On the short-maturity behaviour of the implied volatility skew for random strike options and applications to option pricing approximation

In this paper, we propose a general technique to develop first- and second-order closed-form approximation formulas for short-maturity options with random strikes. Our method is based on a change of numeraire and on Malliavin calculus techniques, which allow us to study the corresponding short-maturity implied volatility skew and to obtain simple closed-form approximation formulas depending on the derivative operator. The numerical analysis shows that these formulas are extremely accurate and improve some previous approaches for two-asset and three-asset spread options such as Kirk’s formula or the decomposition method presented in Alòs et al. [Energy Risk, 2011, 9, 52–57]. This methodology is not model-dependent, and it can be applied to the case of random interest rates and volatilities.     

The governance,risk-taking,and performance of Islamic banks

We examine whether the difference in governance structures influences the risk taking and performance of Islamic banks compared to conventional banks. Using a sample of 52 Islamic banks and 104 conventional banks in 14 countries for the period from 2005 to 2013, we conclude that the governance structure in Islamic banks plays a crucial role in risk taking as well as financial performance that is distinct from conventional banks. Particularly, we show that the governance structure in Islamic banks allows them to take higher risks and achieve better performance because of product complexities and transaction mechanisms. However, Islamic banks maintain a higher capitalization compared to conventional banks. These results support the research on Islamic investment and risk taking. Our results add a new dimension to the governance research that could be a valuable source of knowledge for policy makers and regulators in the financial services sector.     

Religion and political economy in Saint-Simon

Abstract

The project of Henri Saint-Simon (1760–1825) was to complete the French Revolution by a social change in order to eliminate the so-called “feudal-military” system and to bring about a new society which he named “the industrial system”. Everything had to be changed, including religion and its relation to political economy. In this paper, I examine: (i) the recurring problem of religion, raised by Saint-Simon as early as his first text; (ii) the emergence of the economic problem of identifying production with politics; (iii) and finally, the metamorphosis of the Christian religion into a moral and industrial religion.     

Corollaries of the collective: The influence of organizational culture and memory development on perceived decision-making context

The market-focused learning organization continues to attract attention in the marketing literature. Two central and interrelated aspects of collective learning are organizational culture and memory. The relationship between culture and performance has been demonstrated both theoretically and empirically. This study investigates the influence of culture and organizational memory development on perceptions of managers’ decision-making context. Findings suggest that both organizational culture and memory influence marketing managers’ perceptions of decision-making context. Specifically, managers in externally focused cultures tend to perceive a relatively higher proportion of strategic problems than managers in internally focused cultures, and managers in organic process cultures tend to perceive a relatively higher proportion of unstructured problems than managers in mechanistic cultures. The implications for managerial practice are discussed and avenues for future research outlined. Pierre Berthon is a professor of marketing at the School of Management, University of Bath, United Kingdom. Prior to taking up his present position, he was adjunct professor of marketing at Columbia Business School, University of Columbia, New York. His research interests are eclectic but focus mainly on the areas of management decision making, strategic modes of organization, electronic commerce, and interactive marketing. His work has been published in a wide range of journals, includingSloan Management Review, California Management Review, Journal of Business Research, Journal of Advertising Research, Business Horizons, Omega, andTechnological Forecasting and Social Change. He is coauthor of a textbook on electronic commerce (Electronic Commerce: The Strategic Perspective, published by Dryden). Leyland F. Pitt is a professor in the School of Marketing at Curtin University of Technology in Perth, Western Australia. He has also taught executive programs at the University of Chicago, Columbia University, and the London Business School. His current research focuses on marketing strategy and the marketing/technology interface. His work has been accepted for publication in such academic and practitioner journals as theCalifornia Management Review, Sloan Management Review, Columbia Journal of World Business, Communications of the ACM, theJournal of Advertising Research, theJournal of Business Research, andMIS Quarterly, of which he is also an associate editor. Michael T. Ewing is an associate professor in the School of Marketing at Curtin University of Technology. Before that, he worked for Ford Motor Company. He has taught in Australia, Hong Kong, Singapore, Malaysia, the Czech Republic, South Africa, and England. His research and teaching interests include marketing communications, E-commerce, and international advertising. Among others, his work has appeared in theAsian Journal of Marketing, Business Horizons, theJournal of Advertising Research, theJournal of Business Research, theJournal of Marketing Communications, and theInternational Journal of Advertising. He serves on the editorial review board of theJournal of Advertising Research.     

