A systematic and efficient simulation scheme for the Greeks of financial derivatives

Greeks are the price sensitivities of financial derivatives and are essential for pricing, speculation, risk management, and model calibration. Although the pathwise method has been popular for calculating them, its applicability is problematic when the integrand is discontinuous. To tackle this problem, this paper defines and derives the parameter derivative of a discontinuous integrand of certain functional forms with respect to the parameter of interest. The parameter derivative is such that its integration equals the differentiation of the integration of the aforesaid discontinuous integrand with respect to that parameter. As a result, unbiased Greek formulas for a very broad class of payoff functions and models can be systematically derived. This new method is applied to the Greeks of (1) Asian options under two popular Lévy processes, i.e. Merton's jump-diffusion model and the variance-gamma process, and (2) collateralized debt obligations under the Gaussian copula model. Our Greeks outperform the finite-difference and likelihood ratio methods in terms of accuracy, variance, and computation time.     

Does ‘Work for the Dole’ work?: an Australian perspective on work experience programmes

This study examines the effect of Work for the Dole (WfD), a community-based work experience programme, on transitions out of unemployment in Australia. To evaluate the WfD programme, a quasi-experimental exact matching approach is applied. Participation in the WfD programme is found to be associated with a large and significant adverse effect on the likelihood of exiting unemployment payments. The main potential explanation is the existence of a ‘lock-in’ effect whereby programme participants reduce job search activity.     

The role of Chinese stock market in global stock markets: A safe haven or a hedge?

The contribution of the study is threefold. First, the paper proposes a new empirically testable definition for a safe haven and a hedge from the viewpoint of extreme and regular dependences measured by a modern statistical tool of copulas. Second, this paper investigates the extreme and regular dependences between the Chinese and the G7 stock markets, using a mixture copula specification, and the results reveal that the Chinese stock market has been not only a hedge but also a safe haven for the G7 stock markets all these years. Finally, this study suggests that the Chinese stock market is the target market for global stock fund managers and international investors, who are seeking a hedge or a safe haven for their portfolios, under turbulence.     

An empirical study on the effects of an enterprise fan page

Most major enterprises have invested in social networking to provide services, promote products, or communicate with customers. However, to date, no clear understanding on the effects of social networks on business performance has emerged. This study examines the relationship between the capability of the enterprise to manage social networks and the resultant benefits of their investing in the social network. A fan page on Facebook is the selected target of study. By analyzing the effort required to manage a fan page, we measured the fan-page managing capability by its number of fans. Then, we proposed six hypotheses for empirical examination of the causal relationship between enterprises’ social network managing capability and business benefits. The study applied two-stage data collection and testing. The first stage is to build a general understanding of the relationship between the number of fans and business revenue. Based on findings of the first stage, the study tested the hypotheses on selected global firms and sought patterns of benefits generated from the fan page. This study builds deep understanding from various aspects about fan-page effects on enterprises, and proposes that firms that provide products and services with characteristics of low-product price, short-product durability, and low-customer involvement are empirically influenced by the management of their fan pages.