Applications of Gram–Charlier expansion and bond moments for pricing of interest rates and credit risk

The purpose of this paper is to demonstrate the powerful and flexible applicability of the Gram–Charlier expansion to pricing of a wide variety of interest rate related products involving interest rate risk and credit risk. In this paper, we develop easily implemented approximations of the prices of several derivatives; swaptions, CMS, CMS options, and vulnerable options. Associated with the default risk, a survival contingent forward measure is constructed.     

Household Saving in Japan

Recent research has indicated that Japanese and American saving behaviour may not be fundamentally different. In this paper we have tried to determine if aggregate saving in Japan, as in the United States, is driven by a small number of very wealthy or high-income households. We found that about 12% of households account for 75% of total positive saving, 75% of total negative saving and 75% of total net saving. These conclusions reinforce the hypothesis that the savings process in Japan is not distinctive, and highlight the importance of research on the heterogeneity of saving behaviour.
JEL Classification Numbers: D12, D31, E21.     

Institutional elasticity as a significant driver of IT functionality development

Institutions drive innovation and stimulate broad diffusion. Not surprisingly, national systems of innovation are influenced by their institutional flexibility in response to changing market conditions. As nations move from industrial to information-based societies, a key factor governing institutional “elasticity” is how institutions integrate information technology (IT). Since IT functionality is intimately connected with institutional dynamics, unlike simple manufactured products such as refrigerators, IT's specific functionality is formed through dynamic interaction with institutional systems. Consequently, institutional elasticity is a critical factor in the functionality of IT and its subsequent self-propagating behavior.This paper analyzes the mechanism of IT functionality development, with special attention to the interaction of the technology with institutional systems.     

Are Depositors Aware of the Governance of their Banks?1

In the discussion of corporate governance from the standpoint of economists, it is common for economists to pay more attention to the stockholders of a corporation (as stakeholders) than to the creditors. However, the behaviors of depositors as creditors should not be neglected in the management of banking institutions. The purpose of this paper is to analyze statistically the decision factors of depositors in opening an account at a particular bank with respect to corporate governance variables. My result shows that depositors with risk aversion consider banks well managed based on the following: a lower rate of external auditors, a longer time of service by the bank’s president, and the existence of a simultaneous promotion system of the bank’s president and chairperson.     

Value Co-Creation in Business-to-Business and Business-to-Consumer Service Relationships

Abstract

The purpose of this study is to examine the interrelationships among value co-creation, switching costs (SC), and customer share (CS) in both business-to-business (B2B) and business-to-consumer (B2C) relationships. In spite of increasing attention to value co-creation in the Service Dominant Logic, there are only a limited number of empirical studies on this concept. Furthermore, few researchers have investigated the inter-relationship among value co-creation, SC, and CS in a single framework for both B2B and B2C relationships, although many enterprises serve both types of customers. The conceptual framework is developed primarily based on relationship marketing and services marketing. This study evaluates six hypotheses, analyzing survey data from 209 enterprises and 337 individuals by structural equation modeling (SEM). Further, confirmatory factor analysis (CFA) is conducted to confirm the convergent validity and discriminant validity. In conclusion, the positive impact of execution of value co-creation (EVC) activities on SC and CS is supported with appropriate statistical evidence in both B2B and B2C relationships. Also, the causal relationship between values in relational exchanges (VRE) and CS is confirmed with adequate empirical findings for both relationships. These results suggest to marketing managers that service firms may achieve larger CS by executing value co-creation activities and providing VRE for customers.     

Fiscal policy switching in Japan, the US, and the UK

This paper estimates fiscal policy feedback rules in Japan, the United States, and the United Kingdom for more than a century, allowing for stochastic regime changes. Estimating a Markov-switching model by the Bayesian method, we find the following: First, the Japanese data clearly reject the view that the fiscal policy regime is fixed, i.e., that the Japanese government adopted a Ricardian or a non-Ricardian regime throughout the entire period. Instead, our results indicate a stochastic switch of the debt-GDP ratio between stationary and nonstationary processes, and thus a stochastic switch between Ricardian and non-Ricardian regimes. Second, our simulation exercises using the estimated parameters and transition probabilities do not necessarily reject the possibility that the debt-GDP ratio may be nonstationary even in the long run (i.e., globally nonstationary). Third, the Japanese result is in sharp contrast with the results for the US and the UK which indicate that in these countries the government’s fiscal behavior is consistently characterized by Ricardian policy.