Book Review

Books reviewed:
Ira A. Jackson and Jane Nelson, Profits with Principles: Seven Strategies for Delivering Values with Values .     

EXPRESSING INVENTORY CONTROL POLICY IN THE TURNOVER CURVE

Estimation of the inventory level for an entire class of items is a valuable time saver when control of inventories at the aggregate level, rather than the item level, is of interest. Inventory approximation by location in supply chain network configuration and evaluation of inventory control policy shifts, are two examples of application. In this article, various popular inventory policies are related to a general function known as an inventory turnover curve that expresses inventory levels from the combined demand of multiple items. By knowing some basic item characteristics of representative items in a product class, the type of inventory policy being used, and the current aggregate inventory level, an inventory turnover curve can be constructed. This resulting turnover curve can be used to estimate inventory levels within 4.6%, on the average, of theoretically predicted ones.     

Half-Way House or Dead End?

Education vouchers ore conventionally attacked by commentators who prefer to maintain the dominance of the srate in the supply of education. Richard Henderson, of the stockbrokers Sheppards & Chase, analyses the vulnerability of vouchers to capture by pressure group and therefore argues for a genuine market in education without the compromise of vouchers.     

From edgeworth to fisher to vickrey: A comment on Michael J. Boskin's Vickrey lecture

Irving Fisher has been overlooked as an influence on William Vickrey's work on taxation and as a link between Edgeworth and Vickrey. Vickrey was Fisher's last and greatest student.     

A MULTINOMIAL APPROXIMATION FOR AMERICAN OPTION PRICES IN LÉVY PROCESS MODELS

This paper gives a tree-based method for pricing American options in models where the stock price follows a general exponential Lévy process. A multinomial model for approximating the stock price process, which can be viewed as generalizing the binomial model of Cox, Ross, and Rubinstein (1979) for geometric Brownian motion, is developed. Under mild conditions, it is proved that the stock price process and the prices of American-type options on the stock, calculated from the multinomial model, converge to the corresponding prices under the continuous time Lévy process model. Explicit illustrations are given for the variance gamma model and the normal inverse Gaussian process when the option is an American put, but the procedure is applicable to a much wider class of derivatives including some path-dependent options. Our approach overcomes some practical difficulties that have previously been encountered when the Lévy process has infinite activity.