Existence of a calibrated regime switching local volatility model

By Gyöngy's theorem, a local and stochastic volatility model is calibrated to the market prices of all European call options with positive maturities and strikes if its local volatility (LV) function is equal to the ratio of the Dupire LV function over the root conditional mean square of the stochastic volatility factor given the spot value. This leads to a stochastic differential equation (SDE) nonlinear in the sense of McKean. Particle methods based on a kernel approximation of the conditional expectation, as presented in Guyon and Henry‐Labordère [Risk Magazine, 25, 92–97], provide an efficient calibration procedure even if some calibration errors may appear when the range of the stochastic volatility factor is very large. But so far, no global existence result is available for the SDE nonlinear in the sense of McKean. When the stochastic volatility factor is a jump process taking finitely many values and with jump intensities depending on the spot level, we prove existence of a solution to the associated Fokker–Planck equation under the condition that the range of the squared stochastic volatility factor is not too large. We then deduce existence to the calibrated model by extending the results in Figalli [Journal of Functional Analysis, 254(1), 109–153].     

Creating a Sustainable Supply Chain Network by Adopting Relationship Management Strategies

ABSTRACT

Purpose: This paper develops a conceptual framework to analyze the impact of a supply chain network (SCN) structure on relationship management strategies (RMS) that focal firms apply to manage sustainability issues within the SCN.

Design/methodology/approach: This paper is based on a comprehensive review and analysis of the industrial marketing and purchasing (IMP), sustainable supply chain management (SSCM), and SCN literature.

Findings: The conceptual framework expands the network perspective in the SSCM context by considering the important role of the SCN structure in the firm’s decision-making process. Four factors (dependency, distance, power, and transparency) were found that are useful in conceptualizing the SCN structure. The conceptual framework also categorizes various sustainability practices into four RMS (noncompliance, transactional, dictatorial, and collaborative), which are needed to make an SCN more sustainable. In addition, 16 propositions are developed based on how firms may identify the most effective RMS to implement appropriate sustainability practices through examining their SCN structure.

Research limitations/implications: The conceptual framework, developed as a result of a comprehensive review of the literature, led to the development of 16 propositions, which can assist in furthering a research agenda on RMS to diffuse various sustainability practices within SCN structures.

Originality/value: The relationship between SCN structure and RMS in the sustainability context remains an under-researched but emerging area of interest. This paper leverages existing research to develop a conceptual framework suitable for empirical testing.     

Forging meaningful consumer-brand relationships through creative merchandise offerings and innovative merchandising strategies

This research highlights the importance of retailer-consumer identity congruence – the match between the retail brand identity and the consumers’ identity. Retailers can leverage identity congruence to forge meaningful consumer-brand relationships which will result in enhanced engagement, brand loyalty, and willingness to pay. The paper discusses how creative merchandise offerings and innovative merchandising strategies contribute to the creation of a unique retail brand identity and facilitate communication of this identity to consumers. Based on interviews with retail practitioners, we formulate five ways in which retailers can establish and communicate their brand identity through creative merchandise offerings (by focusing on unique and original merchandise, leveraging local merchandise to reflect the area, making their merchandise akin to art, offering sustainable merchandise, and a high fashion product assortment). In addition, we focus on five innovative merchandising strategies which help the retailer connect the brand to the customer (creating themes, reflecting the brand story, being playful, signaling exclusivity, and virtual merchandising). We then discuss how retailers can utilize social and technological tools to amplify the retailer identity to consumers, thus increasing the likelihood that a consumer will view their identity congruent with the retail brand.     

The Relationship between Interest Rates and Inflation: Examining the Fisher Effect in China

This study revisits the Fisher effect using a different empirical method that considers a potential nonlinear relationship between interest rates (treasury bond rates) and inflation in China. The rising uncertainty and asymmetric information in financial markets between bond holders and bond issuers suggest such a potential nonlinear relationship. To this aim, we apply Shin et al.’s (2014) nonlinear autoregressive distributed lag (NARDL) model with asymmetric dynamic multipliers for the sample period 2002M7–2018M4. The empirical findings reveal symmetric and asymmetric partial Fisher effects for all sample bond rates in China. Furthermore, we find that 20-year bond rates experience the lowest partial Fisher effect.     

