Futures-Style Options on Euro-deposit Futures: Nihil sub Sole Novi?

Euro-deposit futures play a relevant role among the derivative products traded in official markets. As opposed to most futures contracts, the underlying instrument is not represented by a traded asset but by a linear transformation of an interest rate, the Libor. The options written on Euro-deposit futures that are traded at the London International Financial Futures & Options Exchange (LIFFE) are subject to daily marking to market, as the underlying futures; thus, they are called futures-style options or pure futures options. These options are often priced with the Black (1976) formula, whose use entails several shortcomings. A more realistic alternative is represented by the univariate Cox, Ingersoll and Ross (1985) model. The closed-form solutions for the prices of Euro-deposit futures and futures-style options on Euro-deposit futures obtained in the CIR model are two major original contributions presented in this paper. Other original contributions involve the determination of the relation between futures rates and forward rates and the derivation of the equivalent portfolio for the hedging of futures-style options on Euro-deposit futures.     

The styles of management inventory: A methodological analysis of a training and research instrument

In recent years several theoretical ideas have been advanced in the area of problem-solving and decision-making in administration, with a focus on “leadership” styles. Instruments have been designed to operationalize the theory and for purposes of training and research. However, there has been little systematic testing of such instruments. This study examines the theoretical underpinning of one particular instrument, the Styles of Management Inventory. Then, it proceeds to test it for internal consistency by using multidimensional scaling. The data for this study were obtained from 288 probation administrators in the United States. Since this instrument is currently used by trainers and researchers, it is felt that this methodological study has important implications for both the management training and research fields.     

The Comprehensive Assessment: What lessons can be learned?

Analysing the database made available by the European Central Bank and by the European Banking Authority, we evaluate the Comprehensive Assessment (CA) (Asset Quality Review and Stress Test (ST)) of banks carried out in 2014. In a nutshell, the main results are: (i) risk-adjusted capital ratios are negatively related to the Asset Quality Review shortfall, but not to the ST shortfall, whereas the leverage ratio plays a significant role in both cases; (ii) the CA predominantly concentrated on traditional credit activity rather than on banks’ financial assets and (iii) the CA seems to be characterized by double standards. The Asset Quality Review was severe with banks operating in non-core countries, while medium-sized banks were either riskier or were treated severely in both exercises. The analysis leads to a puzzle: comparatively, the assessment per se led to significant adjustments for solid banks and large shortfalls for weak banks. The puzzle can be resolved by referring to the legacy of the country’s former supervisory activity and to the low level of capitalization of weak banks mostly in peripheral countries.

Abbreviations: ADJ_AQR: adjustment due to the AQR; ADJ_ST: adjustment due to the ST adverse scenario; AQR: asset quality review; bps: basis points (1?bp is equal to 0.01%); bn: billion; CA: comprehensive assessment; CET1: common equity tier 1; CR: coverage ratio; CRD/CRR: capital requirements directive/capital requirements regulation; CVA: credit valuation adjustment; EBA: European Banking Authority; ECB: European Central Bank; LM test: Lagrange-multiplier test; NPE: Non-performing exposure; RWA: risk-weighted asset; SF_AQR: shortfall due to the AQR; SF_ST: shortfall due to the ST adverse scenario; SREP: supervisory review and evaluation process; SSM: single supervisory mechanism; ST: stress test; tr: trillion (one thousand of billions)     

An inverse demand analysis with introduction of quality effects: an application to Spanish consumption of fruit and vegetables

This article analyzes consumer preference for fruit and vegetables when, by using time series with socioeconomic characteristics of households, there can be seemingly unobserved quality effects, which are increased by aggregation. The changes in Spanish demand for fresh and processed fruit and vegetables over the period 1987–2000 are discussed. Following previous tests and analyses, quantities are taken as predetermined and prices as matching the offer conditions. Thus, quality effects (based on the nutritional and/or health value of the product) are estimated from the error terms associated with the functions of the unit values. Quality variables are introduced as taste shifters in the inverse demand system (Laitinen–Theil model). The results show the positive effects of quality differences on the normalized price for the group of products through own‐quality flexibilities, and the negative effects between fresh and processed products through cross‐quality flexibilities.     

Productivity and Environmental Performance in Marketing Cooperatives: An Analysis of the Spanish Horticultural Sector

The paper analyses the productivity of marketing cooperatives incorporating environmental inputs/outputs. In the European agriculture, expectations for attaining sustainable and competitive agriculture rely to a great extent on the cooperative sector's ability to adapt to new market conditions. These challenges have led marketing cooperatives in the fruit and vegetables sector to consider improvements in productivity and sound environmental performance. The study analyses the total factor productivity related to environmental variables in this sector using a parametric‐stochastic approach and panel data on Spanish cooperatives over the period 1994–2002. Additionally, the determinants of environmental productivity are examined econometrically. The estimates obtained show an increase in efficiency for the period under study and a relationship between productivity changes and management factors, such as labour quality, capital intensity and environmental spillover.     

Technological and Organizational Tools for Knowledge Management: In Search of Configurations

Knowledge Management (KM) is becoming a growing concern in management research and practice because of its role in determining firm innovation capability and in enhancing working life quality of knowledge workers. This requires, even for Small and Medium Enterprises (SMEs) the creation of a sustainable work organization in terms of configuration of organizational and Information and Communication Technology (ICT) tools. With a particular emphasis in the area of Product Innovation (PI) and on the basis of a survey on 127 Italian SMEs, this paper aims at analysing the emergent technological and organizational approaches to managing knowledge in the PI process. Three different KM Configurations emerge: the `technical', the `relational' and the `advanced' approach.     

Construction of voting situations concordant with ranking patterns

Decisions in Economics and Finance - Referring to a standard context of voting theory, and to the classic notion of voting situation, here we show that it is possible to observe any arbitrary set...     

A flexible lattice framework for valuing options on assets paying discrete dividends and variable annuities embedding GMWB riders

In a market where a stochastic interest rate component characterizes asset dynamics, we propose a flexible lattice framework to evaluate and manage options on equities paying discrete dividends and variable annuities presenting some provisions, like a guaranteed minimum withdrawal benefit. The framework is flexible in that it allows to combine financial and demographic risk, to embed in the contract early exercise features, and to choose the dynamics for interest rates and traded assets. A computational problem arises when each dividend (when valuing an option) or withdrawal (when valuing a variable annuity) is paid, because the lattice lacks its recombining structure. The proposed model overcomes this problem associating with each node of the lattice a set of representative values of the underlying asset (when valuing an option) or of the personal subaccount (when valuing a variable annuity) chosen among all the possible ones realized at that node. Extensive numerical experiments confirm the model accuracy and efficiency.