Implied risk aversion and pricing kernel in the FTSE 100 index

This paper studies the estimation of the pricing kernel and explains the pricing kernel puzzle found in the FTSE 100 index. We use prices of options and futures on the FTSE 100 index to derive the risk neutral density (RND). The option-implied RND is inverted by using two nonparametric methods: the implied-volatility surface interpolation method and the positive convolution approximation (PCA) method. The actual density distribution is estimated from the historical data of the FTSE 100 index by using the threshold GARCH (TGARCH) model. The results show that the RNDs derived from the two methods above are relatively negatively skewed and fat-tailed, compared to the actual probability density, that is consistent with the phenomenon of “volatility smile.” The derived risk aversion is found to be locally increasing at the center, but decreasing at both tails asymmetrically. This is the so-called pricing kernel puzzle. The simulation results based on a representative agent model with two state variables show that the pricing kernel is locally increasing with the wealth at the level of 1 and is consistent with the empirical pricing kernel in shape and magnitude.     

Stochastic Volatility With an Ornstein-Uhlenbeck Process: An Extension

In this paper, we reexamine and extend the stochastic volatilitymodel of Stein and Stein (S&S) (1991) where volatility followsa mean–reverting Ornstein–Uhlenbeck process. UsingFourier inversion techniques we are able to allow for correlationbetween instantaneous volatilities and the underlying stockreturns. A closed-form pricing solution for European optionsis derived and some numerical examples are given. In addition,we discuss the boundary behaviour of the instantaneous volatilityat v(t) = 0 and show that S&S do not work with an absolutevalue process of volatility. JEL Classification: G13     

The relationship between conditional value at risk and option prices with a closed-form solution

Options and CVaR (conditional value at risk) are significant areas of research in their own right; moreover, both are important to risk management and understanding of risk. Despite the importance and the overlap of interests in CVaR and options, the literature relating the two is virtually non-existent. In this paper we derive a model-free, simple and closed-form analytic equation that determines the CVaR associated with a put option. This relation is model free and is applicable in complete and incomplete markets. We show that we can account for implied volatility effects using the CVaR risk of options. We show how the relation between options and CVaR has important risk management implications, particularly in terms of integrated risk management and preventing arbitrage opportunities. We conduct numerical experiments to demonstrate obtaining CVaR from empirical options data.     

Service with a smile: Does the type of smile matter?

Service providers have often used the mantra of “service with a smile” as a strategy to engender customer satisfaction. The findings of the current research indicate that a smile alone may not be sufficient in achieving service excellence. Specifically, this work extends prior research suggesting that customers have more positive reactions to Duchenne, or authentic, smiles compared to non-Duchenne, or non-genuine, smiles. Two experimental vignette studies examined the influence of the type of smile a service provider displays (Duchenne vs. non-Duchenne) and gender of the service provider on perceptions of service quality, as well as the Stereotype Content Model dimensions of competence and warmth. The results suggest that the type of smile (Duchenne vs. non-Duchenne) impacts evaluations of service providers in terms of their perceived level of competence, as well as their perceived service quality ratings. Implications for the hiring and training of service providers are also discussed.     

LOCAL VARIANCE GAMMA AND EXPLICIT CALIBRATION TO OPTION PRICES

In some options markets (e.g., commodities), options are listed with only a single maturity for each underlying. In others (e.g., equities, currencies), options are listed with multiple maturities. In this paper, we analyze a special class of pure jump Markov martingale models and provide an algorithm for calibrating such models to match the market prices of European options with multiple strikes and maturities. This algorithm matches option prices exactly and only requires solving several one‐dimensional root‐search problems and applying elementary functions. We show how to construct a time‐homogeneous process which meets a single smile, and a piecewise time‐homogeneous process which can meet multiple smiles.     

知识密集型服务业发展与制造业战略升级研究

随着经济全球化的不断深入,提高技术创新能力已成为培育企业与产业核心竞争力和提高国际竞争力的必经之路。在知识经济时代,知识成为企业创造竞争优势的重要要素,而知识密集型服务业(KIBS)已成为技术创新的必然选择。目前我国KIBS发展仍相对滞后,不能够有效支撑制造业战略转型升级。因此,促进制造业升级有待KIBS的快速发展支持,改变低端竞争的局面。     

Competitive advantage and the transformation of value chains over time: The example of a South Korean diversified business group, 1953–2013

We examine the historical evolution of different elements in value chains that create value-added and competitive advantage. This is achieved by using the conceptual model of the ‘smile curve’ with a longitudinal case study of a diversified business group, CJ Group, a former affiliated firm of Samsung Group. We found that the value-added structure graph in the industrialisation period displayed an ‘upside-down U shape’, indicating that production and manufacturing were the most value-adding sectors. However, in the more recent knowledge-based economy period, the graph shows a quite different shape, indicating R&D, firm infrastructure, manufacturing, logistics, service, and marketing as sources of value-added. This shows that competitive advantage diversified into other fields to fit with the changed economy. We also investigate what type of organisational structure, strategy, and capabilities were adopted for organisational change. We found an evolution, with an unrelated diversification strategy by altering capabilities from contacts and generic to organisational and technological capabilities.     

微笑服务对顾客满意的影响机制：一个服务质量分类视角

随着服务业竞争加剧,为了获取顾客满意,微笑服务越来越受到企业的青睐。而在学术界,有关微笑服务与顾客满意之间关系的研究结论却互相矛盾。为此,文章将两者之间的重要中介变量感知服务质量进行分类,并收集了餐饮行业204对员工—顾客接触数据,进一步研究了微笑服务对顾客满意的影响机制。结果发现,功能质量在微笑服务和顾客满意之间起到中介作用,而技术质量则通过功能质量这一中介调节两者之间的关系。     

“微笑服务”——现代酒店管理成功的重要标志

微笑是世界通用的体态语,它超越了各种民族和文化的差异。世界著名的希尔顿酒店的创始人康纳.希尔顿,每当遇到员工时,都要询问这样一句话:"你今天对顾客微笑了没有?"他指出:"饭店里第一流的设备重要,而第一流服务员的微笑更重要,如果缺少服务员的美好微笑,好比花园里失去了春日的太阳和春风"。希尔顿酒店的成功,让我们看到"微笑的力量是巨大的"。在当今酒店业激烈的竞争中,微笑服务的重要性更加突显出来。可以说,微笑服务在酒店经营管理中是一条生命线,关系到酒店的生死存亡。     

Pricing American Options Fitting the Smile

This paper is a compendium of results—theoretical and computational—from a series of recent papers developing a new American option valuation technique based on linear programming (LP). Some further computational results are included for completeness. A proof of the basic analytical theorem is given, as is the analysis needed to solve the inverse problem of determining local (one‐factor) volatility from market data. The ideas behind a fast accurate revised simplex method, whose performance is linear in time and space discretizations, are described and the practicalities of fitting the volatility smile are discussed. Numerical results are presented which show the LP valuation technique to be extremely fast—lattice speed with PDE accuracy. American options valued in the paper range from vanilla, through exotic with constant volatility, to exotic options fitting the volatility smile.