Savings bonds,retractable bonds and callable bonds

Savings bonds, retractable bonds and callable bonds are each equivalent to a straight bond with an option. Neglecting default risk the value of these contingent claims depends upon the riskless interest rate. This paper employs the option pricing framework to value these bonds, under the assumptions that the interest rate follows a Gauss-Wiener process and that the pure expectations hypothesis holds.     

Electricity Prices and Power Derivatives: Evidence from the Nordic Power Exchange

This paper examines the importance of the regular pattern in the behavior of electricity prices, and its implications for the purposes of derivative pricing. We analyze the Nordic Power Exchange's spot, futures, and forward prices. We conclude that the seasonal systematic pattern throughout the year, in particular, is of crucial importance in explaining the shape of the futures/forward curve. Moreover, in the context of the oneand two factor models analyzed in this paper, a simple sinusoidal functionis adequate in order capture the seasonal pattern of the features and forwardcurve directly implied by the seasonal behavior of spot electricity prices.     

Is the Debt Crisis History? Recent Private Capital Inflows to Developing Countries

The outlook for economic development for an important groupof middle-income countries has once again been buoyed by substantialprivate capital inflows in the 1990s. As in the 1970s, thisdevelopment has been met with cautious optimism. This empiricalstudy finds that although debt reduction and policy reformsin debtor countries have been important determinants of renewedaccess to international capital markets, changes in internationalinterest rates have been the dominant factor. We calculate theeffects of changes in international interest rates for a "typical"debtor country. We conclude that increases in interest ratesassociated with a business cycle upturn in industrial countriescould depress the secondary market prices of existing debt tolevels inconsistent with continued capital inflows.     

Financial opening, deposit insurance, and risk in a model of banking competition

We study the impact of competition on banks’ risk-taking behavior under different assumptions about deposit insurance and the dissemination of information. While financial opening increases banks’ riskiness, a risk-based deposit insurance or, alternatively, the public disclosure of financial information, are likely to mitigate this effect. Moreover, the limiting cases of uninsured but fully informed depositors, and risk-based full deposit insurance, yield the same equilibrium risk level. Although the welfare consequences of increased competition depend on its impact on risk, financial opening unambiguously improves welfare as we approach the limiting cases.     

Agricultural commodity futures trading based on cross-country rolling quantile return signals

This paper formulates and examines a new type of bivariate time series trading strategy based on signals generated from cross-country quantiles of return distributions. We conduct rolling quantile trading strategies separately in the U.S. and Chinese futures markets for soybeans, wheat, corn and sugar over very short (daily, intraday and overnight) holding periods. Overall, we find that these practical strategies outperform various benchmarks and there is a large profit potential when trades follow quantile-based signals rather than focusing on the median only. The results highlight the value of cross-country trading strategies and the harnessing of information from different parts of the return distributions which have so far been neglected.     

Management Behaviour in Vietnamese Commercial Banks

This study identifies managerial behaviour in Vietnamese banks between the years 2000 and 2014, based on the managerial framework of banks, as identified by Rossi et al. ( 2009 ). This framework is built on the interrelationships between efficiency, risk, capital and diversification. This study uses the Z‐score to measure insolvency risk, the SFA to estimate cost efficiency, the ratio of total equity to total assets to capture bank capital and the HHI index to measure the diversification of revenue and earning assets. The results from the 3SLS estimator indicate that revenue diversification has an insignificant impact on insolvency risk, capital ratio and cost efficiency, but earning assets diversification has a negative effect on these three variables, supporting ‘classical diversification’, ‘economic capital’ and ‘monitoring’ behaviours. Moreover, a decline in cost efficiency leads to a rise in insolvency risk, implying ‘bad management’ behaviour; an increase in risk results in a reduction in cost efficiency, indicating ‘bad luck’ behaviour; and a reduction in capital ratio in the poorly capitalised banks leads to a growth in risk, suggesting ‘moral hazard’ behaviour. The results remain strongly robust when using an alternative risk measurement (the loan loss provision ratio) and an alternative SFA model.     

Promotion Signals,Experience, and Education

This paper uses a nation‐wide representative survey of employees to examine whether more informative job promotions carry larger wage increases. In job assignment models with asymmetric information, unexpected promotions send a signal to the external labor market to revise upward their assessment of a worker's ability. The employing firm must then increase wages to prevent the worker from being bid away. Less educated workers are assumed to come from a group with lower average ability. Their promotion is hypothesized to induce a larger positive update of the assessment of their ability than the promotion of more educated workers. Promotions of less experienced workers, with less known about their abilities, should also result in strong signaling effects. We obtain regression results consistent with our hypotheses, although the size and significance of the estimates hinge on the promotion definition. Inexperienced workers gain more from promotions that entail new managerial responsibilities, whereas less educated workers gain more from nonmanagerial promotions. This sensitivity to the definition of promotion suggests that promotions reveal information on different dimensions of ability for different types of workers.     

From the islands of knowledge to a shared understanding: interdisciplinarity and technology literacy for innovation in smart electronic product design

In the context of the evolving Internet, a balance between technological advances and meaning change is crucial to develop innovative and breakthrough “connected electronics” that enable the Internet of Things. Designers and technologists are key enablers of this process respectively, ensuring adequate users’ needs and technology development, inside the evolving context of social environment and human relations. Smart electronic product design must be a truly interdisciplinary process, in which technologists are aware of how much their decisions impact the user-product relationship and designers understand the full potential and associated limitations of technology involved. Shared knowledge and communication are essential in this scenario, but, due to their technological limitations, designers are often excluded from high-level decision processes. In this paper, we address the design of constructivist tools and associated strategy to enhance the technological literacy of designers, as a strong foundation for knowledge-based dialogue between these realms. We demonstrate its effectiveness in a long-term multidisciplinary Project-Based Learning application with Design and Electronics students. We present the cases from 2 years’ experimentation (with the first year as control group) that demonstrate improvement in the quality of teamwork; in learning results; improved performance of the students reflected in the quality of the projects developed; and positive teachers’ and students’ evaluations. We conclude that the use of the proposed tool not only provides the designer an active voice in the process of designing smart electronics, but also promotes an effective common language between these two worlds.     

O/S: The relative trading activity in options and stock

Relatively little is known about the trading volume in derivatives relative to the volume in underlying stocks. We study the time-series properties and the determinants of the options/stock trading volume ratio (O/S) using a comprehensive cross-section and time-series of data on equities and their listed options. O/S is related to many intuitive determinants such as delta and trading costs, and it also varies with institutional holdings, analyst following, and analyst forecast dispersion. O/S is higher around earnings announcements, suggesting increased trading in the options market. Further, post-announcement absolute returns are positively related to pre-announcement O/S, which suggests that at least part of the pre-announcement options trading is informed.     

A model of management teams

We present a simple model of management teams where the time it takes to make decisions is related to the size of the committee. We characterize the situations where larger or smaller sizes of the management team are desirable depending on the covariance structure of the signals that the managers observe. © 1998 John Wiley & Sons, Ltd.