Multidimensional quasi-Monte Carlo Malliavin Greeks

The aim of this paper is extensively investigate the performance of the estimators for the Greeks of multidimensional complex path-dependent options obtained by the aid of Malliavin Calculus. The study analyses both the computation effort and the variance reduction in the Quasi-Monte Carlo simulation framework. For this purpose, we adopt the approach employed by Montero and Kohatsu-Higa to the multidimensional case. The multidimensional setting shows the convenience of the Malliavin Calculus approach over different techniques that have been previously proposed. Indeed, these techniques may be computationally expensive and do not provide enough flexibility for variance reduction. In contrast, the Malliavin approach provides a class of functions that return the same expected value (the Greek) with different accuracies. This versatility for variance reduction is not possible without the use of the generalized integral by part formula of Malliavin Calculus. In the multidimensional context, we find convenient formulas that permit to improve the localization technique, introduced in Fournié et al. and reduce both the computational cost and the variance. Moreover, we show that the parameters for the variance reduction can be obtained on the flight in the simulation. We illustrate the efficiency of the proposed procedures, coupled with the enhanced version of Quasi-Monte Carlo simulations as discussed in Sabino, for the numerical estimation of the Deltas of call, digital Asian-style and exotic basket options with a fixed and a floating strike price in a multidimensional Black-Scholes market. Given the fact that the gammas of a call option coincides, apart from a constant, with the deltas of digital options, this setting also covers the analysis of formulas tailored for the second order Greeks of call options.     

The spatial sorting and matching of skills and firms

Abstract .  In this paper we make use of a matched employer-employee database for Italy to look at the spatial distribution of wages. Using this rich database we aim to open up the black box of agglomeration economies exploiting the micro dimension of interaction among economic agents, both individuals and firms. We provide evidence that firm size and, especially, skills are sorted across space and account for a large portion of the spatial wage variation. Our data also support the assortative matching hypothesis, which we show not to be driven by co-location of good workers and firms. Finally, we point out that assortative matching is negatively related to local market size.     

Characterizing the mission statements of benefit corporations: Empirical evidence from Italy

In 2015, Italy introduced a new legal form—“benefit corporation” (società benefit)—that provides legal status to companies that have one or more common benefit objectives in addition to the profit-seeking goal. Italian benefit corporations are obligated by law to operate in a responsible, sustainable, and transparent way and to include the interests of different stakeholders in their corporate strategy. This study examines the Italian case by applying textual statistical analysis on benefit corporations' public mission statements using the IRaMuTeQ software. Performing hierarchical cluster analysis and correspondence factor analysis identifies the “benefit” concept emerging from the mission statements in terms of promotion of individual skills, development of a new business model, and service to society. This study contributes to the debate on the content of mission statements by giving empirical evidence about this new form of business, and it provides some practical implications for managers, entrepreneurs, and policymakers.     

Heterogeneity vs. externalities in technological competition: A tale of possible technological landscapes

The article presents a stochastic interaction model based on Gibbs random fields to analyze technological competition in a population of heterogeneous adopters with local or global externalities. The relationships between both heterogeneity and externalities and imperfect and asymmetric information are first emphasized. When local externalities and heterogeneity coexist, the technological landscapes of the industry are then shown to depend on the relative influence of these two parameters, with a phase transition: technologies coexist either in approximately equal market shares when heterogeneity is high enough or with one of the technologies only surviving in technological niches when local externalities dominate. Niches do also spontaneously appear: technological options survive in economic space due to the existence of some amount of heterogeneity among agents. On the contrary, when global externalities are added, pure standardization almost always occurs. We finally argue that different public policies should be designed so as to fit with different technological landscapes.     

