What moves the tail? The determinants of the option‐implied probability density function of the DAX index

In this article a study of the option‐implied probability density function (PDF) of German stock returns is presented. The use of option prices allows for the quantification of the risk‐neutral probability of large movements in the DAX index. Using daily data for the period from December 1995 to May 2002, the mixture of log‐normals specification with a constant maturity of 49 days is estimated. The time series behavior of the option‐implied PDF during episodes of market turbulence is discussed at the outset. The main purpose of the study is to consider the relationship of summary measures of the option‐implied PDF to macroeconomic news, information from the U.S. stock market, and risk premia. The results suggest the existence of a significant spillover from the U.S. stock market. Returns and the volatility of U.S. stock prices have a strong effect on changes in the lower DAX tail probability, but also on the higher moments of the option‐implied PDF. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:515–536, 2005     

Private equity and entrepreneurial management in management buy-outs

Critics claim that short-term profit orientation and high deal price strategies of private equity (PE) firms can negatively affect the ability of management buyouts to initiate and sustain entrepreneurial management. This study investigates this claim by comparing effects of majority PE backed and other buy-outs at different levels of financial leverage on post buy-out increases in entrepreneurial management. We propose that PE can be used as an organizational refocusing device that simultaneously increases entrepreneurial and administrative management. We find that majority PE-backed buy-outs significantly increase entrepreneurial management practices. Furthermore, the increased financial leverage positively affects administrative management in management buy-outs. However, the effect of high financial leverage is larger for majority PE-backed buy-outs. These results support the notion that PE firms help buy-out companies develop ambidextrous organizational change: i.e. simultaneously develop entrepreneurial and administrative management practices. The findings have important implications for practitioners and policy makers.     

Jump-robust volatility estimation using nearest neighbor truncation

We propose two new jump-robust estimators of integrated variance that allow for an asymptotic limit theory in the presence of jumps. Specifically, our MedRV estimator has better efficiency properties than the tripower variation measure and displays better finite-sample robustness to jumps and small (“zero”) returns. We stress the benefits of local volatility measures using short return blocks, as this greatly alleviates the downward biases stemming from rapid fluctuations in volatility, including diurnal (intraday) U-shape patterns. An empirical investigation of the Dow Jones 30 stocks and extensive simulations corroborate the robustness and efficiency properties of our nearest neighbor truncation estimators.     

Catching-up Crisis and Industrial Upgrading: Evolutionary Aspects of Technological Learning in Korea's Electronics Industry

This paper address a puzzle: How is it possible that a country that has established a broad, export-oriented industrial base at record speed, remain vulnerable to the vicissitudes of international finance and currency markets? We argue that the Korean model that was tremendously successful for catching-up has now reached its limits. The focus is on the role of technological learning for development of the electronics industry, a main carrier of Korean's successful late industrialization. It is shown that a heavy reliance on credit and an extremely unbalanced industry structure have given rise to a narrow knowledge base, and a sticky pattern of specialization. Catching-up has focused on capacity and international market share expansion for homogenous, mass-produced products; very little upgrading has occurred into higher-end and rapidly growing market segments for differentiated products and services. Such truncated upgrading is one important reason for Korea's vulnerability to the financial and currency crisis.     

Capped hospital budgets,risk-influencing activities and financial consequences

It has long been recognized in the health economics literature that increased financial incentives for better-informed health care providers not only lead to desirable efficiency gains and cost savings but may have unintended consequences. Accounting-based cost containment instruments like capped budgets or prospective payment may induce physicians and hospitals to systematically avoid high-cost patients. Our paper uses an empirical approach backed by theoretical arguments to study a small German hospital’s reactions to a major increase in financial incentives. We first describe essential features of the German hospital sector and developments that led to the introduction of capped budgets for hospital care in 1993. Next, incentives to treat high-cost patients before and after the reform are analyzed in more detail. Using an anesthesia-related patient severity score (ASA score) as a proxy for financial patient risk, we empirically address the question of how the distribution of ASA scores has changed over time at the hospital for the 1989–2002 period. Our analysis of detailed operating room data reveals that the number of high-risk patients (high-ASA score) showed a systematic and significant decrease after the introduction of capped budgets. Using data from the new German DRG-reimbursement system, we also gain some preliminary evidence of the possible financial consequences of such practices.     

A three‐gap and macrodecomposition analysis for South Africa, 1993–2002

The South African government is evaluating the economy's performance over its first decade in power. This period can be characterised by a ‘double’ liberalisation: democratisation of the political process going hand in hand with liberalisation of the economy. This article provides a broad overview of the macroeconomic aspects of this liberalisation.     

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OP-Abdeckungen und Kleidung unter der Lupe

Im OP ist der Patient grunds?tzlich durch den Eintrag von Krankheitserregern und Partikeln gef?hrdet, die in die offene Wunde gelangen k?nnen. Dieses Risiko gilt es auch durch geeignete Abdeckungen und Schutzkleidung so gering wie m?glich zu halten. Welche Anforderungen sind aus hygienischer Sicht zu stellen?     

Variable annuities in a Lévy-based hybrid model with surrender risk

This paper proposes a market consistent valuation framework for variable annuities (VAs) with guaranteed minimum accumulation benefit, death benefit and surrender benefit features. The setup is based on a hybrid model for the financial market and uses time-inhomogeneous Lévy processes as risk drivers. Further, we allow for dependence between financial and surrender risks. Our model leads to explicit analytical formulas for the quantities of interest, and practical and efficient numerical procedures for the evaluation of these formulas. We illustrate the tractability of this approach by means of a detailed sensitivity analysis of the fair value of the VA and its components with respect to the model parameters. The results highlight the role played by the surrender behaviour and the importance of its appropriate modelling.