Time series patterns in credit ratings

This article offers a substitute setting to simulate credit rating migrations. The internal correlations model tracks time-series movements within credit rating entries, rather than cross-ratings correlations. The proposed nonhomogeneous process is authenticated through the likelihood ratio Dickey–Fuller test, and is found to be statistically and economically significant, by better fitting observed cumulative default rates. Several nonlinear regression models assist to better identify these time-related patterns. The economic structure underlying the time dependency often corresponds to changes in GDP, business cycles, and market risk. Furthermore, significant positive autocorrelation is detected mostly among downgrade probabilities.     

The cost allocation issue in joint replenishment

Joint replenishment for several products to achieve a lower inventory logistics cost has been a topic of extensive studies. Less attention has been paid to the issue of deciding how the joint replenishment costs should be allocated across the individual products. Ideally, when items are ordered together one would require a stable cost allocation, such that no subset of products subsidizes another subset. When part of each product's ordering cost is product specific and part can be shared with other products (like in a 3PL setting of Anily and Haviv), it has been shown that even when a stable allocation exists, such an allocation might be difficult to compute. In addition, usually the components of ordering costs are partially determined using estimates and accounting discretion. This paper provides two main insights for determining an appropriate cost allocation. It provides the means to test how sensitive a stable cost allocation is to a range of cost parameter values. Then, in a computational study, it is shown how to obtain a stable cost allocation without excessive computation.     

Technology Innovation Indicators

Abstract
A survey of the US patent database has yielded indicators to trends in technology innovations. Three types of indicator were developed, namely technology maturity, growth potential and product vs process innovations. The patent data show how innovations in one technology area are linked to other technologies and a measure of these links was incorporated into the above trend indicators. Results have a wide range of applications, including assessment of technological opportunities and helping a company in the analysis of strategic alternatives.     

On preserving the reservation wage property in a continuous job search model

The purpose of this article is to examine a continuous model of job search. Job offers are received randomly over time according to a renewal process. The wage offers are assumed to be positive, independent, and identically distributed random variables. There is a search cost of c monetary units per unit time. The only decision the searcher must make is when to stop searching and accept an offer. It is shown that the optimal stopping strategy which maximizes the searcher's expected net return over the class of all stopping times possesses the reservation wage property, provided that the interarrival time between two successive job offers in NBUE (new better than used in expectation).     

The Effects of Dynamic Changes in Bank Competition on the Supply of Small Business Credit

We study the effects of structural changes in banking markets on the supply of credit to small businesses. Specifically, we examine whether bank mergers and acquisitions (M & As) and entry have ``external' effects on small business loans by other banks in the same local markets. The results suggest modest positive external effects from these dynamic changes in competition, except that large banks may reduce small business lending in reaction to entry. We confirm bank size and age as important determinants of this lending, and show that the measured age effect does not appear to be driven by local market M & A activity.