Machine learning for pricing American options in high-dimensional Markovian and non-Markovian models

In this paper we propose two efficient techniques which allow one to compute the price of American basket options. In particular, we consider a basket of assets that follow a multi-dimensional Black–Scholes dynamics. The proposed techniques, called GPR Tree (GRP-Tree) and GPR Exact Integration (GPR-EI), are both based on Machine Learning, exploited together with binomial trees or with a closed form formula for integration. Moreover, these two methods solve the backward dynamic programing problem considering a Bermudan approximation of the American option. On the exercise dates, the value of the option is first computed as the maximum between the exercise value and the continuation value and then approximated by means of Gaussian Process Regression. The two methods mainly differ in the approach used to compute the continuation value: a single step of the binomial tree or integration according to the probability density of the process. Numerical results show that these two methods are accurate and reliable in handling American options on very large baskets of assets. Moreover we also consider the rough Bergomi model, which provides stochastic volatility with memory. Despite that this model is only bidimensional, the whole history of the process impacts on the price, and how to handle all this information is not obvious at all. To this aim, we present how to adapt the GPR-Tree and GPR-EI methods and we focus on pricing American options in this non-Markovian framework.     

Confronting sustainable development in two rural heritage valorization models

Many rural areas have reinvented their territorial development through tourism, turning to vernacular heritage to ensure their future. Various models of heritage preservation and valorization are adopted where small-scale agriculture is no longer viable. Among them, ecomuseums and place-based labelization schemes transform rural heritage into an economic resource while remaining grounded in cultural and architectural preservation and identity transmission to future generations. Both face criticisms, including being decried as fostering the museumification and mythification of the rural, effectively holding back rural areas in an imagined and romanticized past rather than providing a vision for a sustainable future. The Association of the Most Beautiful Villages of France and the Ecomusée d'Alsace illustrate the debate. This investigation analyzes how these two initiatives challenge critics. It unveils their respective understandings of the future of rurality and their approach to promoting sustainable communities through tourism. By highlighting responses to tensions between valorizing the past and forward development in the countryside, findings reveal paradigm shifts from traditional habitat preservation to future-oriented architectural pedagogy in one case, while operational exigencies and normative quality principles mitigate opportunities in the other.     

A Comment on Weak Disposability in Nonparametric Production Analysis

In his 2005 paper in this journal, Kuosmanen argues that Shephard's specification of weak disposability in activity analysis (DEA) models is not correct. We show that Shephard's specification does satisfy weak disposability and is the "smallest" technology to do so.     

Christian Ethics and Spirituality in Leading Business Organizations: Editorial Introduction

Christian ethics applied to economics and business has a long tradition. This dates back at least to the thirteenth century, with noteworthy developments in the four following centuries and again in the last century. Christian faith and reason intertwine to bring about principles, criteria, and guidelines for action and a set of virtues with relevance for economic activity. Christian spirituality, with 2000 years of history, has been embedded in Christianity from its beginning, but the application to modern business activity is relatively recent. This article introduces a special issue which, we hope, will make its own small contribution to the developments of both Christian ethics and spirituality in the leading business organizations. After a short historical overview and a consideration of the current situation of Christian ethics and spirituality in business, we introduce the papers selected for this issue.     

Ethics in Finance and Accounting: Editorial Introduction

In light of the recent crisis and its aftershocks, it becomes crucial to reflect on the relationship between finance and accounting and on how to integrate ethics and efficiency, as well as on how to motivate and empower practitioners in the world of finance to commit to justice, fairness and enhanced understanding, and to improving their personal integrity. This article, written as an editorial introduction to a special issue includes works related to control measurement and ethical behavior, misbehaviors in finances and accounting, professionalism in accounting, ethical investing and corporate reporting. We conclude by suggesting further research for a better integration of technical aspects of accounting and finances into business activity—human activity actually—and an for understanding of ethics not limited to rules, but as a mutual and interdependent system of values (human goods), virtues and principles.     

Is power more evenly balanced in poor households?

The structure of intra-household allocation is crucial to know whether a transfer from a rich household to a poor one translates into a transfer from a rich individual to a poor one. If rich households are more unequal than poor ones, then a progressive transfer among households reduces intra-household inequality, hence inequality among individuals. More specifically, two conditions have to be satisfied for extending Generalized Lorenz judgments from household level to individual one. The fraction of the couple's expenditures devoted to goods jointly consumed should decrease at the margin with the couple's income as well as the part of private expenditure devoted to the disadvantaged individual. This double concavity condition is non-parametrically tested on the French Household Expenditure Survey (2000). It is not rejected by the data and supports the view that power is more evenly distributed in poor households.     

Strategic niche management of social innovations: the case of social entrepreneurship

Strategic niche management (SNM), a tool to understand and manage radical socio-technical innovations and facilitate their diffusion, has always departed from a technical artefact. Many radical innovations, however, do not revolve around such an artefact. Social entrepreneurship is a new business model that combines a social goal with a business mentality and is heralded as an important new way to create social value such as sustainability. This study examines if and how SNM can be applied to such a social innovation. It identifies theoretical and practical limitations and proposes solutions. The main conclusion is that SNM can be used to analyse radical social innovation, although it requires rethinking the initial entry point for research and management. Exemplifying quotes are proposed as an alternative. Second, this paper suggests using values to describe niche–regime interaction as a better way to anticipate future niche–regime interactions.     

Wages,selectivity, and vacancies: Evaluating the short-term and long-term impact of the minimum wage on unemployment

Using a circular matching model (Marimon R, Zilibotti F. Unemployment vs. mismatch of talents: Reconsidering unemployment benefits. Economic Journal 1999;109; 266–291), where the wage setting is similar to Weiss (Weiss A. Job queues and layoffs in labor markets with flexible wages. Journal of Political Economy 1980; 88; 526–538), we reexamine Card and Krueger's (Card, D., Krueger, A. Myth and Measurement, the New Economics of the Minimum Wage. Princeton University Press; 1995) intuition on the impact of the minimum wage on unemployment. In the short term, a rise in the minimum wage increases the employment level by making firms less selective. In the long term, numerical simulations show that, despite the reduction of job creation, introducing a minimum wage may lower unemployment as soon as workers and jobs are sufficiently differentiated. However, beyond some limit, the wage increase raises unemployment whatever the degree of differentiation is.