American options under stochastic volatility: control variates,maturity randomization & multiscale asymptotics

American options are actively traded worldwide on exchanges, thus making their accurate and efficient pricing an important problem. As most financial markets exhibit randomly varying volatility, in this paper we introduce an approximation of an American option price under stochastic volatility models. We achieve this by using the maturity randomization method known as Canadization. The volatility process is characterized by fast and slow-scale fluctuating factors. In particular, we study the case of an American put with a single underlying asset and use perturbative expansion techniques to approximate its price as well as the optimal exercise boundary up to the first order. We then use the approximate optimal exercise boundary formula to price an American put via Monte Carlo. We also develop efficient control variates for our simulation method using martingales resulting from the approximate price formula. A numerical study is conducted to demonstrate that the proposed method performs better than the least squares regression method popular in the financial industry, in typical settings where values of the scaling parameters are small. Further, it is empirically observed that in the regimes where the scaling parameter value is equal to unity, fast and slow-scale approximations are equally accurate.     

CASE: Mozilla vs. Godzilla — The Launch of the Mozilla Firefox Browser

The case describes an interactive marketing campaign used to launch the open source, Mozilla Firefox browser. The case highlights key features of the campaign and the facilitating conditions that enabled product success. The sustainability of the community marketing effort in light of product maturation is the central marketing challenge that the organization now faces.     

Arms Races and Negotiations

Two players simultaneously decide whether or not to acquire new weapons in an arms race game. Each player's type determines his propensity to arm. Types are private information, and are independently drawn from a continuous distribution. With probability close to one, the best outcome for each player is for neither to acquire new weapons (although each prefers to acquire new weapons if he thinks the opponent will). There is a small probability that a player is a dominant strategy type who always prefers to acquire new weapons. We find conditions under which the unique Bayesian–Nash equilibrium involves an arms race with probability one. However, if the probability that a player is a dominant strategy type is sufficiently small, then there is an equilibrium of the cheap-talk extension of the game where the probability of an arms race is close to zero.     

Exchange Rate Exposure and its Determinants: Evidence from Indian Firms

This article examines the determinants of the exchange rate exposure by comparing both manufacturing and service sector firms in India over the period of 2000 to 2013. First, the study finds that service sector firms are more exposed to exchange rate changes than manufacturing firms in India. Second, the results indicate that the market-to-book ratio and export are significant and positively related; however, size is negatively related to the exchange rate exposure of both the manufacturing and service sector firms. These results are robust with the estimation using a trade-weighted exchange rate.     

Rationale and Motivation of Agricultural Producers in Adopting Crop Rotation in the Northern Great Plains,USA

Despite several environmental and economic benefits of crop rotation, the adoption of this agricultural practice is relatively low. Understanding the reasons for low adoption is important from a sustainability policy perspective. This study explores the motivation, challenges, and sources of information of agricultural producers who participate in crop rotation practices in South Dakota, North Dakota, and Nebraska. The findings of a mail survey of 672 producers in these three states show that producers are familiar with the crop rotation practice. Economic profitability is found to drive motivation for crop rotation adoption. The results of a binary logistic regression model show that a producer who perceives that crop rotation is beneficial to farm profitability is 1.83 times more likely to adopt it than the producer who does not believe in its profitability to the farm. The lack of time or resources is the primary barrier to the adoption of crop rotation practice. This study provides additional evidence in support of the importance of farm profitability for the adoption of the practice of crop rotation. Understanding the rationale and addressing the challenges faced by agricultural producers would be useful in planning and policy making of sustainable agriculture.     

So what do I get? The bank's view of lending relationships

While many empirical studies document borrower benefits of lending relationships, less is known about lender benefits. A relationship lender's informational advantage over a non-relationship lender may generate a higher probability of selling information-sensitive products to its borrowers. Our results show that the probability of a relationship lender providing a future loan is 42%, while for a non-relationship lender, this probability is 3%. Consistent with theory, we find that borrowers with greater information asymmetries are significantly likely to obtain future loans from their relationship lenders. Relationship lenders are likely to be chosen to provide debt/equity underwriting services, but this effect is economically small.     

The Effect of Provision Points on Generic Advertising Funding

Marketing Letters - Generic advertising promotes the general qualities of a product category and, therefore, benefits all firms in the category. Recent examples of such campaigns organized through...     

Incentive Complementarity in China’s Rural Enterprises

Complementarity between incentive instruments is a central theme of theoretical research in industrial organization. However, despite its importance, empirical evidence on the existence of complementarities is limited. We identify complementarities between incentive mechanisms using a dataset on rural firms in China. Using a panel regression framework, we confirm that significant complementarities exist in terms of the impact of incentive instruments on the performance of firms. In order to evaluate the robustness of our results we account for unobserved differences in firm quality using fixed effects and instrumental variables regressions. Support for the complementarity hypothesis is found after controlling for unobserved heterogeneity.     

Bibliometric monitoring of research performance in ICT-based disaster management literature

Quality & Quantity - The increasing diffusion of Information Communication Technologies (ICT) in the domain of disaster management depicts the catalyzed efforts and interests of nations for...     

Towards a model of dynamic capabilities in innovation-based competitive strategy: Insights from project-oriented service firms

With the growing significance of services in most developed economies, there is an increased interest in the role of service innovation in service firm competitive strategy. Despite growing literature on service innovation, it remains fragmented reflecting the need for a model that captures key antecedents driving the service innovation-based competitive advantage process. Building on extant literature and using thirteen in-depth interviews with CEOs of project-oriented service firms, this paper presents a model of innovation-based competitive advantage. The emergent model suggests that entrepreneurial service firms pursuing innovation carefully select and use dynamic capabilities that enable them to achieve greater innovation and sustained competitive advantage. Our findings indicate that firms purposefully use create, extend and modify processes to build and nurture key dynamic capabilities. The paper presents a set of theoretical propositions to guide future research. Implications for theory and practice are discussed. Finally, directions for future research are outlined.