Catastrophe Risk Bonds

Abstract

This article examines the pricing of catastrophe risk bonds. Catastrophe risk cannot be hedged by traditional securities. Therefore, the pricing of catastrophe risk bonds requires an incomplete markets setting, and this creates special difficulties in the pricing methodology. The authors briefly discuss the theory of equilibrium pricing and its relationship to the standard arbitrage-free valuation framework. Equilibrium pricing theory is used to develop a pricing method based on a model of the term structure of interest rates and a probability structure for the catastrophe risk. This pricing methodology can be used to assess the default spread on catastrophe risk bonds relative to traditional defaultable securities.     

Income Inequality and Income Mobility in the Scandinavian Countries Compared to the United States

This paper compares income inequality and income mobility in the Scandinavian countries and the United States during 1980–90. The results suggest that inequality is greater in the United States than in the Scandinavian countries and that this inequality ranking of countries remains unchanged when the accounting period of income is extended from one to eleven years. The pattern of mobility turns out to be remarkably similar, in the sense that the proportionate reduction in inequality from extending the accounting period of income is much the same. But we do find evidence of greater dispersion of first differences of relative earnings and income in the United States. Relative income changes are associated with changes in labor market and marital status in all four countries, but the magnitude of such changes are largest in the United States.     

Influence of design on tourists’ recommendation intention: an exploratory study of fjord cruise boats

ABSTRACT

In this article we study the influences of esthetic, functional, and symbolic dimensions of design on attitude toward fjord cruise boats and intention to recommend using the product. Also, we argue for the importance of a product to blend in with the surroundings in which it is used – contextually congruent design. In two studies we find that aesthetic, functional and contextually congruent design has positive influences on attitude toward fjord cruise boats. Designers of fjord cruise boats should develop boats with designs that are congruent with the surroundings in which they will be used.     

“This is who i am”: Identity expressiveness and the theory of planned behavior

This paper explores the role of self‐identity expressiveness and social identity expressiveness in the context of Multimedia Messaging (MMS) adoption. An extended version of the Theory of Planned Behavior (TPB) including a wider array of identity and social influences is developed and tested. As hypothesized, self‐identity expressiveness and social identity expressiveness prove to be significant determinants of intentions to use. Moreover, the extended TPB model explains 62% of the variance in usage intentions. The paper also investigates the relationship between self identity expressiveness and attitude and between social identity expressiveness and subjective norm. The study results indicate that the concept of subjective norm alone is insufficient to capture the rich universe of identity and social influences driving behavioral intentions. Implications for marketing managers and scholars are discussed. © 2007 Wiley Periodicals, Inc.     

Bubbles and Crises: The Role of House Prices and Credit

This paper utilizes quarterly panel data for 20 OECD countries over the period 1975:Q1–2014:Q2 to explore the importance of house prices and credit in affecting the likelihood of a financial crisis. Estimating a set of multivariate logit models, we find that booms in credit to both households and non‐financial enterprises are important to account for when evaluating the stability of the financial system. In addition, we find that global housing market developments have predictive power for domestic financial stability. Finally, econometric measures of bubble‐like behavior in housing and credit markets enter with positive and highly significant coefficients. Specifically, we find that the probability of a crisis increases markedly when bubble‐like behavior in house prices coincides with high household leverage. Copyright © 2016 John Wiley & Sons, Ltd.     

How Love Evolved from Sex and Gave Birth to Intelligence and Human Nature

This article argues that emotional attachment drive has shaped the evolution of human intelligence, interpersonal relationships and culture. The first section is about the evolution of social bonds and their role in the rise of intelligence. At the outset, I present evidence that desire for emotional closeness to others is a primary human instinct. Recent discoveries in neurobiology are then incorporated into a summary of the evolution of brain systems that activate emotional attachments and the vital role of parental nurture in the development of offspring's social behavior and capacity to cope with stress. The evolution of maternal behavior is discussed as a particularly important event enabling expansion of brain size and complexity and initiating a pattern of mutually enhancing co-evolution between social complexity and intelligence leading ultimately to the modern human brain. The second section examines how emotional attachment drive may have contributed to the evolution of prominent aspects of human nature and culture. It is hypothesized that the evolution of unique human mental abilities provided vast new outlets for and means of expressing emotional attachment leading to much closer and more diverse interpersonal relationships and the rise and transmission of culture. These developments were very likely important for increasing the adaptive advantages and decreasing the dangers of high intelligence. Emotional bonding between human sex partners was probably selected for because the slow maturation, complex cognitive and psychological development and culture acquisition needs of children required more parental attention for much longer periods compared to offspring of other primate species. Integration of attachment motivation and high intelligence is hypothesized to have been important in the selection of hominid species that were the immediate ancestors of modern humans.     

Preindustrial patterns in Chinese organizational culture

Chinese organizational culture is usually described as being influenced by Confucian social norms and unique to the country. The paper argues in contrast to this view that there are important cultural similarities between values and norms in organizations in China and other developing countries. It is suggested that China, like other developing countries, is in a process of industrialization but retains preindustrial social norms which shape social relations and organizational structures. The paper shows first that the morals of social distance and reciprocity which anthropologists have found to be constitutive of a large number of preindustrial communities also govern relationships within and between organizations in present-day China. The paper then turns to organizations in Africa and Latin America and it is shown that the same social morals structure behaviours in these two developing regions, suggesting that the cultural characteristics of Chinese organizations are not simply unique to this country but a set of preindustrial norms that industrializing countries have in common as a legacy of the past.     

The Role of Corporate Sustainability in a Low‐Cost Business Model – A Case Study in the Scandinavian Fashion Industry

This multi‐level case study illustrates how corporate sustainability contributes to the low‐cost business model of a Scandinavian fashion company. Contrary to parts of the extant literature, we do not find that corporate sustainability directly adds measurable value (e.g. a better brand image); neither does it exert coercive control over critical supplier relationships. However, corporate sustainability minimizes the downside risk of the business model. It does so by (1) creating implicit contracts that reach beyond traditional ‘shareholder value’, (2) transferring risk to suppliers and (3) improving leadership by motivating management and employees, and by directing their attention to critical issues. For companies, we offer the insight that corporate sustainability is a necessary complement to shareholder value, even if the relationship is not obvious at first sight. We also suggest that concerted actions of companies or a positive connotation of certification create effective control over suppliers. As to public policy, we conclude that regulators could introduce mandatory disclosure of suppliers to facilitate controls through stakeholders, or alternatively an industry‐wide comply‐or‐explain code of conduct. We also address how regulators can take direct actions against countries with unsustainable labor policies. Last, we suggest future research topics, e.g. expanding the notion of a business model by interpreting ‘adding value’ as prevention of losses. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment.