A MULTINOMIAL APPROXIMATION FOR AMERICAN OPTION PRICES IN LÉVY PROCESS MODELS

This paper gives a tree-based method for pricing American options in models where the stock price follows a general exponential Lévy process. A multinomial model for approximating the stock price process, which can be viewed as generalizing the binomial model of Cox, Ross, and Rubinstein (1979) for geometric Brownian motion, is developed. Under mild conditions, it is proved that the stock price process and the prices of American-type options on the stock, calculated from the multinomial model, converge to the corresponding prices under the continuous time Lévy process model. Explicit illustrations are given for the variance gamma model and the normal inverse Gaussian process when the option is an American put, but the procedure is applicable to a much wider class of derivatives including some path-dependent options. Our approach overcomes some practical difficulties that have previously been encountered when the Lévy process has infinite activity.     

Why Democracies Cooperate More and Fight Less: The Relationship Between International Trade and Cooperation

This paper provides an economics-based interpretation of the standard finding in the literature that democracies rarely fight each other. A general theory of conflict between two countries is presented and empirical analysis applies this theory to the question of why democracies rarely fight each other. The results show that the fundamental factor in causing bilateral cooperation is trade. Countries seek to protect wealth gained through international trade, therefore trading partners are less combative than nontrading nations. Democratic dyads trade more than nondemocratic dyads, and thus exhibit less conflict and more cooperation.     

Evaluating the effects of executive learning and development on organisational performance: implications for developing senior manager and executive capabilities

In spite of decades of research into high‐performance work systems, very few studies have examined the relationship between executive learning and development and organisational performance. In an attempt to close this gap, this study explores the effects of a validated four‐dimensional executive learning and development measure on a composite measure of organisational performance. The study is based on ordinal regression analysis with empirical data elicited from 222 executives and senior leaders drawn from a wide geographic region. The theoretical link theoretical between the two variables was established by building on the Activity‐Motivation‐Outcome concept in order to encapsulate human capital, dynamic capability, resource dependency, social exchange and leader‐member‐exchange theories. The study reported an overall positive effect of executive learning and development on firm performance and has significant implications for the effective development of executive and senior management capabilities as a means of improving organisational effectiveness.     

Spare parts demand: Linking forecasting to equipment maintenance

Demand for spare parts is typically intermittent and forecasting the relevant requirements constitutes a very challenging exercise. Why is the demand for spare parts intermittent and how can we use models developed in maintenance research to forecast such demand? We attempt to answer these questions; we present a novel idea to forecast demand that relies upon the very sources of the demand generation process and we compare it with a well-known time-series method. We conclude that maintenance driven models are associated with a better performance under certain conditions. We also outline an inter-disciplinary agenda for further research in this area.