Some Remarks on Modified FDH

One of the tools in theoretical and empirical work on the measurement of productive efficiency is the socalled Free Disposal Hull (FDH) method. As a result of its very generous character, many of the observations belonging to an evaluated dataset are labeled efficient by this method. Modified FDH, similar in spirit as Andersen and Petersen's modified Data Envelopment Analysis, may thus be used to discriminate between FDH-efficient units. We aim to show why particularly for FDH this method seems quite apt and may be called for as a valuable complementary tool to standard FDH analysis.     

THE EFFECT OF THE SEC'S ORDER-HANDLING RULES ON NASDAQ

We study the effect of the implementation of new Securities and Exchange Commission order-handling rules—the Limit Order Display Rule, the Quote Rule, and the Actual Size Rule—on NASDAQ's quoting and trading behavior. We find that the number of reported quotes increases and the bid-ask spread decreases following the implementation of the new rules. The decreased quoted depth associated with placement of individual investors' limit orders—the Limit Order Display Rule—outweighs the increased quoted depth associated with displaying institutional quotes—the Quote Rule. Further, the number of trade executions increases while the average trade size decreases. The volatility of trade-to-trade and midpoint returns decreases for the initial group of stocks subject to the rules, but not for the two subsequent groups.     

绩效奖励的陷阱

物质性奖励并非多多益善。实际上，绩效奖励的负效应与其使用强度相应成比例。     

Accounting for stochastic interest rates,stochastic volatility and a general correlation structure in the valuation of forward starting options

A quantitative analysis on the pricing of forward starting options under stochastic volatility and stochastic interest rates is performed. The main finding is that forward starting options not only depend on future smiles, but also directly on the evolution of the interest rates as well as the dependency structures among the underlying asset, the interest rates, and the stochastic volatility: compared to vanilla options, dynamic structures such as forward starting options are much more sensitive to model specifications such as volatility, interest rate, and correlation movements. We conclude that it is of crucial importance to take all these factors explicitly into account for a proper valuation and risk management of these securities. The performed analysis is facilitated by deriving closed‐form formulas for the valuation of forward starting options, hereby taking the stochastic volatility, stochastic interest rates as well the dependency structure between all these processes explicitly into account. The valuation framework is derived using a probabilistic approach, enabling a fast and efficient evaluation of the option price by Fourier inverting the forward starting characteristic functions. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark 31:103–125, 2011     

APPLYING MONTE CARLO SIMULATION AND RISK ANALYSIS TO THE FACILITY LOCATION PROBLEM

Facility location problems have become a more strategic decision than just finding the lowest cost space to house a company's product. When choosing the placement of a distribution center, a company must weigh the new freight costs and the cost of a new or leased structure against its necessary service levels, as well as several other factors. Companies can also save on logistics costs in choosing the correct location by incorporating the inherent risk and variability that are involved in a facility location decision. However, in reality, most companies do not analytically consider risk and variability in choosing a location. This article presents a methodology to help determine candidate locations and then conduct a financial risk analysis to determine the ideal location of a new facility.     

Changes in subjective risks of hurricanes as time passes: analysis of a sample of Katrina evacuees

Using a quasi‐field experiment, we report on subjects' perceptions of the risks of hurricanes. All experimental subjects were displaced by either Hurricane Katrina or Rita, in New Orleans and other Gulf Coast areas, except for a small control group consisting of people who live in central Texas. We examine their perceptions of risks just after the hurricanes occurred, and over one year later to evaluate the change in subjective risk perceptions over time. A latent risk model is estimated in which subjective probabilities of hurricane strike risk are represented as a function of respondents' demographic characteristics and experiences following the storms.     

Learning-by-Doing and Strategic Trade Policy

The paper models international rivalry between a domestic firm that is going through a learning-by-doing phase, and a mature foreign rival. It is shown that the optimal production subsidy for the domestic firm depends on the degree of strategic sophistication of the foreign firm. Optimal production subsidy rules are derived under various scenarios. They are shown to be very sensitive to the specification of the game between the domestic and the foreign firms. Whether the optimal subsidy should decrease over time depends on the strategic sophistication of the foreign firm.