ISOLATING THE WILD CARD OPTION

Many embedded options are difficult to value the wild card option in the Treasury bond futures contract is one of these embedded options. We illustrate how narrow theoretical bounds on the value of this option, relative to the price of the contract, may be obtained in the presence of other embedded options. Simulations suggest that the value of the wild card option is close to zero. This implies that, in this economy, a simpler pricing model of the Treasury bond futures contract, which ignores the wild card option, will result in only a small loss of accuracy.     

AGRICULTURAL PROCESSING INDUSTRIES IN THE INTERNATIONAL DIVISION OF LABOUR*

Agricultural processing industries are sometimes recommended as being particularly suitable for industrialisation programmes in developing countries. In this article, however, it is argued that such a general statement does not appear to be warranted. In a short survey some of the criteria are first discussed by which suitability of agro-processing industries can be judged. It is concluded that the contribution to development objectives of some feasible sub-sectors can easily be overestimated. It also appears that the wide disparity of characteristics of sub-sectors that belong to the category of agricultural processing industries necessitate careful examination of individual sub-sectors before judgement as to their attractiveness for developing countries is pronounced. In order to illustrate this point evaluations of the cocoa and leather industries are briefly discussed.     

Consideration of the social context of auditors’ reliance on expert system output during evaluation of loan loss reserves

Auditors are accountable for judgments made within the social context of the accounting firm. Tetlock (1985) states that decision makers often use the acceptability heuristic to cope with accountability. According to this heuristic, individuals make decisions which they are reasonably confident will be acceptable by others to whom they are accountable. When auditors form judgments with the aid of expert system output, they must determine the appropriate level of reliance on the expert system output. Since the expert system output is based on the input of experts, auditors may decide the output is ‘acceptable‘ and overrely on the output. In addition, because of the conservative nature of the accounting firm, expert system output which is negative may be viewed as more acceptable than positive output leading to greater overreliance. The results indicate that auditors do overrely on expert system output and rely to a greater degree on output which is negative versus output which is positive. Copyright © 1999 John Wiley & Sons, Ltd.