Structural homophily or social asymmetry? The formation of alliances by poorly embedded firms

Recent research shows that preexisting network structure constrains the formation of new interorganizational alliances. Firms that are poorly embedded in a network structure are less likely than richly embedded firms to form alliances, because they lack informational and reputational benefits. This study examines the types of ties that poorly embedded firms can form to overcome the constraints that their structural positions impose, in turn helping to explain how firms' actions can transform existing network structures. We argue that poorly embedded firms are more likely to participate in ties characterized by social asymmetry than in ties characterized by structural homophily. We analyze the terms of trade that socially asymmetric partners negotiate for alliance governance and discuss how such alliances influence network dynamics. To test our arguments, we use longitudinal data on the alliance activities of 97 global chemical firms from 1979 to 1991. Copyright © 2009 John Wiley & Sons, Ltd.     

Likelihood Inference for Gibbs Processes in the Analysis of Spatial Point Patterns*

Several authors have proposed stochastic and non‐stochastic approximations to the maximum likelihood estimate (MLE) for Gibbs point processes in modelling spatial point patterns with pairwise interactions. The approximations are necessary because of the difficulty of evaluating the normalizing constant. In this paper, we first provide a review of methods which yield crude approximations to the MLE. We also review methods based on Markov chain Monte Carlo techniques for which exact MLE has become feasible. We then present a comparative simulation study of the performance of such methods of estimation based on two simulation techniques, the Gibbs sampler and the Metropolis‐Hastings algorithm, carried out for the Strauss model.     

Fixed-Rate Endowment Mortgage and Mortgage Indemnity Valuation

We use a contingent claims framework for valuing the the default and prepayment embedded options in certain British fixed-rate endowment mortgages, with a (capped) mortgage indemnity guarantee (MIG). This methodology provides a template for the borrower, lender, and insurer to compare mortgage terms, including the fairness of contract rates, arrangement fees, prepayment penalties, any MIG premiums required, and co-insurance exposure. With empirical inputs, this model may eventually be useful as a mark-to-value proxy for all parties, as expected parameters change (especially interest rate and house price levels, and expected future volatilities), for purposes of determining valued added accounting, appropriate reserves, and indeed for setting premiums and business drivers. Fixed-rate endowment mortgages differ from fixed-rate repayment mortgages primarily because, in the event of early termination, the amount owed by the borrower is a function of the evolution of the term structure of interest rates, whereas for a repayment mortgage it is pre-determined. We compare endownment and repayment mortgages for different levels of loan-to-value ratios, interest rate and house price volatilities.     

Another step towards full fair value accounting for financial instruments

The international Joint Working Group of Standard Setters (JWG) was established by the IASC (replaced by the IASB in 2001) and other national accounting standard setters for the purpose of developing a comprehensive set of principles for reporting financial instrument at fair value. In December 2000 the JWG issued a Draft Standard addressing the accounting for financial instruments and similar items. The proposals in the Draft Standard would affect existing accounting practice in many areas, including those related to the use of hedge accounting. This article states the main problems that could result from applying the provisions of that Draft Standard, offering some alternative approaches to overcome those problems.     

准则国际趋同及其对中小企业的适用性——促进高质量准则所面临的挑战

一、对准则国际趋同的看法在我看来,在实现准则趋同目标已经面临的诸多困难中,如今又新增了一种新的、更大的威胁,那就是:放弃趋同目标的诱惑。1.迄今为止,阻碍我们在趋同进程中取得进展的首要因素到底有哪些呢?几乎所有的人都在理论上支持准则趋同,但并非所有人都愿意改变用以达到该理想境界的做事方式。因此,此种障碍并非技术性障碍。虽然尚不明确,但是文化问题、思维模式与政治因素都对准则趋同进程产生着很大影响。近年来,国际会计准则委员会(IASB)已经编制了集全面性、连续性与高质量于一身的国际财务报告准则(IFRS)。那么,这套准…     

Option pricing when correlations are stochastic: an analytical framework

In this paper we develop a novel market model where asset variances–covariances evolve stochastically. In addition shocks on asset return dynamics are assumed to be linearly correlated with shocks driving the variance–covariance matrix. Analytical tractability is preserved since the model is linear-affine and the conditional characteristic function can be determined explicitly. Quite remarkably, the model provides prices for vanilla options consistent with observed smile and skew effects, while making it possible to detect and quantify the correlation risk in multiple-asset derivatives like basket options. In particular, it can reproduce and quantify the asymmetric conditional correlations observed on historical data for equity markets. As an illustrative example, we provide explicit pricing formulas for rainbow “Best-of” options.     

Some results on residual entropy function

Ebrahimi and Pellerey (1995) and Ebrahimi (1996) proposed the Shannon residual entropy function as a useful dynamic measure of uncertainty. They studied the characterization problem from the residual entropy. They also used this function to define a stochastic order and two classes of distributions, DURL and IURL. In this paper, we obtain some new results on this function and we correct some mistakes in the preceding literature.Supported by Ministerio de Ciencia y Tecnologia under grant BFM2000-0362Acknowledgements. We thank two anonymous referees for some useful comments that led to an improvement in the presentation of this paper.     

Additional utility of insiders with imperfect dynamical information

In this paper we consider a market driven by a Wiener process where there is an insider and a regular trader. The insider has privileged information which has been deformed by an independent noise vanishing as the revelation time approaches. At this time, the information of every trader is the same. We obtain the semimartingale decomposition of the original Wiener process under dynamical enlargement of the filtration, and we prove that if the rate at which the additional noise in the insiders information vanishes is slow enough then there is no arbitrage and the additional utility of the insider is finite.Received: 1 October 2003, Mathematics Subject Classification: 60G48, 90A09, 60H07, 90A60JEL Classification: D82, G11, G14