Closed-form valuation of American call options on stocks paying multiple dividends

An American call option on a stock paying a single known dividend can be valued using the Roll–Geske–Whaley formula. This paper extends the Roll–Geske–Whaley model to the n dividends case by using the generalized n-fold compound option model. In this way this paper offers a closed-form solution for American options on stocks paying n known discrete dividends. Moreover, the model also offers the critical values of the early exercise boundaries at each ex-dividend date instant, making it easy to define an early exercise strategy. Numerical examples are included to illustrate this approach.     

A Norwegian fixation: explaining cheap money in Norway, 1945–1986

In a number of European countries, credit markets were characterised by heavy regulations of quantities and prices, in terms of interest rates, in the post war years. In Norway, the regulations became more vigorous and lasted much longer, than most other countries. This article seeks to explain the extent and persistence of the policy by tracing the role of leading economists, of financial sector, and political considerations in relation to growths policies and the housing markets. Whereas a number of factors are highlighted in the emergence of the system, the role of political considerations in relation to cheap funding for the housing sector appears as a fundamental cause and condition in explaining the persistence of the cheap money policies into the mid-1980s.     

Island futures—Does a participatory scenario process capture the common view of local residents?

Scenarios are often developed by small groups of motivated individuals, but how representative are they of community views of desirable futures? A scenario process in the coastal community of Vega in central Norway was complemented by a survey among 200 community residents in which respondents rated a preferred development option from a series of future choices and dilemmas. While the scenario process produced novelty and diversity in thinking about the future, the common community view reflects a more traditionalistic view of the future. Tourism was identified as a key economic opportunity in the scenario process, but the larger island community has little faith in tourism as a future cornerstone of economic development and would rather rely on traditional sectors like agriculture and fisheries. The scenarios brought out richness in future development options, highlighted place identity and support for heritage conservation based on wise use of natural resources. The scenarios were less suited for making decisions about economic investments, but produced salient information about opportunities, uncertainties and complexities of the future. Findings show the need to compliment scenario processes where a small group explores “possible futures” with surveys to explore the wider populations’ views about “preferred futures”.     

An Empirical Model of Automobile Engine Variant Pricing

This paper estimates a random-coefficients structural model of the demand for car model engine variants. It uses a new identification approach that assumes the mean unobserved quality is the same for all engine variants within a model. The demand estimates imply that absolute markups increase in horsepower within a car model, while percentage markups are constant or falling in horsepower. The estimated results–as well as simulations of a simple theory model–show that prices are not typically cost-plus-fixed-fee, and absolute markups may increase in quality.     

Book Review

World Heritage Sites (WHSs) are motivated by such diverse reasons as heritage celebration, alarm calls, tourism branding and marketing and place making. Irrespective of the primary motivation for their creation, WHSs are often used to develop tourism based on cultural and natural resources of international significance. Heritage conservation may or may not be in agreement with what local populations perceive as desirable development paths. We conducted a survey among the island community of Vega in Norway that received WHS status in 2004 motivated by conservation alarm, tourism marketing and place making. We examined the local population's views of the key aspects of future development and how this related to WHS status. The islanders placed high value on social and community conditions as well as heritage linked to cultural and natural resources. While a majority supported tourism based on sustainable use of heritage they also felt that WH listing should not limit development opportunities. There were differences between younger people and adults. WHS may be an effective agent of sustainable tourism development if the main goals and strategies of the WHS are clearly understood and prioritized in the local community, leave room and perhaps link to other development opportunities.     

A Real Case Application of Game Theoretical Concepts in a Complex Decision-Making Process: Case Study ERTMS

Group Decision and Negotiation - Engineering systems are complex, amongst others due to the interdependencies between actor and technical aspects. This complexity has consequences for the way of...