Jackknifing Bond Option Prices

Prices of interest rate derivative securities depend cruciallyon the mean reversion parameters of the underlying diffusions.These parameters are subject to estimation bias when standardmethods are used. The estimation bias can be substantial evenin very large samples and much more serious than the discretizationbias, and it translates into a bias in pricing bond optionsand other derivative securities that is important in practicalwork. This article proposes a very general and computationallyinexpensive method of bias reduction that is based on Quenouille's(1956; Biometrika, 43, 353–360) jackknife. We show howthe method can be applied directly to the options price itselfas well as the coefficients in the models. We investigate itsperformance in a Monte Carlo study. Empirical applications toU.S. dollar swap rates highlight the differences between bondand option prices implied by the jackknife procedure and thoseimplied by the standard approach. These differences are largeand suggest that bias reduction in pricing options is importantin practical applications.     

Frictions, Heterogeneity and Optimality in Mortgage Modeling

The purpose of this article is to provide a unified framework for incorporating frictions into a theoretical options-pricing model (OPM) for mortgages. This article presents formulation for a frictions-adjustable mortgage model that integrates borrower heterogeneity while simultaneously preserving prepayment and default financial decisions. Our model demonstrates the flexibility of the OPM by simulating separate and concurrent effects of three categories of frictions on the mortgage and mortgage components. Researchers can use our example formulation to determine the effects of specific borrower characteristics on mortgage values without destroying the options theoretic framework.     

The Grocery Shopper and Food Specials: A Case of Subjective Deception?

Advertised food specials may be deceptive to consumers who mistake the advertised prices as reduced prices. Of all the advertised food specials examined in this research, at least 13 percent and as many as 25 percent of those advertised in newspapers were not reduced in price.     

Public Policy and Attitudes on Tax Support for Live Artistic Communications Media

Abstract . Hypothesized direct and interaction relationships among the dependent variable willingness to pay more taxes for support of live artistic communications media and the independent variables of past attendance, education, income, leisure time, and liberalism-conservatism are tested. Past enjoyment probably makes people more favorable to tax support. Social policy implications of the results are discussed.     

When customers are members: Customer retention in paid membership contexts

This article seeks to gain an understanding of how members’ characteristics relate to lapsing behavior in paid membership contexts. Literatures such as social identity theory are used to propose hypotheses that are tested using a hazard rate model on archival data pertaining to 7,798 members of an art museum. The results indicate that the hazard of lapsing is lowered with increasing duration, participation in special interest groups whose goals are related to those of the focal organization, gift frequency, and increasing interrenewal times. Conversely, members who have downgraded their membership level in the past, those who have participated in special interest groups whose goals are unrelated to those of the focal organization, and those who received their membership as a gift are more likely to lapse. C. B. Bhattacharya is an assistant professor of marketing at the Goizueta Business School of Emory University. His Ph.D. in marketing is from The Wharton School, University of Pennsylvania. His research interests include brand loyalty and brand health, customer retention, and organizational identification and disidentification. He has published in theJournal of Marketing, International Journal of Research in Marketing, Journal of Retailing and Consumer Services, Marketing Letters, and other journals. During the past few years, students in his marketing research course have addressed real problems for over 30 nonprofits. In 1995, he received The Emory Williams Distinguished Teaching Award, which is the highest teaching honor conferred by Emory University.