Pricing Asian options in a semimartingale model

In this paper we studyy arithmetic Asian options when the underlying stock is driven by special semimartingale processes. We show that the inherently path dependent problem of pricing Asian options can be transformed into a problem without path dependence in the payoff function. We also show that the price is driven by a process with independent increments, Levy processes being a special case. This approach applies for both discretely or continuously options.     

How Today's Consumers Perceive Tomorrow's Smart Products*

This paper investigates consumer responses to new smart products. Due to the application of information technology, smart products are able to collect, process, and produce information and can be described as “thinking” for themselves. In this study, 184 consumers respond to smart products that are characterized by two different combinations of smartness dimensions. One group of products shows the smartness dimensions of autonomy, adaptability, and reactivity. Another group of smart products are multifunctional and able to cooperate with other products. Consumer responses to these smart products are measured in terms of the innovation attributes of relative advantage, compatibility, observability, complexity, and perceived risk. The study shows that products with higher levels of smartness are perceived to have both advantages and disadvantages. Higher levels of product smartness are mainly associated with higher levels of observability and perceived risk. The effects of product smartness on relative advantage, compatibility, and complexity vary across product smartness dimensions and across product categories. For example, higher levels of product autonomy are perceived as increasingly advantageous whereas a high level of multifunctionality is perceived disadvantageous. The paper discusses the advantages and pitfalls for each of the five product smartness dimensions and their implications for new product development and concludes with a discussion of the limitations of the study and suggestions for further research.     

Regulation,Minimum Wage and Informality: Introduction to Symposium

Are markets in developing and transition economies over‐regulated or under‐regulated? This is a perennial question in the development discourse, but one for which answers appear to come more from preset ideology than from context‐specific analysis and evidence. These issues become even more pressing when the debate turns to the links between regulation, deregulation and inequality. The recent experience of rising inequality in many countries has also brought to the fore predictable policy positions. A key aspect of labor regulation in developing countries, and one becoming more prominent in the era of rising inequality, is the minimum wage. The range of issues around regulation, minimum wage and informality was addressed by papers presented to a conference held in New Delhi on December 17–18, 2014. The conference was co‐sponsored by the World Bank, UK Department for International Development, Cornell University and Columbia University. The organizers of the conference were Kaushik Basu, Stefan Dercon, Ravi Kanbur and Jan Svejnar. A selection of papers from the conference which passed the usual review procedures of the Review of Development Economics, and a further selection of papers from those submitted to the journal, form this symposium.     

Fiscal Policy in Europe: How Effective Are Automatic Stabilisers?

It is largely recognised that fiscal policy will have largerresponsibilities for cyclicalstabilisation in EMU given the loss of the monetary instrument.At the same time, theEMU's budgetary framework emphasises the need to rely onautomatic fiscal stabilisers,rather than active policies in cushioning the business cycle.We show that automaticstabilisers are relatively powerful in the event of shocksto private consumption, but lessso in the case of shocks to private investment and exports.In the case of supply sideshocks, the automatic stabilisers are largely ineffective,but this may actually be a goodthing to the extent that supply-side disturbances call forstructural adjustment rather thancyclical stabilisation.     

Forecasting interest rates with shifting endpoints

We consider forecasting the term structure of interest rates with the assumption that factors driving the yield curve are stationary around a slowly time‐varying mean or ‘shifting endpoint’. The shifting endpoints are captured using either (i) time series methods (exponential smoothing) or (ii) long‐range survey forecasts of either interest rates or inflation and output growth, or (iii) exponentially smoothed realizations of these macro variables. Allowing for shifting endpoints in yield curve factors provides substantial and significant gains in out‐of‐sample predictive accuracy, relative to stationary and random walk benchmarks. Forecast improvements are largest for long‐maturity interest rates and for long‐horizon forecasts. Copyright © 2013 John Wiley & Sons, Ltd.     

Technical Analysis as a Rational Tool of Decision Making for Professional Traders

The psychological background of technical analysis usage is investigated to further explain the popularity and common usage of technical analysis as an investment decision tool. Attitudes toward technical analysis of professional futures market traders and neophyte investors, represented by finance students, were examined. Technical analysis is one of the most popular methods supporting investment decisions and it is much more popular among future market traders than among neophyte investors. The concept of processing information was used to explain this phenomenon. Neophyte investors are more experiential and intuition-driven while using technical analysis models, while futures market traders are more rationally driven. Technical analysis methods help professional traders on futures markets, which are less transparent than regulated stock markets, to process information; those methods are perceived by them as rational, cognitive tools supporting their decision making.     

Continuity and Discontinuity in Accounting Technology in Danish State Institutions

The development of accounting technology in the Danish state sector is characterised by episodes of disruption and the longevity of certain principles that define accounting's accountability as involved in producing the state as a unit, as providing a continuous concern for productivity, and as providing the means by which a parliamentary democracy may work. The episodes of disruption may often repair on this trinity of issues. The recent transformations are radical as they introduce a new form of management via individualised 'accounting-cultured' institutions and managers. They do so via a heightened emphasis on a core technology already in place supplemented by a new mode of output orientation rather than input orientation via a Company Accounts . In addition to reporting on spending, this set of accounts introduced a series of non-financial measures such as productivity, quality, and customer satisfaction.