U.S. Monetary Policy since the 1950s and the Changing Content of FOMC Minutes

Content analysis is used to analyze 60 years of Federal Open Market Committee (FOMC) minutes. Since there is no unique algorithm to quantify content, two different algorithms are applied. Wordscores compares content relative to a chosen benchmark, while DICTION is an alternative algorithm that is specifically designed to capture various elements that capture the sentiment or tone conveyed in a text. The resulting indicators are then incorporated into a VAR. The content of FOMC minutes is found to be significantly related to the state of the economy, notably real GDP growth, and changes in the fed funds rate. However, the relationship between content and macroeconomic conditions changes after 1993 when minutes are made public with a lag. Both content indicators also suggest substantive changes in the content of FOMC minutes since the 1950s in terms of the FOMC's dovishness or hawkishness.     

A Case of Mistaken Identity? Measuring Rates of Improved Seed Adoption in Tanzania Using DNA Fingerprinting

Studies of improved seed adoption in developing countries are almost always based on household surveys and are premised on the assumption that farmers can accurately self-report their use of improved seed varieties. However, recent studies suggest that farmers’ reports of seed varieties planted, or even whether the seed is local or improved, are sometimes inconsistent with the DNA fingerprinting results of those crops. We use household survey data from Tanzania to test the alignment between farmer-reported and DNA-identified maize seed types planted. In the sample, 70% of maize seed observations are correctly reported as local or improved, while 16% are type I errors (falsely reported as improved) and 14% are type II errors (falsely reported as local). Type I errors are more likely to have been sourced from other farmers, rather than formal channels. An analysis of input use, including seed, fertiliser, and labour allocations, reveals that farmers tend to treat improved maize differently, depending on whether they correctly perceive it as improved. This suggests that errors in farmers’ seed type awareness may translate into suboptimal management practices. The average yield of seed that is correctly identified as improved is almost 700 kg per hectare greater than that of type I errors. This indicates that investments in farmers’ access to information, seed labelling, and seed system oversight are needed to complement investments in seed variety development.     

The GCC’s Fixed Exchange Rate: A Major Anomaly for OCA Analysis

From the standpoint of traditional optimal currency area (OCA) analysis, the Gulf Cooperation Council (GCC) countries are a major anomaly. They successfully maintained pegged exchange rates among themselves for two decades while failing to meet a number of major OCA criteria. Contrary to the optimistic predictions of some of the most enthusiastic advocates of endogenous OCA analysis, intra‐regional trade has remained low and there is little synchronisation of their business cycles or harmonisation of their fiscal positions. We argue that their success in operating a fixed rate regime has been due to a combination of high oil revenue, the heavy use of foreign workers and the limited extent to which their economies rely on market forces. These are conditions that are not met by most other countries.     

Corruption and International Trade: An Empirical Investigation of African Countries

This paper attempts to estimate the effect of corruption on the flows of exports and imports of African countries. Using the gravity model approach and annual data for the period 1998–2007, we obtain negative and statistically significant correlations between the values of exports and imports and the levels of corruption in Africa and trading partners. Thus the results support the view that corruption adversely affects international trade. Our estimates suggest that if a country with Africa’s average corruption perception index of 2.8 were to improve its corruption level to Botswana’s 5.9, its exports would improve by about 15 per cent and imports by about 27 per cent.