Robust hedging with proportional transaction costs

A duality for robust hedging with proportional transaction costs of path-dependent European options is obtained in a discrete-time financial market with one risky asset. The investor’s portfolio consists of a dynamically traded stock and a static position in vanilla options, which can be exercised at maturity. Trading of both options and stock is subject to proportional transaction costs. The main theorem is a duality between hedging and a Monge–Kantorovich-type optimization problem. In this dual transport problem, the optimization is over all probability measures that satisfy an approximate martingale condition related to consistent price systems, in addition to an approximate marginal constraint.     

Duality and convergence for binomial markets with friction

We prove limit theorems for the super-replication cost of European options in a binomial model with friction. Examples covered are markets with proportional transaction costs and illiquid markets. A dual representation for the super-replication cost in these models is obtained and used to prove the limit theorems. In particular, the existence of a liquidity premium for the continuous-time limit of the model proposed in Çetin et al. (Finance Stoch. 8:311–341, 2004) is proved. Hence, this paper extends the previous convergence result of Gökay and Soner (Math Finance 22:250–276, 2012) to the general non-Markovian case. Moreover, the special case of small transaction costs yields, in the continuous limit, the G-expectation of Peng as earlier proved by Kusuoka (Ann. Appl. Probab. 5:198–221, 1995).     

Estimation of food demand in Turkey: method of an almost ideal demand system

In this study, data of the household income and consumption expenditure surveys conducted by the Turkish Statistical Institute for 1994 and 2003 years were used; income, price, and cross price elasticities under six aggregated product groups were estimated within the framework of the an almost ideal demand system approach for food expenditures; and estimation of household consumers’ food demand in Turkey was analyzed. According to the findings obtained, it was established that a price-bound change would appear in the food demand, and elasticities were calculated. Expenditures by product groups and price elasticities were obtained, and the product groups were aggregated as bread and cereals; meat, fish, and poultry; milk and dairy products, oil and egg; vegetables and fruits; various fast food and alcoholic and non-alcoholic beverages.     

Examining the returns of American depository receipts: Evidence from emerging and developed markets

The purpose of this article is to explain the returns of American Depository Receipts (ADRs), comparing the results across emerging and developed markets. Using a sample of 167 ADRs from 14 emerging and 17 developed markets (31 markets in total) for the period 2000–2004, we found variations in the impacts of specific variables and in the explanatory power of models associated with the annual holding‐period return of firms. Dividing ADRs into emerging and developed markets suggests that firm size and local market conditions influenced returns in the two groups in similar ways. However, firm‐specific business risk and country‐specific economic risk are only important to emerging markets' ADRs, while country‐specific exchange‐rate variables are more important to developed markets' ADRs. © 2009 Wiley Periodicals, Inc.     

Macroeconomic performance index: a new approach to calculation of economic wellbeing

Since the rise of the global financial crisis, there has been revival of interest in performance indexes that measure the overall stance of the economy and the wellbeing of households. Such indexes typically consist of inflation, growth, employment and long-term interest rates. We develop such an index by appending exchange rate and weighting each variable by the inverse of its variance in order to prevent the more volatile variable to dominate the index. We call this macroeconomic performance index (MPI) and argue that such an index better explains the overall economic stance especially in emerging economies. We generate the index using data from three emerging economies, namely Turkey, Brazil and Poland. Our analysis indicates that the index has a nonlinear structure and hence we analyse its behaviour using threshold autoregressive (TAR) model. It is observed that MPI captures the economic stance and main economic incidents quite successfully in each subject country. To further see the relevance of the MPI, we run TAR cointegration analysis with consumer confidence indexes (CCIs) for the subject countries with TAR cointegration test. The results indicate long-term relationship between the MPI and CCI in all three countries.     

