Bootstrapping the chain-ladder method for several correlated run-off portfolios

The prediction of the outstanding loss liabilities for a non-life run-off portfolio as well as the quantification of the prediction error is one of the most important actuarial tasks in non-life insurance. In this paper we consider this prediction problem in a multivariate context. More precisely, we derive the predictive distribution of the claims reserves simultaneously for several correlated run-off portfolios in the framework of the Chain-ladder claims reserving method for several correlated run-off portfolios.     

Investment timing in presence of downside risk: a certainty equivalent characterization

We demonstrate that the value of a single threshold investment strategy under stochastic dynamics allowing both continuous fluctuations and instantaneous downward jumps has a certainty equivalent representation in terms of the value of this strategy under risk-adjusted deterministic dynamics, and that this risk adjustment can be made either to the discount rate or to the expected infinitesimal growth rate of the underlying. In this way our analysis characterizes a class of optimal timing problems of irreversible investments for which the solution of the stochastic problem coincides with the solutions of certain risk-adjusted deterministic optimal timing problems.     

The moderating effect of innovative capacity on the relationship between real options and strategic flexibility

In dynamic sectors, organizations should be capable of adapting to unpredictable environmental conditions. Strategic flexibility grants organizations the capacity to respond to the changes in their environment in the direction required, renewing their strategies and making the required organizational changes. The goal of this study is to analyze how the use of real options relates to strategic flexibility from a managerial capacity perspective. Through an empirical study performed on European firms, we confirm that innovative capacity exercises a moderating role between real options and strategic flexibility. The fact that a firm's management has foreseen and contemplated real options does not necessarily lead to their execution; they must also be accompanied by some innovative capacity.     

Bidder Asymmetry in Infrastructure Procurement: Are There any Fringe Bidders?

Asymmetric auctions are among the most rapidly growing areas in the auction literature. The potential benefits from intensified auction competition could be enormous in the public procurement context. Entrant bidders are considered a key to enhance competition and break potential collusive arrangements among incumbent bidders. Asymmetric auction theory predicts that weak (fringe) bidders would bid more aggressively when they are faced with a strong (incumbent) opponent. Using data from official development projects, this paper shows that entrants actually submitted aggressive bids in the presence of incumbent(s) in the road sector and to a certain extent in the water sector. For electricity projects, the general competition effect is found to be particularly significant, but the entrant effect remains unclear. The results suggest that auctioneers should foster competition in public procurement, including fringe bidders, to contain public infrastructure investment costs.     

Combining Stated and Revealed Preferences on Typical Food Products: The Case of Dry‐Cured Ham in Spain

An extensive body of research concerns the valuation of EU certification schemes of quality based on the origin of food products. This literature focuses mainly on stated preferences (SPs) and reported behaviours by the consumers. We combine consumers’ SPs, obtained through a conjoint ranking experiment, with revealed preferences (RP), obtained through a retail scanner database. We evaluate SPs as predictors of RP, and investigate whether SPs and RPs are consistent. Dry‐cured ham in Spain is chosen as the anchor product, mainly because of its broad customer base and long history of origin certification. A ‘trick’ nested logit model with non‐identical and identical samples of consumers is estimated to answer each of the objectives. Results show that, irrespective of the analysed samples, SP can predict general market trends and choices but not accurately predict market shares, and that consumers’ actual behaviour is partly consistent with their SPs. We find that consumers prefer ham produced in Teruel, compared with unspecified Spanish origin. Quality Certification and a Distributor’s Brand are preferred over the alternatives of no quality label or identified with a brand owned by the producer. Interestingly, SPs for the Quality Certification and the distributor’s brand lead to an over‐ and under‐estimation, respectively, of the market share.     

Open door policies: Measuring impact using attitude surveys

This study examines employee perceptions of an Open Door Complaint System from both those who have filed claims and those who have not. The sample includes over 4000 employees working in a Fortune 100 company. These perceptions are examined through an organization-wide employee attitude survey. Situation-specific perceptions are analyzed, and their relationship with overall fairness, satisfaction, and intent to remain with the organization are examined. Results suggest that a positive Open Door incident raises both distributive and procedural justice perceptions. In turn, fairness perceptions influence satisfaction levels. Finally, results indicate that satisfaction has a strong effect on the intent to remain with the organization. Implications are discussed for both complaint systems and employee opinion surveys. © 1996 by John Wiley & Sons, Inc.     

Regional volatility in emerging countriesThe case of Russia1

An uneven distribution of natural resources and the Soviet legacy of artificial regional specialization expose Russia's regions to large income shocks. Using an unique regional dataset covering Russian regions between 1992 and 2003, we assess how these features influence the magnitude and persistence of regional income shocks. We propose a novel measure of regional exogenous shocks that we use to show that fiscal policy in Russia's regions has largely been pro‐cyclical, exacerbating rather than moderating regional exogenous shocks.     

Single and Double Black–Cox: Two approaches for modelling debt restructuring

In this paper we propose two first-passage-time approaches for pricing debt and equity when the firm is able to restructure its debt as an alternative to liquidation. In contrast to other first passage models that account for reorganization, our approaches allow the firm to restructure its debt by changing its maturity and/or its face value. The first approach developed consists of a first-passage model for reorganization together with a Merton approach for default, while the second approach uses first-passage models for both reorganization and default. We also provide a comparison of the proposed approaches with the Merton (Merton, R.C., 1974. On the pricing of corporate debt: The risk structure of interest rates. Journal of Finance, 29, 449–470.) and Black and Cox (Black, F. and Cox, J.C., 1976, Valuing corporate securities: Some effects of bond indenture provisions. Journal of Finance, 31, 351–367.) models.     

The case for the virtual strike

In this paper we outline the economic rationale behind the virtual strike, and workers’ incentives to use this bargaining solution rather than resorting to standard strike action. We show that, from a welfare perspective, a well-designed virtual strike always dominates a standard strike and it would be most needed precisely when workers have weaker incentives to adopt it. We then discuss the pros and cons of legally regulating the virtual strike rather than leaving it to self-regulation. Finally, we apply our findings to the analysis of Italy’s draft legislation on virtual strikes.