The short‐time behavior of VIX‐implied volatilities in a multifactor stochastic volatility framework

We consider a modeling setup where the volatility index (VIX) dynamics are explicitly computable as a smooth transformation of a purely diffusive, multidimensional Markov process. The framework is general enough to embed many popular stochastic volatility models. We develop closed‐form expansions and sharp error bounds for VIX futures, options, and implied volatilities. In particular, we derive exact asymptotic results for VIX‐implied volatilities, and their sensitivities, in the joint limit of short time‐to‐maturity and small log‐moneyness. The expansions obtained are explicit based on elementary functions and they neatly uncover how the VIX skew depends on the specific choice of the volatility and the vol‐of‐vol processes. Our results are based on perturbation techniques applied to the infinitesimal generator of the underlying process. This methodology has previously been adopted to derive approximations of equity (SPX) options. However, the generalizations needed to cover the case of VIX options are by no means straightforward as the dynamics of the underlying VIX futures are not explicitly known. To illustrate the accuracy of our technique, we provide numerical implementations for a selection of model specifications.     

Feeling capable and valued: A prosocial perspective on the link between empathy and social entrepreneurial intentions

Empathy is a key trait distinguishing social entrepreneurs from traditional entrepreneurs, and an important antecedent of social entrepreneurial (SE) intentions. Yet, little research explains the mechanisms through which empathy motivates SE intentions. We argue that studying the link between the prosocial trait of empathy and the prosocial outcome of SE intentions requires a prosocial lens that traditional entrepreneurial intent theories cannot offer. Building on prosocial motives research, we propose that empathy explains SE intentions through two complementary mechanisms: self-efficacy (an agentic mechanism), and social worth (a communal mechanism). We find support for our hypotheses in a study of 281 university students.     

The asymptotic expansion of the regular discretization error of Itô integrals

We study an Edgeworth‐type refinement of the central limit theorem for the discretization error of Itô integrals. Toward this end, we introduce a new approach, based on the anticipating Itô formula. This alternative technique allows us to compute explicitly the terms of the corresponding expansion formula. Two applications to finance are given; the asymptotics of discrete hedging error under the Black–Scholes model and the difference between continuously and discretely monitored variance swap payoffs under stochastic volatility models.     

Using reputation for corporate sustainability to tackle banks digitalization challenges

The new landscape in the financial sector, characterized by fierce competition and the entrance of new technological players, has forced banks to speed up their digital transformation. However, for banks, digitalization entails challenges that can hinder the potential benefits and compromise their survival. In this context, we argue that the reputation generated by corporate sustainability (RCS) may offset these digitalization drawbacks. In particular, we find that the combination of RCS and digitalization facilitates in transforming the organizational nature of banks by simultaneously narrowing their boundaries and expanding their scope. We empirically confirm our hypotheses by analyzing a panel of 110 multinational banks from developed countries.     

Loss and damage: a critical discourse analysis of Parties’ positions in climate change negotiations

The years-long negotiations on loss and damage (L&D) associated with climate change impacts reached a milestone with the adoption of the Paris Agreement, sanctioning the permanence of the Warsaw International Mechanism (WIM) created in 2013. The WIM aims at advancing knowledge gathering, coordination and support to address L&D associated with extreme and slow onset events in vulnerable developing countries (Decision 2/CP.19). Despite being among the most controversial issues to be recently treated in climate change negotiation, L&D has attracted little attention in the field of international relations. This paper aims at addressing this gap by reconstructing the emergence and evolution of the negotiating positions on L&D of developing and developed countries. It employs a critical discourse analytical approach and builds on Fairclough’s three-dimensional framework for critical discourse analysis, taking decision 2/CP.19 as the core communicative event. Consistently, the decision is analysed at three different levels: as a text (micro-scale); as a discursive practice (meso-scale); and as a social practice (macro-scale). The analysis makes use of a wide range of materials including previous decisions, High Level Segment statements and Parties submissions. It reconstructs Parties’ conflicting views on the positioning of L&D vis-à-vis the adaptation space (L&D as a part of, or as beyond adaptation) and the scientific, ethical and legal arguments employed to support these standpoints. It highlights, in particular, the strategic importance which the ‘compensation argument’ had in determining developing countries’ capacity to influence the UNFCCC process up to the inclusion of a specific article on L&D in the Paris Agreement. While calls for compensation might have lost momentum as a result of the Warsaw and Paris talks, the paper argues that their potential is far from exhausted. They in fact imply a more general request for climate justice which the UNFCCC has not yet addressed.     

Drivers of productivity in Vietnamese SMEs: the role of management standards and innovation

Using a rich panel dataset of small and medium scale manufacturing enterprises (SMEs) active in the manufacturing sector in Viet Nam, this paper investigates the drivers of firm productivity, focusing on the role played by international management standards certification. We test the hypothesis that, accounting for technological innovation (product and process) and other variables related to technological capabilities, international standards are conducive to higher productivity, through improved management practices and business organization. In line with the requirement of continuous improvement implied by most international standards, the main findings show that the possession of an internationally recognized standard certificate leads to significant productivity premium. We further find that the effect of certification on productivity is particularly strong for firms with technological innovation, located in southern provinces, and operating in more scale-intensive industries.     

From volatility smiles to the volatility of volatility

Decisions in Economics and Finance - The paper reviews models of the option surface and reduced-form models for stochastic volatility in continuous time, under the risk-neutral measure. It defines...     

Profiling the segments of senior tourists throughout motivation and travel characteristics

Interest in tourism market segmentation of seniors has been increasing in recent years as the tourism industry has begun to be aware of their importance for the sector. This is a very heterogeneous group, with greater purchasing power and lifestyle-oriented entertainment and enjoyment of leisure time by performing travel than previous generations. This study strives to contribute towards the hitherto scarce research on segmentation in senior tourism. Specifically, this work aims to determine the existence of various profiles of senior tourism by means of using socio-demographic variables, motivation and characteristics of travel of seniors. For this, two complementary analysis techniques, the nonlinear canonical correlation (OVERALS) and a two-stage cluster analysis, were used. Five market segments were identified according to the behavioural variables analysed that allow marketers to target this group in the most convenient manner and to exploit new market opportunities.     

Cost of capital and public loan guarantees to small firms

In this paper, we study the determinants of the spread charged by banks under a UK policy intervention scheme, aimed at supporting access to the credit market for small firms through guarantee backed loans. We exploit a unique dataset containing data on 29,266 guarantee backed loans under the UK SFLG scheme over the period 2000 to 2005. Results suggest that lower spreads are offered for loans of larger amounts and higher durations, for service firms, for larger firms, and for those located in the most advanced regions. Higher spreads are applied to high-tech manufacturing firms and to loans issued for working capital purposes. We also find that the presence of other extant debt is associated with a relatively higher spread and that this effect is especially significant for the subset of firms that have reached a maximum debt capacity based on collateralized assets. Further, we also find that the higher the incidence of the publicly guaranteed debt over the total amount of outstanding loans, the lower, on average, the spread. However, an increase in the guaranteed coverage leads to a contraction in the spread only for loans aimed at covering working capital needs rather than investments.