Integrating Real Options with Managerial Cash Flow Estimates

This article presents a real options model that fits managerial cash flow estimates (optimistic, likely, and pessimistic projections) to a continuous geometric Brownian motion (GBM) cash flow process with changing growth and volatility parameters. The cash flows and the value of a project are correlated to a traded asset, so the real option is priced under the risk-neutral measure with a closed-form solution. The analysis is extended to a sequential compound call option for investments over multiple periods. If the project is correlated to the market, then some of the risk may be mitigated by a delta-hedging strategy. A numerical example shows that the effect of the correlated asset on the real option value is significant, and the relationship between the volatility of the project and the real option value is not analogous to the typical relationship found in financial option pricing. Integrating the expertise and industry knowledge of management, this approach makes possible a more rigorous estimation of model inputs for real option pricing.     

Tourists' attitudes towards textiles and apparel-related cultural products: A cross-cultural marketing study

This study examined American, Korean, and Chinese female consumers' evaluations of and purchase intentions towards Korean textiles and apparel-related cultural products. This study also investigated how a consumer's evaluations of Korean textiles and apparel-related cultural products are related to novelty-seeking tendency, world-mindedness, and familiarity with Northeast Asian culture on the part of female tourists. Novelty-seeking appeared to be useful only when predicting how one will respond to cultural products from other countries and cultures, but not from one's own. Regardless of the sample, respondents' evaluations of the color and design of the product stood out as the most important indicator, across all four products, of how much they would like a given product, and further, would also like to purchase the product. Northeast Asian design contributed to favorable purchase intention even for those who are from Northeast Asia, indicating that fashion cultural products are not targeted only at those from other cultures.     

Much ado about making money: the impact of disclosure,news and rumors on the formation of security market prices over time

Journal of Economic Interaction and Coordination - This article develops an agent-based model of security market pricing process, capable to capture main stylised facts. It features collective...     

Fuzzy model estimation of the risk factors impact on the target of promotion of the software product

ABSTRACT

This article studies the application of fuzzy logic to the risk analysis of a new software product development and marketing in specific case of a small size IT company. Identification and analysis of external and internal risk factors show that this type of business activity could be evaluated as high-risk enterprise. So, the purpose of the paper is to develop robust method to evaluate probability of occurrence of major risk events and their impact on the company financial health. The fuzzy logic is used to estimate degrees of threat of each relevant risk factor due to lack of reliable statistical data. The novelty of proposed approach is the inclusion into the model the risk event time.     

Private information in futures markets: An experimental study

This paper presents the results of an experimental study on how people use their private information to estimate the “fair” futures price and how the quality of this information affects the traders' behavior and desire to trade. It finds that subjects are able to use their information correctly and that their desire to rely on it depends positively on the information precision. It shows that subjects are able to recognize that they are expected to lose money on futures trading when other traders have better quality information. However, subjects failed to recognize the symmetry of the futures contracts.     

Changes in Russian managerial values: a test of the convergence hypothesis?

This paper considers how Russian managerial values are developing in the context of the sweeping economic, political and social changes associated with the transition of Russia to a market economy.

By replicating earlier research (Holt et al., ; Ralston et al., ), it was possible to overcome the weaknesses of previous cross-sectional studies by tracking changes in Russian managers' values over time.

The paper concludes that some convergence between the values of Russian and US managers can be observed, but that the form of this convergence is not uniform. In addition, the way in which Russian managers act upon these values in the context of their own national context means that considerable divergence in managerial behaviour is still evident. Implications for international human resource management are discussed.     

On the law of one price

We consider the standard discrete-time model of a frictionless financial market and show that the law of one price holds if and only if there exists a martingale density process with strictly positive initial value. In contrast to the classical no-arbitrage criteria, this density process may change its sign. We also give an application to the CAPM.Received: November 2003, Mathematics Subject Classification (2000): 60G44JEL Classification: G13, G11Freddy Delbaen: This research was done during the stay of the author at Université de Franche-Comté.     

Understanding fashion communication between Korean middle‐aged mothers and daughters

Daughters can be considered important social role models for middle‐aged mothers in fashion communication such as the clothing purchase or conformity. This study explores antecedents (trust in daughters as fashion informants and internalized social pressure for appearance management) and outcomes (solidarity between mother and daughter, psychological well‐being of mother) of fashion communication (mother–daughter shopping, clothing conformity) between middle‐aged mothers and daughters. The data were collected using a self‐administered online survey of 307 middle‐aged Korean women between ages of 45 and 65. The result shows that mothers’ trust in daughters as fashion informants and internalized social pressure for appearance positively influence mother–daughter shopping and mothers’ clothing conformity to daughters. Next, mother–daughter shopping and mothers’ clothing conformity have a positive influence on the solidarity of mothers and daughters. When solidarity becomes stronger, the degree of the mothers’ psychological well‐being increases.     

Compensation and performance: An experimental study

This paper investigates how compensation structure affects performance in a simple but effort-consuming task. In this experimental study, the subjects were asked to multiply two-digit numbers for 40 min and were paid using either a linear (with different pay for performance sensitivities) or a convex (option-based) compensation mechanism. We found that per-unit wage has a non-linear positive effect on performance: whereas increasing per-unit compensation from $0 to $0.02 or from $0.05 to $0.15 has virtually no effect on performance, an increase from $0.02 to $0.05 results in higher productivity. We also found that option-based compensation results in better performance.     

Economic life replacement under improving technology

The economic life (EL) method of asset replacement is analyzed under improving technology that impacts the maintenance cost, new asset cost, and salvage value. In particular, we prove that the asset EL is constant when all these costs decrease with the same rate. If these costs decrease geometrically, then the EL method with a corrected capital recovery factor calculates the optimal asset lifetime over the infinite horizon for arbitrary age-dependent deterioration and salvage value. In a general case, the EL method delivers an optimal replacement decision when the relative rate of technological change is less than 1%. For larger rates, we recommend to minimize the annual cost over two future replacement cycles, which was earlier proposed and implemented by Christer and Scarf, Journal of the Operational Research Society 45, 1994.