Perturbative Expansion Technique for Non-linear FBSDEs with Interacting Particle Method

In this paper, we propose an efficient Monte Carlo implementation of a non-linear FBSDE as a system of interacting particles inspired by the idea of the branching diffusion method of McKean. It will be particularly useful to investigate large and complex systems, and hence it is a good complement of our previous work presenting an analytical perturbation procedure for generic non-linear FBSDEs. There appear multiple species of particles, where the first one follows the diffusion of the original underlying state, and the others the Malliavin derivatives with a grading structure. The number of branching points are capped by the order of perturbation, which is expected to make the scheme less numerically intensive. The proposed method can be applied to semi-linear problems, such as American options, credit and funding value adjustments, and even fully non-linear issues, such as the optimal portfolio problems in incomplete and/or constrained markets.     

Asymptotic analysis for stochastic volatility: martingale expansion

A general class of stochastic volatility models with jumps is considered and an asymptotic expansion for European option prices around the Black–Scholes prices is validated in the light of Yoshida’s martingale expansion theory. Several known formulas of regular and singular perturbation expansions are obtained as corollaries. An expansion formula for the Black–Scholes implied volatility is given which explains the volatility skew and term structure. The leading term of the expansion is always an affine function of log moneyness, while the term structure of the coefficients depends on the details of the underlying stochastic volatility model. Several specific models which represent various types of term structure are studied.     

A characteristic feature of the consumption-loan model

Samuelson provided an exact consumption-loan model of interest, and asserted, by way of an example, the impossibility theorem that the biological rate of interest with the optimality properties of the so-called golden rule can never be achieved dynamically through the consumption-loan market. Despite his contribution and those that followed, the important question remains as to whether the alleged instability of the biological rate of interest is of a more general nature. To date no definite conclusion is yet available. The purpose in this paper is to present a clear-cut view of the problem, and to clarify the key factors that validate or invalidate the impossibility theorem.     

Regional development or resource preservation? A perspective from Japanese appliance exports

This paper examines Japanese resource outflows in the form of exported used (and functional) products in 2007 by quantifying the unintentional metal exports for a number of specialty metals typically used in electronics and electrical equipment. We find that more than half of the indium and 20-30% of the barium, lead, antimony, strontium, zirconium, silver, gold, and tin in domestically discarded products were not recycled in Japan, but rather were exported in products to be used elsewhere. The destinations of these metals were mainly Asian countries with rudimentary recycling technology. These results demonstrate that although these metals could have been stockpiled domestically for future recovery and recycling, they were instead sent to countries where recycling of these scarce metals is unlikely. From a resource perspective, therefore, the free trade of used Japanese products compromises long-term domestic resource availability as it increases the quality of life in developing countries.     

Nonlinear dynamism of innovation and business cycles

The aim of this paper is to describe the nonlinear dynamism of innovation and to clarify the role of innovation for economic development in terms of Kondratiev business cycles, especially the causal relation of the bubble economy and depressions with innovations. Any paradigm of technological innovation develops within a definite time span reaching maturity. This nonlinear nature clarifies many characteristic features of innovation. Schumpeters innovation theory on business cycles is examined through this dynamism. Trunk innovation is defined as that which plays a decisive role in building infrastructures and inducing subsequent innovations. Every innovation has its own technological development period just before the innovation diffusion. The emergence of new markets can be estimated by chasing the ongoing technologies.JEL Classification: E32, L16, O11, O14, O30Paper presented at the 9th Conference of the International J.A. Schumpeter Society, Gainesville, Florida, USA.Previous affiliation was Ryutsu Kagaku University, Faculty of Information Science, Kobe, Japan.     

Market orientation and performance of export ventures: the process through marketing capabilities and competitive advantages

Our study focuses on the internal process through which market orientation influences performance in export markets, and develops a model of market orientation–marketing capabilities–competitive advantages–performance relationships. Using survey data of 491 export ventures based in China, we find that marketing capabilities mediate the market orientation–performance relationship, while competitive advantages partially mediate the marketing capabilities–performance relationship. Moreover, coordination mechanism strengthens, and cost leadership strategy weakens, the effects of market orientation on new product development and marketing communication capabilities, respectively. Market turbulence attenuates the effect of market orientation on new product development capability while competitive intensity strengthens this effect.     

Stepwise aggregation for material balances

This paper develops further the Montias-Levine model for the material-balances process, and presents a stepwise aggregation process with full-cost price formation. It shows that stepwise aggregation speeds up the iterative process, and shows further that the Manove-Weitzman process is an important, but very special, version of the model presented here. Numerical experiments, using the Soviet 15- and 76-sector I-O tables, offer comparative degrees of convergence speed for various processes and verify that any process using stepwise aggregation is more efficient.     

Volatility has to be rough

Under power-law blow-up of the short ATM skew, volatility must be rough in a viable market for the underlying asset