A Re-examination of Traditional Hypotheses about the Term Structure of Interest Rates

The term structure of interest rates is an important subject to economists, and has a long history of traditions. This paper re-examines many of these traditional hypotheses while employing recent advances in the theory of valuation and contingent claims. We show how the Expectations Hypothesis and the Preferred Habitat Theory must be reformulated if they are to obtain in a continuous-time, rational-expectations equilibrium. We also modify the linear adaptive interest rate forecasting models, which are common to the macroeconomic literature, so that they will be consistent in the same framework.     

Options Arbitrage in Imperfect Markets

Option valuation models are based on an arbitrage strategy—hedging the option against the underlying asset and rebalancing continuously until expiration—that is only possible in a frictionless market. This paper simulates the impact of market imperfections and other problems with the “standard” arbitrage trade, including uncertain volatility, transactions costs, indivisibilities, and rebalancing only at discrete intervals. We find that, in an actual market such as that for stock index options, the standard arbitrage is exposed to such large risk and transactions costs that it can only establish very wide bounds on equilibrium options prices. This has important implications for price determination in options markets, as well as for testing of valuation models.     

Dispersed alarm systems – a review

The increase in the number of retired, elderly and very old in society has begun to pose the problem of how to provide access to care services for those in households which are not purpose built, specially adapted and serviced accommodation. Liberalization of telecommunications in the U.K. allied to technical advances have allowed ‘dispersed alarm systems’ to be developed and thus provide a means of communication between isolated elderly people in distress and a central emergency service. The selection of an appropriate system and its management are discussed in this paper.     

How Different Are Human Resource Practices in Japanese “Transplants” in the United Kingdom?

Are the practices in Japanese plants really prototypical of a universal commitment-maximizing approach, or do they largely mirror local conventions? The research reported here aims to address this question by comparing the personnel practices of Japanese manufacturing plants in the United Kingdom and a similar sample of non-Japanese plants. It shows that the extent of high-commitment management is significantly higher among the Japanese plants and moreover that the practices associated with it are used in distinctive ways. As such there is no evidence of a wholesale “Japanization” of British industry. The study shows that the difference between Japanese and non-Japanese plants partly reflects their being Japanese, although the Japanese seniority plus merit pay (nenko) system has not been fully adopted. Nor is the current extent of fully fledged just-in-time in Japanese plants sufficient to account for the difference; yet the author concludes by suggesting that their managements' commitment to developing this still may be crucial.