Community-Wide Discount Programs for Older Persons: A Review and Evaluation

An evaluation of a community-wide discount program for elderly people in Richmond, Virginia is reported. The costs and benefits to both the elderly card holders and participating merchants were examined. While some elderly shoppers reported significant savings, many realized little benefit from the program. Most merchants did not vigorously promote the program, and experienced little impact on sales and profits. Implications for program management are explored.     

Over-the-Counter Option Market Dividend Protection and “Biases” in the Black-Scholes Model: A Note

Most options are traded over-the-counter (OTC) and are dividend “protected;” the exercise price decreases on the ex date by an amount equal to the dividend. This protection completely inhibits the early exercise of American call options. Nevertheless, OTC-protected options have market values which differ systematically from Black-Scholes values for European options on non-dividend paying stocks. The pricing difference is related to both the variance of the underlying stock return and to time until expiration of the option, but it is quite small in dollar amount.     

Interest Rate Caps “Smile” Too! But Can the LIBOR Market Models Capture the Smile?

Using 3 years of interest rate caps price data, we provide a comprehensive documentation of volatility smiles in the caps market. To capture the volatility smiles, we develop a multifactor term structure model with stochastic volatility and jumps that yields a closed‐form formula for cap prices. We show that although a three‐factor stochastic volatility model can price at‐the‐money caps well, significant negative jumps in interest rates are needed to capture the smile. The volatility smile contains information that is not available using only at‐the‐money caps, and this information is important for understanding term structure models.     

Arbitrage-Based Estimation of Nonstationary Shifts in the Term Structure of Interest Rates

The purpose of this paper is to provide a test of a state-dependent multinomial model of intertemporal changes in the term structure of interest rates. The theoretical background for the model comes from Ho and Lee (1986) . The current paper extends their model in several significant ways. First, we perform diagnostic tests on the data to demonstrate that the empirical results reject a binomial model in favor of a trinomial one. After theoretically deriving the appropriate trinomial model, the current paper extends their model to allow for state-dependent shifts which are determined by the set of ex ante observable state variables. The methodology for the study utilizes OLS regressions to identify the exogenous explanatory variables which drive the hypothesized trinomial process of term structure evolution. The empirical tests indicate that the set of state variables explains a significant portion of the variability in the shifts of the term structure over time. The model also identifies and quantifies a set of variables which impact on changes in the term structure of interest rates.     

Recentering the City

In The City and the Grassroots, Manuel Castells recentered the city as the site of distinctively urban social movements and reaffirmed the role of purposive social action in constructing a distinctively urban space. Although Castells’ recitation of five centuries of urban political activism documents the consistent failure of such movements to achieve their goals, his account is persistently optimistic on at least three counts. First, recentering the city reminds us that, despite the failure of transitory political movements, the city endures as an opportunity for renewed political activism. The continual possibility of change offered by the city's ontological persistence is separate from the fate of any given political intervention. Second, regardless of its specific success or failure, each episode of urban activism establishes a new context for the next encounter, its legacy persisting in the collective memories — the stock of mnemonic capital — of which the city is the repository. Third, Castells’ emphasis on political agency affirms that, while all action is ephemeral, its constitutive re‐enactment ceaselessly provides openings for insurgency and transgression. This optimistic message is worth repeating today.     

COMPARING APPLES AND ORANGES

Considering its importance to the consumer, price is a relatively neglected variable in the technical consumer literature. The neglect is attributed to the inability of researchers to ensure the equivalency of comparison items or the apple-and-orange question. The argument is made that price comparisons of non-equivalent items are valid and appropriate when the investigator assesses different retail outlets which promote different products, examines common elements found in different products, or compares groups of consumers with different buying preferences.