Z-Transform and preconditioning techniques for option pricing

In the present paper, we convert the usual n-step backward recursion that arises in option pricing into a set of independent integral equations by using a z-transform approach. In order to solve these equations, we consider different quadrature procedures that transform the integral equation into a linear system that we solve by iterative algorithms and we study the benefits of suitable preconditioning techniques. We show the relevance of our procedure in pricing options (such as plain vanilla, lookback, single and double barrier options) when the underlying evolves according to an exponential Lévy process.     

Making small firms happy? The heterogeneous effect of trade facilitation measures

The different facets of trade facilitation may impact heterogeneously exporters of different size and productivity. Using the cross‐sectional variation in procedures at the border, we identify how red tape affects trade through the extensive and/or the intensive margin and show that small and large exporters are affected differently. We observe that while information availability benefits both small and large exporters, other measures like advance ruling, appeal procedures and the automation of border formalities tend to favor large exporters. This result suggests that trade facilitation policies affect exporters through channels other than simply the fixed or variable cost component of the red tape barriers. Beyond affecting the size and composition of trade flows, uncertainty about the conditions of crossing borders plays an important role in shaping the demography of exporters across different destinations.     

Virtual currencies: different schemes and research opportunities

Marketing Letters - The digitization of money has led to the emergence of numerous virtual currencies. Despite their great financial relevance, virtual currencies have not received much attention...     

Trust and trustworthiness after a land restitution program: lab-in-the-field evidence from Colombia

Constitutional Political Economy - We assess the impact on trust and trustworthiness of a governmental program to compensate victims of forced displacement. All our subjects were eligible to apply...     

Getting Started with PATSTAT Register

This article provides a technical introduction to the PATSTAT Register database, which contains bibliographical, procedural and legal status data on patent applications handled by the European Patent Office. It presents eight MySQL queries that cover some of the most relevant aspects of the database for research purposes. It targets academic researchers and practitioners who are familiar with the PATSTAT database and the MySQL language.     

Was there a Nasdaq bubble in the late 1990s?

Not necessarily: a firm's fundamental value increases with uncertainty about average future profitability, and this uncertainty was unusually high in the late 1990s. After calibrating a stock valuation model that takes this uncertainty into account, we compute the level of uncertainty that is needed to match the observed Nasdaq valuations at their peak. The uncertainty we obtain seems plausible because it matches not only the high level but also the high volatility of Nasdaq stock prices. In general, we argue that the level and volatility of stock prices are positively linked through firm-specific uncertainty about average future profitability.     

Building responses to sustainable development challenges: A multistakeholder collaboration framework and application to climate change

The affirmation of open innovation and collaborative systems is enabling unprecedented opportunities to create business value while facilitating multistakeholder conversation on sustainability issues. In particular, platform‐based models are emerging as organization archetypes able to facilitate cooperative dynamics among industrial actors, policy makers, academicians, scientists, and citizens. In this article, we use interdisciplinary business management and collaborative innovation literature to build the conceptual framework of a multisided platform as a collaboration environment gathering actors willing to define responses to sustainable development challenges. We present five dimensions or “genes,” that is, the focus and strategic intent or orientation of the platform (what), the participating sides, actors and groups (who), the actions, flows and coordination mechanisms (how), and the value drivers, benefits and externalities (why), and the rules regulating the affiliation and interaction processes (governance). We also present and discuss 30 subtopics or management items that are associated with the five dimensions defined. We then apply the conceptual model to analyze a case in the climate change endeavor and to show how competitive and cooperative dynamics can be virtuously integrated to provide individual‐ and company‐driven responses to a timely socioenvironmental issue. The article provides a new perspective on collaboration to enhance social development, and it offers theoretical and practitioner insights for a broad interdisciplinary audience including scholars, practitioners, business, and platform managers.     

Detecting Co‐Movements in Non‐Causal Time Series

This paper introduces the notion of common non‐causal features and proposes tools to detect them in multivariate time series models. We argue that the existence of co‐movements might not be detected using the conventional stationary vector autoregressive (VAR) model as the common dynamics are present in the non‐causal (i.e. forward‐looking) component of the series. We show that the presence of a reduced rank structure allows to identify purely causal and non‐causal VAR processes of order P>1 even in the Gaussian likelihood framework. Hence, usual test statistics and canonical correlation analysis can be applied, where either lags or leads are used as instruments to determine whether the common features are present in either the backward‐ or forward‐looking dynamics of the series. The proposed definitions of co‐movements are also valid for the mixed causal—non‐causal VAR, with the exception that a non‐Gaussian maximum likelihood estimator is necessary. This means however that one loses the benefits of the simple tools proposed. An empirical analysis on Brent and West Texas Intermediate oil prices illustrates the findings. No short run co‐movements are found in a conventional causal VAR, but they are detected when considering a purely non‐causal VAR.     

Migration and Regional Trade Agreements: A (New) Gravity Estimation

This paper investigates the role of regional trade agreements (RTAs) on bilateral international migration. Building on a gravity model for migration, our econometric strategy controls for the multilateral resistance to migration and solves the zero migration flows problem by using a censored quantile regression approach. Further, the endogeneity problem of RTAs in migration settlement is addressed by using instrumental variable censored quantile regression. Our results suggest that the presence of a RTA stimulates the migration stocks among member countries. The pro‐migration effect of RTAs is magnified if the agreement includes also provisions easing bureaucratic procedures for visa and asylum among member countries. Finally, we find an asymmetric effect of RTAs across the quantiles of the distribution of migration settlements.     

Pricing discretely monitored Asian options under Lévy processes

We present methodologies to price discretely monitored Asian options when the underlying evolves according to a generic Lévy process. For geometric Asian options we provide closed-form solutions in terms of the Fourier transform and we study in particular these formulas in the Lévy-stable case. For arithmetic Asian options we solve the valuation problem by recursive integration and derive a recursive theoretical formula for the moments to check the accuracy of the results. We compare the implementation of our method to Monte Carlo simulation implemented with control variates and using different parametric Lévy processes. We also discuss model risk issues.