A Multiphase,Flexible, and Accurate Lattice for Pricing Complex Derivatives with Multiple Market Variables

With the rapid growth and the deregulation of financial markets, many complex derivatives have been structured to meet specific financial goals. Unfortunately, most complex derivatives have no analytical formulas for their prices, particularly when there is more than one market variable. As a result, these derivatives must be priced by numerical methods such as lattice. However, the nonlinearity error of lattices due to the nonlinearity of the derivative's value function could lead to oscillating prices. To construct an accurate, multivariate lattice, this study proposes a multiphase method that alleviates the oscillating problem by making the lattice match the “critical locations,” locations where nonlinearity of the derivative's value function occurs. Moreover, our lattice has the ability to model the jumps in the market variables such as regular withdraws from an investment account, which is hard to deal with analytically. Numerical results for vulnerable options, insurance contracts guaranteed minimum withdrawal benefit (GMWB), and defaultable bonds show that our methodology can be applied to the pricing of a wide range of complex financial contracts.     

Driving dynamic knowledge articulation and dynamic capabilities development of service alliance firms

By investigating drivers of dynamic learning in service alliance firms, this empirical study demonstrates the locus of dynamic knowledge articulation (DKA) and dynamic capabilities (DCs) development. This study uses a sample of 363 service alliance firms to test the distinctive role of drivers of dynamic learning in DKA and DC development. The results show that manager integration powers, external linkages, codification of experience, and ambiguity have positive effects on DKA. Moreover, DKA has a strong positive influence on DC development. This study contributes to the literature by focusing on DKA and DC development from the perspective of processes, structure, and DCs of service alliance firms.     

Does high-speed rail accessibility influence residential property prices? Hedonic estimates from southern Taiwan

A new high-speed railway line (HSR) connects seven metropolitan areas in Taiwan. From Tainan, it is possible to reach Kaohsiung, Chiayi and Taichung in less than one hour, implying an enlarged spatial range of feasible commuting opportunities. The implicit price of HSR accessibility is estimated using hedonic price functions for the residential property market. The results of pre-specified and Box-Cox hedonic price functions are compared. The estimated functions show that HSR accessibility has at most a minor effect on house prices. High ticket prices and entrenched residential location patterns prevent otherwise feasible daily commuting opportunities between Tainan and other cities.