Web content analysis of agricultural cooperatives located in Turkey

After the appearance of the globalization process post of 1980＇s, world has becaming a big village, that had been brought many important outcomes related with cooperatives which are aimed to emit the capital to the base. These conditions have been forced the movement to adopt themselves to this process vitally. As of year 2007, there are 26 several types of cooperatives with 90.086 unit cooperatives which have total number of 8,561.618 partners that are all dependent to Turkish cooperative association as well as Ministry of Industry and Commerce. In this study, the web sites of Turkish agricultural cooperatives were examined in terms of their contents. Also, it is tried to find out the sufficiency level of their electronic marketing activities. Within the context of this study, web sites of 5 agricultural cooperatives are examined in terms of their design.     

Economics of upgrading gravel roads to Otta seal surface

Maintenance of low volume roads especially gravel roads is costly, and millions of funding annually are spent for aggregate replacement alone. Otta seal, compared to other bituminous surface treatments (BSTs) for low volume roads that require high-quality materials and specialized expertise, can be constructed using cheaper local aggregates and accessible equipment. However, only three states have reported Otta seal constructions and performance in the US. In this study, an economic analysis was conducted to compare the cost of maintaining a gravel road to the cost of upgrading an existing gravel road to a double Otta seal surface. This analysis was conducted at three levels: deterministic life-cycle cost analysis (LCCA), a stochastic Monte Carlo simulation-based LCCA, and a traffic based economic analysis. A generic one-mile rural road in Midwest was considered as a case study location. Although, according to the analysis conducted in this paper, an upgrade to Otta seal investment might be justified by maintenance savings, resorting to only such justification cannot warrant investment in most cases. The upgrade from gravel road to Otta seal, or any other BSTs, might be justified in terms of enhancing safety for road users and also encouraging economic development beneficial to local areas.     

Type I error and test power of different tests for testing interaction effects in factorial experiments

A simulation study was conducted to investigate the effect of non normality and unequal variances on Type I error rates and test power of the classical factorial anova F‐test and different alternatives, namely rank transformation procedure (FR), winsorized mean (FW), modified mean (FM) and permutation test (FP) for testing interaction effects. Simulation results showed that as long as no significant deviation from normality and homogeneity of the variances exists, generally all of the tests displayed similar results. However, if there is significant deviation from the assumptions, the other tests are observed to be affected at considerably high levels except FR and FP tests. As a result, when the assumptions of factorial anova F‐test are not met or, in the case those assumptions are not tested whether met, it can be concluded that using FR and FP tests is more suitable than the classical factorial anova F‐test.     

Zone of tolerance for banks: a diagnostic model of service quality

Service quality has become an increasingly important factor for success and survival in the banking sector. Provision of high-quality service aids in meeting several requirements such as customer satisfaction and its consequent loyalty and market share, soliciting new customers, financial performance, and profitability (Cui, C.C., Lewis, B.R., & Park, W. (2003). Service quality measurement in the banking sector in South Korea. International Journal of Bank Marketing, 21(4), 191–201.). This paper presents the bank service quality measurement in its extended form. It deals with the concept of ‘zone of tolerance’ in judgments of service quality proposed by Zeithaml, Berry, and Parasuraman (1993, The nature and determinants of customer expectations of service. Journal of the Academy of Marketing Science, 21(1), 1–12.). The ‘zone of tolerance’ is recognized in the service quality literature as representing a range of expectations and an area of acceptable outcomes in service interactions. The present study describes the zone of tolerance for young customers’ service expectations and determines the customer satisfaction level for banks. The study focusses only on the youth market to formulate long-term strategies because young customers tend to keep themselves up to date with latest technological developments. A conceptual model BANKZOT is presented in this study, and the results demonstrate that evaluation of services can be scaled according to different types of expectations – ‘desired' and ‘adequate’ – and that customers use these two types of expectations as a comparison standard in evaluating bank services. The findings reveal that young customers have a narrow zone of tolerance with regard to the services provided by the banks. The results with respect to gap analysis reveal that there was a shortfall in the service quality provided by the banks in the sample, with the largest gap being found in tangibles and empathy of service quality dimensions. The results of exploratory factor analysis reveal that the SERVQUAL model is found to be uni-dimensional in this study. The results, managerial implications, and future research implications are discussed in detail.