measures, eastern Europeans said they were less contented than their western European counterparts. The strongest support for the changes that have occurred in eastern Europe is to be found among men, the young, the most educated, students, and the employed and particularly the self-employed. Support for market reforms is particularly low amongst the unemployed who were found to be particularly unhappy on two well-being measures. J. Japan. Int. Econ., December 2001, 15(4), pp. 364–402. Department of Economics, Dartmouth College, New Hampshire 03755; and NBER.     

Externalities,Cross-Sectoral Spillovers and Productivity Growth

We provide an interpretation of the productivity dynamics in the manufacturing sector based on the idea of the thick market externality à la Diamond. An econometric model has been estimated which allows to disentangle the long run effects of these trading externalities from those of internal economies of scale and of aggregate industry-level economies. The results obtained—based on a cointegrated system of non-linear-error-correction equations—confirm the hypothesis that the trading externality matters. Moreover, our findings point out that the emphasis generally posited both on internal and external economies of scale is not justified.     

Market microstructure and price discovery on the Tokyo Stock Exchange

This paper compares the price discovery processes at the opening and closing transactions for the fifty largest stocks trading on the Tokyo Stock Exchange. Open-to-open returns are found to have a greater volatility and a more negative autocorrelation pattern than close-to-close returns, similar to the pattern we found on the New York Stock Exchange. The results are consistent with pricing over-reaction at the opening and partial price-adjustment at the close. These patterns persist over time and prevail when estimated for returns conditional on the contemporaneous market effect. Our analysis of daytime and overnight returns suggest that pricing errors at the opening are corrected over the trading day. We present a new measure of volatility — the relative dispersion of stock returns around the market return — and find that it is greater at the opening, consistent with a more noisy price discovery process.     

How regulatory changes affect IPO underpricing in China

This paper examines the underpricing of IPOs in the Chinese A-share market during the period 1992–2006. Since its inception, the Chinese IPO market has transformed from a tightly-controlled system to a more market-oriented system. Reforms include the abolishment of listing quotas and fixed issue price determination; allowing for more market participation in IPO pricing. The regulatory changes of Chinese IPO market, though improving over time, actually are not monotonic. The regulatory framework started from over-restrictive to over-unrestrictive, then fine-tuned with additional restrictions. This study documents the regulatory reforms during the sample period and investigates how these regulatory changes affect IPO underpricing in China. During this period, we find that Chinese IPOs exhibit a huge underpricing. The size of the underpricing, however, decreases over the sample period. This study further finds that the IPO pricing method before the regulatory changes, which was based on a fixed P/E ratio pre-determined by the regulators, contributed significantly to the IPO underpricing in China. After adopting a series of regulatory reforms allowing underwriters discretion in the determination of issue price, this regulatory underpricing component vanishes. This study has policy implications in demonstrating the impacts of regulatory frameworks on IPO underpricing.     

权证定价分析：极端之间的游移

本文采用Black-Scholes模型分析了中国权证市场存在的定价错误和价格泡沫现象。发现在牛市阶段有近30％的认购权证定价低于其内在价值,同时还发现权证隐含波动率显著超过正股实际波动率。通过对市场因素、正股因素及权证因素的回归分析,本文认为造成两种对立现象并存的原因在于套利机制的缺失造成的正股市场和权证市场脱节,以及权证交易者显著的非理性行为。     

Post-Conflict Reconstruction and the Challenge to International Organizations: The Case of El Salvador

Countries in post-conflict transitions have to reconcile the development challenge with the additional burden of reconstruction and national reconciliation. This paper first describes the peculiarities of these countries which make them clearly different from those pursuing normal development. Second is a discussion of the challenges that these transitions pose on the countries involved and on the international organizations that support them. Third, the paper illustrates through a discussion of El Salvador—by all standards a success story—how the International Monetary Fund and the United Nations had to adapt to meet the challenges of post-conflict reconstruction. The paper concludes with some policy recommendations.     

Option Trading,Price Discovery,and Earnings News Dissemination*

Abstract. Option market activity increases by more than 10 percent in the four days before quarterly earnings announcements. We show that the direction of this preannouncement trading foreshadows subsequent earnings news. Specifically, we find option traders initiate a greater proportion of long (short) positions immediately before “good” (“bad”) earnings news. Midquote returns to active-side option trades are positive during nonannouncement periods and are significantly higher immediately prior to earnings announcements. Bid-ask spreads for options widen during the announcement period, but traders do not gravitate toward high delta contracts. Collectively, the evidence shows option traders participate generally in price discovery (the incorporation of private information in price), and more specifically in the dissemination of earnings news.     

The choice between PIPE and SEO in China

China's private investment in public equity (PIPE) market has exceeded the aggregate proceeds raised by its seasoned equity offering (SEO) market. Taking into account the institutional and regulatory backgrounds of China's secondary equity markets, this paper examines how listed firms choose between PIPE and SEO. Firms with both options tend to be induced by the greater flexibility in its equity offering mechanism to choose PIPE over SEO, particularly when stock price volatility is high or the market is performing poorly. SEO issuers are more likely to time the stock market. Post issuance abnormal returns, in both short- and long-run tend to be higher for PIPE than for SEO issuers.     

Managing Stock Option Expense: The Manipulation of Option‐Pricing Model Assumptions*

This paper examines whether firms that voluntarily recognize stock option expense in their financial statements manage that expense downward more than firms that do not recognize the expense by adjusting option‐pricing model assumptions. To examine this issue, I collect option‐pricing model assumptions from fiscal year 2002 for both a sample of firms that voluntarily recognize stock option expense (“recognizing firms”) and a sample of control firms that do not (“disclosing firms”). The empirical results suggest that recognizing firms manage the recognized stock‐based compensation expense reported in their financial statements downward more than do firms that only disclose the expense. Additional analyses reveal that recognizing firms assume a lower level of volatility than disclosing firms in the option‐pricing model calculations; however, I find no evidence that recognizing firms manage the dividend yield and risk‐free interest rate assumptions more than disclosing firms. The Financial Accounting Standards Board (FASB) recently issued Statement of Financial Accounting Standards No. 123(R), which requires the expensing of the fair value of stock options, so these results may be of interest to capital‐market participants and the FASB as they assess the reliability of stock option expense as determined by option‐pricing models.