Performance Regularity: A New Class of Executive Compensation Packages

The ability of standard executive stock options to incite managers to adequately select the assets of their firm has been extensively questioned by academics and practitioners. However, very few alternatives exist or have been proposed to better control the investment strategies of top managers. The present article studies the evaluation and sensitivity of a new class of executive stock options well designed for the control of managers. Such packages are aimed at giving incentives to CEOs to maintain a regular performance over time and a stable volatility level. The importance and implications of the choice of the different parameters as well as their robustness with respect to standard financial criteria are examined. In brief, this article studies in a utility-based framework a new type of executive stock options that can be useful to protect and enhance the economic performance of corporations.     

湖南经济周期阶段的分析与预测

根据湖南1978～2010年相关数据对湖南经济周期阶段进行分析,结果表明:1978～2010年湖南经济经历了5个繁荣时期,分别是1978～1979年、1984～1986年、1991～1993年、1995～1998年、2006～2010年,且繁荣阶段的持续性在不断增强;其余年份经济处于衰退阶段。另外,湖南经济周期阶段预测结果显示:2011～2012年经济依然处于繁荣阶段;2013～2015经济处于衰退阶段,虽然处于衰退阶段,但是其程度并不深,尤其是2015年。     

Impermanent types and permanent reputations

We study the impact of unobservable stochastic replacements for the long-run player in the classical reputation model with a long-run player and a series of short-run players. We provide explicit lower bounds on the Nash equilibrium payoffs of a long-run player, both ex-ante and following any positive probability history. Under general conditions on the convergence rates of the discount factor to one and of the rate of replacement to zero, both bounds converge to the Stackelberg payoff if the type space is sufficiently rich. These limiting conditions hold in particular if the game is played very frequently.     

Impact of service personal values on service value and customer loyalty: a cross-service industry study

This study investigates the customer’s perception of service value based on theory of personal values. A formative structural model is developed and tested using the data surveyed from three service industries in Vietnam. Results show a positive impact of service personal values on service value. Then, service value and satisfaction are proved as two mediating constructs in the impact of service personal values on customer loyalty. Satisfaction and loyalty are, thus, not only determined by the supplier’s service itself, but also the customer’s personal values. This consolidates the value co-creation perspective rather than the traditional value exchange in service research.     

How users’ Internet experience affects the adoption of mobile payment: a mediation model

Mobile payment becomes a convenient way to complete transactions due to the increasing popularity of mobile devices and the maturity of related technologies. Users’ experience of using computers and the Internet in financial activities largely affects their intention to use mobile payment. Combining the Technology Acceptance Model and Innovation Diffusion Theory, we examined the mediating effect of five factors, that is, perceived usefulness, perceived ease of use, compatibility, risk, and privacy concern, in the relationship between Internet experience and the adoption of mobile payment. Data from 922 mobile users supported the partial mediating effects of the five factors.     

Risk-neutral and actual default probabilities with an endogenous bankruptcy jump-diffusion model

This paper focuses on historical and risk-neutral default probabilities in a structural model, when the firm assets dynamics are modeled by a double exponential jump diffusion process. Relying on the Leland [(1994a) Journal of Finance, 49, 1213–1252; (1994b) Bond prices, yield spreads, and optimal capital structure with default risk. Working paper no. 240, IBER, University of California, Berkeley] or Leland and Toft [(1996) Journal of Finance, 51(3), 987–1019] endogenous structural approaches, as formalized by Hilberink and Rogers [(2002) Finance and Stochastics, 6(2), 237–263], this article gives a coherent construction of historical default probabilities. The risk-neutral world where evolve the firm assets, modeled by a class of geometric Lévy processes, is constructed based on the Esscher measure, yielding useful and new analytical relations between historical and risk-neutral probabilities. We do a complete numerical analysis of the predictions of our framework, and compare these predictions with actual data. In particular, this new framework displays an enhanced predictive power w.r.t. current Gaussian endogenous structural models.      

Market Access and Welfare under Free Trade Agreements: Textiles under NAFTA

The effective market access granted to textiles and apparelunder the North American Free Trade Agreement (NAFTA) is estimated,taking into account the presence of rules of origin. First,estimates are provided of the effect of tariff preferences combinedwith rules of origin on the border prices of Mexican final goodsexported to the United States and of U.S. intermediate goodsexported to Mexico, based on eight-digit Harmonized System tariff-linedata. A third of the estimated rise in the border price of Mexicanapparel products is found to compensate for the cost of complyingwith NAFTA’s rules of origin, and NAFTA is found to haveraised the price of U.S. intermediate goods exported to Mexicoby around 12 percent, with downstream rules of origin accountingfor a third of that increase. Second, simulations are used toestimate welfare gains for Mexican exporters from preferentialmarket access under NAFTA. The presence of rules of origin isfound to approximately halve these gains.     

From Libertinism to Marital Commitment: The Economics of Marital Search with Heterogeneous Agents

Synopsis The actual characteristics and desires of candidates or marriage cannot be clearly identified without careful examination (Anderson & Hamori 2000). Accordingly, the classified advertisement system looks like a market or lemons (Akerlof 1970), which sharply contrasts with the matchmaking agency system. The continued existence of classified advertisement system just proves it furthers the goals of certain singles—namely, libertine females and libertine males. The present paper uses two databases: the first database consists of a sample of personal advertisements extracted from a specialized publication; the second database is the customer file of a matchmaking agency. This paper predicts which variables will determine the commitment level desired by individuals and why matchmaking agencies customers are more sincere than advertisers.     

Approximation and Calibration of Short-Term Implied Volatilities Under Jump-Diffusion Stochastic Volatility

We derive an asymptotic expansion formula for option impliedvolatility under a two-factor jump-diffusion stochastic volatilitymodel when time-to-maturity is small. We further propose a simplecalibration procedure of an arbitrary parametric model to short-termnear-the-money implied volatilities. An important advantageof our approximation is that it is free of the unobserved spotvolatility. Therefore, the model can be calibrated on optiondata pooled across different calendar dates to extract informationfrom the dynamics of the implied volatility smile. An exampleof calibration to a sample of S&P 500 option prices is provided.(JEL G12)     

Does the stock market value bank diversification?

This paper investigates whether or not functionally diversified banks have a comparative advantage in terms of long-term performance/risk profile compared to their specialized competitors. To that end, this study uses market-based measures of return potential and bank risk. We calculate the franchise value over time of European banks as a measure of their long-run performance potential. In addition, we measure risk as both the systematic and the idiosyncratic risk components derived from a bank stock return model. Finally, we analyze the return/risk trade-off implied in different functional diversification strategies using a panel data analysis over the period 1989–2004. A higher share of non-interest income in total income affects banks’ franchise values positively. Diversification of revenue streams from distinct financial activities increases the systematic risk of banks while the effect on the idiosyncratic risk component is non-linear and predominantly downward-sloping. These findings have conflicting implications for different stakeholders, such as investors, bank shareholders, bank managers and bank supervisors.