Option Bounds and the Pricing of the Volatility Smile

This paper presents a new approach forthe estimation of the risk-neutral probability distribution impliedby observed option prices in the presence of a non-horizontalvolatility smile. This approach is based on theoretical considerationsderived from option pricing in incomplete markets. Instead ofa single distribution, a pair of risk-neutral distributions areestimated, that bracket the option prices defined by the volatilitybid/ask midpoint. These distributions define upper and lowerbounds on option prices that are consistent with the observableoption parameters and are the tightest ones possible, in thesense of minimizing the distance between the option upper andlower bounds. The application of the new approach to a sampleof observations on the S&P 500 option market showsthat the bounds produces are quite tight, and also that theirderivation is robust to the presence of violations of arbitragerelations in option quotes, which cause many other methods tofail.     

OPEN KNOWLEDGE DISCLOSURE: AN OVERVIEW OF THE EVIDENCE AND ECONOMIC MOTIVATIONS

Abstract.  This paper reviews current literature on open knowledge disclosure strategies used by firms. It is usually acknowledged that for an innovative firm that does not benefit from a natural protection (such as lead time advance) the best strategy is to keep an innovation secret as long as possible or to protect it through an exclusive patent. However, in apparent contrast to this traditional view, many studies suggest that firms often disclose important parts of their knowledge through scientific publications, conferences, the Internet, etc. This paper aims to provide an overview first of the evidence supporting the existence of open knowledge disclosure and second of the economic motivations that encourage rational, profit seeking firms to adopt these behaviours.     

When do better schools raise housing prices? Evidence from Paris public and private schools

In this paper, we investigate how housing prices react to the quality of education offered by neighboring public and private schools. The organization of secondary schooling in the city of Paris, which combines residence-based assignment to public schools with a well-developed and almost entirely publicly funded private school system, offers a valuable empirical context for analyzing how private schools affect the capitalization of public school performance in housing prices. Using comprehensive data on both schools and real estate transactions over the period 1997–2004, we develop a matching framework to carefully compare sales across school attendance boundaries. We find that a standard deviation increase in public school performance raises housing prices by 1.4 to 2.4%. Moreover, we show that the capitalization of public school performance in the price of real estate shrinks as the availability of private schools increases in the neighborhood. Our results confirm the predictions of general equilibrium models of school choice that private schools, by providing an advantageous outside option to parents, tend to mitigate the impact of public school performance on housing prices.     

Inter- and intra-industry linkages as a determinant of FDI in Central and Eastern Europe

This paper uses an unpublished dataset on disaggregated foreign direct investment (FDI) in Central and Eastern European countries (CEECs), and is rooted in new economic geography literature. A 10% increase in access to suppliers based in the FDI recipient country or access to the EU15 market for intermediate goods increases FDI by about 2% in Central European countries and by 1% in Eastern European countries. We argue that Central (core) European countries specialise in upstream industries and re-export goods toward FDI-origin countries, while Eastern (periphery) European countries are also involved in this production chain, but to a lesser extent.     

Liability-creating Versus Non-liability-creating Fiscal Stabilisation Policies: Ricardian Equivalence, Fiscal Stabilisation, and EMU

This paper looks at theoretical and empirical issues associated with the operation of fiscal stabilisers within an economy. It argues that such stabilisers operate most effectively at a national, rather than local, level. As differing cycles across regions tend to offset each other for the country as a whole, national fiscal stabilisers are not associated with the same increase in future tax liabilities for the region as local ones. Accordingly, the negative impact from the Ricardian effects associated with these tax liabilities is smaller. Empirical work on data across Canadian provinces indicates that local stabilisers are only one third to one half as effective as national stabilisers which create no future tax liability.     

La gouvernance des organisations de l’Economie Sociale et Solidaire à l’épreuve dynamique de leurs « Grandeurs »

THE DYNAMICS OF PLURAL ‘WORTH’ AS A CHALLENGE TO THE GOVERNANCE OF SOCIAL AND SOLIDARITY‐BASED ECONOMY ORGANIZATIONS This article resorts to Boltanski and Thevenot's Economies of Worth model (1987, 1991) to examine from a theoretical stance the various institutional logics competing in social and solidarity‐based economy organizations (SSEOs). The originality of our approach does not lie so much in the identification of the main conventions shaping the governance of SSEOs, but rather in the analysis of the conflicts and achievable compromises among each of these polities. Our contribution is threefold. We first show that the competition among several conventions generates organizational conflicts that are difficult to solve. We then reveal that achieving an (ephemeral) compromise entails a risk of excluding a ‘polity’, which may in turn weaken the governance of SSEOs. We finally sketch out some perspectives allowing to mitigate this risk. In particular, we outline organizational strategies likely to frame the governance of SSEOs without impairing their identities and plural forms of ‘worth’.     

The prosumers and the grid

Prosumers are households that are both producers and consumers of electricity. A prosumer has a grid-connected decentralized production unit and makes two types of exchanges with the grid: energy imports when the local production is insufficient to match the local consumption and energy exports when local production exceeds it. There exists two systems to measure the exchanges: a net metering system that uses a single meter to measure the balance between exports and imports and a net purchasing system that uses two meters to measure separately power exports and imports. Both systems are currently used for residential consumption. We build a model to compare the two metering systems. Under net metering, the price of exports paid to prosumers is implicitly set at the price of the electricity that they import. We show that net metering leads to (1) too many prosumers, (2) a decrease in the bills of prosumers, compensated via a higher bill for traditional consumers, and (3) a lack of incentives to synchronize local production and consumption.     

Dynamic stability of portfolio balance models of the exchange rate

The conditions for stability of a portfolio balance model of exchange rate determination with an endogenous current account are examined for various expectational assumptions. It is shown that unless strongly stabilizing expectational assumptions are made, if the economy is a net debtor in foreign currency assets there is the possibility that its exchange rate will exhibit instability.