Efficient quasi-Monte simulations for pricing high-dimensional path-dependent options

Quasi-Monte Carlo method (QMC) is an efficient technique for numerical integration. QMC provides a lower convergence rate, O(ln ^d n/n), than the standard Monte Carlo (MC), , where n is the number of simulations and d the nominal problem dimension. However, some studies in the literature have claimed that the QMC performs better than the MC method for d < 20/30 because of its dependence on d. Caflisch et al. (J Comput Finance 1(1):27–46, 1997) have proposed to extend the QMC superiority by ANOVA considerations. To this aim, we consider the Asian basket option pricing problem, where d is much higher than 30, by QMC simulation. We investigate the applicability of several path-generation constructions that have been proposed to overtake the dimensional drawback. We employ the principal component analysis, the linear transformation, the Kronecker product approximation and test their performance both in terms of computational cost and accuracy. Finally, we compare the results with those obtained by the standard MC.      

Service Trade and Occupational Tasks: An Empirical Investigation

Using microdata for Belgium, we investigate the relationship between changes in the task content of production and the rise in the number of service exporters. We show that occupational tasks changes display an extremely consistent relationship with participation to service exports: in sectors in which the importance of face‐to‐face communication with customers has increased, the firm‐level likelihood of entering export markets has decreased; instead, the likelihood of exporting increased in sectors in which the sophistication of production and delivery has expanded (following an increase in cognitive tasks). Moreover, our analysis suggests that the change in IT use per se does not strike as being a key underlying force behind the increase in the extensive margin of service exports. These results are robust controlling for comparative advantage, offshoring, trade liberalisation and demand shifts.     

TRADE,WAGES, AND PRODUCTIVITY

We develop a general equilibrium monopolistic competition model in which wages, productivity, consumption diversity, and markups respond to trade integration. We structurally estimate the model and simulate the impacts of removing all trade barriers generated by the Canada–U.S. border. Firm selection gets tougher by 8.09% in Canada and by 0.80% in the United States. Markups that consumers face, which are central to welfare, fall by up to 12.11% in Canadian provinces and by up to 2.82% in U.S. states. However, changes in markups measured at the firm level are ambiguous, thus providing a different piece of information.     

Correlating Lévy processes with self-decomposability: applications to energy markets

Decisions in Economics and Finance - Based on the concept of self-decomposability, we extend some recent multidimensional Lévy models built using multivariate subordination. Our aim is to...     

Managers' mobility,trade performance,and wages

Knowledge is key to the competitiveness and success of an organization and in particular of a firm. Firms and their managers acquire knowledge via a variety of different channels which are often difficult to track down and quantify. By matching employer–employee data with trade data at the firm level we show that the export experience acquired by managers in previous firms leads their current firm toward higher export performance, and commands a sizeable wage premium for the manager. Moreover, export knowledge is decisive when it is market-specific: managers with experience related to markets served by their current firm receive an even higher wage premium; firms are more likely to enter markets where their managers have experience; exporters are more likely to stay in those markets, and their sales are on average higher. Our findings are robust to controlling for unobserved heterogeneity and, more broadly, endogeneity and indicate that managers' export experience is a first-order feature in the data with an impact on a firm's export performance that is, for example, at least as strong as that of firm productivity.     

Forward or backward simulation? A comparative study

The aim of this study is to present algorithms for the backward simulation of standard processes that are commonly used in financial applications. We extend the works of Ribeiro and Webber and Avramidis and L'Ecuyer on gamma bridge and obtain the backward construction of a gamma process. In addition, we are able to write a novel acceptance–rejection algorithm to simulate the Inverse Gaussian (IG) bridge and consequently, the IG process backward in time. Therefore, using the time-change approach, we can easily derive the backward generation of the compound Poisson with infinitely divisible jumps, the Variance-Gamma the Normal-Inverse-Gaussian processes and subsequently the time-changed version of the Ornstein–Uhlenbeck process introduced by Li and Linesky. We then compare the performance of the forward and backward construction of all these processes and show that the latter one is the preferable solution in the context of pricing American options or energy facilities like gas storages.