A Leland model for delta hedging in central risk books

Using a tractable extension of the model of Leland (1985), we study how a delta-hedging strategy can realistically be implemented using market and limit orders in a centralized, automated market-making desk that integrates trading and liquidity provision for both options and their underlyings. In the continuous-time limit, the optimal limit-order exposure can be computed explicitly by a pointwise maximization. It is determined by the relative magnitudes of adverse selection, bid–ask spreads, and volatilities. The corresponding option price—from which the option can be replicated using market and limit orders—is characterized via a nonlinear PDE. Our results highlight the benefit of tactical liquidity provision for contrarian trading strategies, even for a trading desk that is not a competitive market maker. More generally, the paper also showcases how reduced-form models are competitive with “brute force” numerical approaches to market microstructure. Both the estimation of microstructure parameters and the simulation of the optimal trading strategy are made concrete and reconciled with real-life high frequency data.     

Who pays attention to sustainability reports and why? Evidence from Google search activity

We introduce country-level Google search activity as a direct measure of the level of stakeholder attention directed towards sustainability reports. We validate this measure by establishing that search activity for sustainability reports is correlated with temporal patterns in firms' supply of these reports. To frame the economic magnitude of this search behaviour, we then show that the level of attention directed towards sustainability reports is very low compared to the level of attention directed towards financial and accounting information. Next, we examine two related research questions. First, we identify who pays attention to sustainability reports. We find, consistent with the environmental Kuznets curve, that attention towards sustainability reports is strongly associated with economic development. Consistent with findings in prior research that suggest citizens in stakeholder-oriented countries have stronger preferences for firms to act prosocially, we also find that search activity for sustainability reports relative to search activity for financial performance metrics is greater in civil law countries than in common law countries. Finally, we then explore the question of why individuals pay attention to sustainability reports and find evidence that suggests sustainability reports are used for two primary purposes: evaluating the societal impacts of firms' actions; and, firm valuation.     

Marital status and hospital use in older adults

The proportion of single person households is increasing with population ageing. At older ages living in a single person household is more likely to be due to bereavement or separation than at younger ages. We examine the association between marital status and the likelihood and the length of hospitalisations, with particular emphasis on whether and how this association varies by different types of hospitalisations with a distinct nature of care. Using a large survey linked to multiple years of detailed administrative records enables us to better control for individual heterogeneity and allows us to conduct a finer classification of hospitalisations. A two-part model is used for estimation. We also investigate the relationship between marital status and the presentations to emergency department. The results show singles have an increased probability of hospitalisation and length of stay, with a substantial heterogeneity revealed in the association between marital status and different types of hospitalisations. The findings are consistent with the lesser availability of informal care for those being single and point to the need to develop appropriate and targeted strategies to reduce hospitalisation in this group.     

Acción colectiva sindical,sindicalismo social y libertad de los trabajadores en Nueva Zelandia

La libertad de asociación puede englobar el derecho sindical a emprender acciones colectivas en interés de los afiliados. En ese sentido, se presume que los sindicatos aumentan la libertad de los trabajadores. Sin embargo, no se ha estudiado suficientemente la vinculación entre esa libertad, entendida como realización personal, y la acción colectiva sindical que crea coaliciones con la sociedad civil. Partiendo de los conceptos de libertad de Berlin (1969) y MacCallum (1967), en este artículo se evalúa cómo influyen esas coaliciones en la libertad de los trabajadores. Posteriormente, desde una perspectiva democrática radical (Laclau y Mouffe 2001) de la participación sindical en el movimiento de transición justa en Nueva Zelandia, se examina si los sindicatos amplían esa libertad.