Optimal Risk Transfer: A Numerical Optimization Approach

Capital efficiency and asset/liability management are part of the Enterprise Risk Management Process of any insurance/reinsurance conglomerate and serve as quantitative methods to fulfill the strategic planning within an insurance organization. A considerable amount of work has been done in this ample research field, but invariably one of the last questions is whether or not, numerically, the method is practically implementable, which is our main interest. The numerical issues are dependent on the traits of the optimization problem, and therefore we plan to focus on the optimal reinsurance design, which has been a very dynamic topic in the last decade. The existing literature is focused on finding closed-form solutions that are usually possible when economic, solvency, and other constraints are not included in the model. Including these constraints, the optimal contract can be found only numerically. The efficiency of these methods is extremely good for some well-behaved convex problems, such as Second-Order Conic Problems. Specific numerical solutions are provided to better explain the advantages of appropriate numerical optimization methods chosen to solve various risk transfer problems. The stability issues are also investigated together with a case study performed for an insurance group that aims capital efficiency across the entire organization.     

Do Institutional Investors Enhance Accounting Earnings Attributes in the Korean Market?

This study examines whether the effectiveness of institutional monitoring depends on the economic conditions of emerging capital markets. We use trading volume data by investor type to compute a proxy for total institutional ownership. We then analyze the impact of the proxy variable on accounting earnings attributes and examine whether the association between the two depends on an expectation of market growth. We find that the effect of institutional monitoring decreases when market growth is expected to be low, implying that market growth may be a critical determinant of institutional investors’ long-term monitoring effectiveness in emerging capital markets.     

The Role of Fashion Brand Authenticity in Product Management: A Holistic Marketing Approach

This study explores the multidimensional construct of brand authenticity and the effect of each component on brand attachment, brand commitment, and brand loyalty by focusing on fashion brands in sporting goods. For this study, two global sports brands, Nike and Adidas, were selected, and brand stimuli (cartoons with scenarios) were designed based on a qualitative analysis of brand cases. A total of 207 usable responses were obtained from Korean consumers who had purchased the selected brands. The findings show that fashion brand authenticity consisted of seven factors: authority, fashionability, consistency, innovativeness, sustainability, origin, and heritage. Of these factors, authority, fashionability, innovativeness, and sustainability were significant predictors of brand attachment, and authority, consistency, and innovativeness were significant predictors of brand loyalty. There were differences in the effects of brand authenticity on brand attachment and brand commitment between Nike and Adidas. From a managerial and holistic marketing perspective, implications are suggested regarding the importance of managing brand authenticity in product innovation and management approaches.     

The Contributions of Firm Innovativeness to Customer Value in Purchasing Behavior

The purpose of this research is to examine the influence of firm innovativeness and product innovativeness on the components of customer value mediated by instrumental and symbolic brand benefits. Over the last 10 years, the mobile phone industry in Korea has grown rapidly, with the introduction of several innovative phone features. The research context therefore is mobile phones with Internet access and their users in Korea. A major research finding is that the firm innovativeness affects product innovativeness, and hence, the instrumental brand benefits. A firm's innovativeness also has a significant effect on the symbolic brand benefits and the partnership value. Our key academic contribution is to expand the previous fragmentary studies of customer value, by classifying customer value into four components: expectation, partnership, transaction, and relationship customer values, rather than just focusing on benefits and sacrifices. Implications for managers include the verification that firm innovativeness is a source of ability for mobile phone firms to create value for customers. Instrumental and symbolic brand benefits through innovation should be the focus area for marketers and new product development (NPD) managers in mobile phone firms to communicate with consumers to increase expectation values in the prepurchase step.     

Wage arrears uncertainty and precautionary saving in Russia1

Wage arrears are widespread in Russia, and are one of the main causes of uncertainty in the labour market. In this paper, we use the Russian Longitudinal Monitoring Survey over the period 1994–98 to construct a new and improved measure of household income risk, based on the uncertainty due to wage arrears. We then use this measure of uncertainty to test the precautionary saving hypothesis, according to which households save to self‐insure against risk. We find significant evidence of additional saving by those households whose head is more likely to suffer from wage arrears one year hence. This suggests the existence of a strong precautionary saving motive.     

Market rationality and dividend announcements

We investigate stock market rationality by examining the timeliness and unbiasedness of the market's response to dividend announcements. Our initial findings for market timeliness show a sluggish market reaction to dividend announcements; however, when the ex-dividend effect is controlled for, we find no evidence of a sluggish market reaction. We examine the unbiasedness of the market's response by testing whether the net announcement effect across a sample that is devoid of ex-post selection bias sums to zero. We observe a significant positive net announcement effect and examine several plausible conjectures for this puzzling phenomenon, but none provides a satisfactory explanation.     

Toward global regulatory harmonization in banking

Several principles of international bank regulatory jurisdictions have emerged since the mid-1970s. Each principle has advantages and disadvantages in promoting cross-border competition, ensuring prudent banking practice, and maintaining worldwide financial stability. At the same time, simultaneous application of different principles by different countries has caused overlapping, underlapping, or sheer avoidance of bank regulations, resulting in less transparency and an uneven playing field for internationally competing banks. To level the playing field, bank regulatory harmonization has been advocated, particularly under the auspices of the Basle Committee on Banking Supervision. However, as demonstrated in the case of setting minimum capital standards for market risks, a successive harmonization approach may not be the panacea. There is a need for rethinking of efficiency in regulation, including incentive-compatible approaches.