Rank tests for price convergence in Australian beverage markets

This article examines the price convergence of beverage products within Australia in order to assess the efficacy of intranational cross-border movements of products under the Australia’s Mutual Recognition Agreement. Since the cointegrating relationship between product prices may not be exact or linear, we adopt the rank tests for analysis which do not require prior knowledge and specification of the linear or nonlinear functional form. Our results validate the price convergence of all beverage products within Australia, with the exception of a few regions in the milk market. Furthermore, a subset of the cointegration relationships exhibits nonlinear long-run price co-movements.     

A novel hotel recommendation method based on personalized preferences and implicit relationships

On tourism websites, hotel recommendations have drawn growing attention from researchers, as they can help customers select a satisfactory hotel from many options with massive information. However, some inherent challenges exist in conventional hotel recommendations, specifically the extent to which there is considerable room for improvement in user preference models and neighbour recognition. Therefore, we propose a two-stage hotel recommendation approach that employs hotel feature information to support preference analysis. First, in the filling stage, association rules between features are considered to accurately capture users’ personalized preferences, which can be incorporated with public preferences to estimate potential ratings of users for unvisited hotels. Then, in the recommendation stage, we combine rating similarities between users with their closeness relationships to identify more reliable neighbours. Finally, a hotel recommendation case on Ctrip.com is performed to evaluate the model. Experimental results confirm that our method outperforms the other five benchmark methods.     

Does supplier development lead to supplier satisfaction and relationship continuation?

The primary purpose of this study is to find out if supplier development can serve as a means for buying firms to actively increase supplier satisfaction and eventually predict relationship continuity. Supplier relationships provide an essential means for buying firms to access and leverage supplier resources. One way in which buying firms influence the supply management process is through supplier development. The findings show that supplier development is an important means by which buying firms can increase supplier satisfaction. Supplier development significantly predicts the future of business relationships. Further analysis based on polynomial regressions provides evidence to show how congruence or discrepancy between economic and non-economic satisfaction impact continuance.     

基于跨组织关系的现代跨组织系统

随着市场竞争的加剧,组织间的联系对于组织的生存与发展越来越关键,并且这种联系已经突破了单纯的物流和资金流,成为更深入复杂的一种跨组织关系：而信息技术,作为辅助和推动现代化企业管理的最有力工具,也开始被应用到这个领域形成了一种特殊的跨越组织边界的信息系统——跨组织系统（IOS）.本文将从系统参与者的竞争关系和它们的跨组织关系对企业战略的重要程度两个维度对跨组织系统进行价值分析和缺点介绍,试图指导企业根据自身情况来进行跨组织系统的选择.     

Multi-factor Risk-return Relationships

This paper derives three multi-factor risk-return relationships each of which employs macro-economic variables in presenting the underlying factors that influence security returns. The first relationship holds if the underlying portfolio lies on the expected return-standard deviation efficient frontier, the second is valid when the underlying portfolio lies inside the efficient frontier and the third characterises security markets in which no arbitrage opportunities are present. An attempt is also made to appraise critically previous multi-factor risk-return relationships which rely on an expected return-standard deviation approach.     

The Russian option: Finite horizon

We show that the optimal stopping boundary for the Russian option with finite horizon can be characterized as the unique solution of a nonlinear integral equation arising from the early exercise premium representation (an explicit formula for the arbitrage-free price in terms of the optimal stopping boundary having a clear economic interpretation). The results obtained stand in a complete parallel with the best known results on the American put option with finite horizon. The key argument in the proof relies upon a local time-space formula.Received: March 2004, Mathematics Subject Classification (2000): 91B28, 35R35, 45G10, 60G40, 60J60JEL Classification: G13Goran Peskir: Centre for Analytical Finance (funded by the Danish Social Science Research Council) and Network in Mathematical Physics and Stochastics (funded by the Danish National Research Foundation).The first draft of the present paper has been completed in September 2002. I am indebted to Albert Shiryaev for useful comments.