Market impact: a systematic study of the high frequency options market

This paper deals with a fundamental subject that has seldom been addressed in recent years, that of market impact in the options market. Our analysis is based on a proprietary database of metaorders—large orders that are split into smaller pieces before being sent to the market—on one of the main Asian markets. In line with our previous work on the equity market [Said, E., Bel Hadj Ayed, A., Husson, A. and Abergel, F., Market impact: A systematic study of limit orders. Mark. Microstruct. Liq., 2018, 3(3&4), 1850008.], we propose an algorithmic approach to identify metaorders, based on some implied volatility parameters, the at the money forward volatility and at the money forward skew. In both cases, we obtain results similar to the now well-understood equity market: Square-Root Law, Fair Pricing Condition and Market Impact Dynamics.     

An examination of the literature relating to issues affecting the human variable in just-in-time environments

There has been an extensive body of research conducted into the technical aspects of the just-in-time (JIT) manufacturing methodology, particularly prior to 1990. It is only in more recent times that the focus has turned toward the more subtle people-related aspects. The recognition of JIT as a truly holistic approach to managing manufacturing operations has led to an appreciation of the importance of the role played by the human variable as well as an emphasis on the impact that organisational structure and management style can have on successful operation. This article examines and analyses the content of a wide range of articles related to issues such as: the need for change in corporate culture, the role of organisational structures, factors significantly impacting chances of success, the importance of employee involvement, how best to involve employees, the importance of training, how/whom/when to train, different team-based organisational structures, the impact of changing roles on various levels of the organisation and the appropriateness of particular change management strategies. An overall picture of the current state of thinking on these issues is thus developed and the importance of these factors to the successful implementation and operation of JIT highlighted. Opportunities for further research in this important area are identified.     

The e-integration dilemma: The linkages between Internet technology application, trading partner relationships and structural change

The evidence from an empirical study involving 281 Australian organizations suggests that the availability, open nature, and (comparative) ease of implementation of Internet technologies for integration with trading partners, whilst on the one hand providing the means by which organizations can integrate processes and systems in a cost effective way, can amplify the need for both structural change and closer collaboration with trading partners. The relationships proposed and tested in the model are justified and explained based on a number of theoretical perspectives. These include Transaction Cost Economics, Socio-technical Systems, Resource Dependency, Knowledge Based View, Stakeholder Theory and Organizational Learning. The implications of the findings for Transaction Cost Theory are noteworthy firstly because they support the appropriateness of the inter-organizational governance structure in the context of this study, and secondly because although application of these technologies may reduce information search and related costs, whether this necessarily leads to reduced coordination costs is problematic. The potential benefits from improved coordination may be constrained by the perceived costs, and risks, of transition to new structural forms. The implication for practice is that increased use of Internet technologies creates substantial pressure to invest in organizational change. The attractiveness of investing in technologies that place managers in a position where they need to promote organizational change in order to extract adequate returns creates a significant dilemma. On the one hand Internet technologies enable extensive sharing and integration of data among trading partners, but at the same time they create conditions requiring managers to embrace fundamental organizational change in order to leverage the potential of such integration.     

Identifying Price Reviews by Firms: An Econometric Approach

Price reviews are a potentially costly activity. A significant fraction of unchanged prices may stem from firms not reviewing prices, rather than from obstacles to changing prices per se, such as menu costs. In this paper, we disentangle these two causes of price stickiness by estimating an inflated ordered probit model on a panel of French manufacturing firms. The results point to a low frequency of price reviews, suggestive of the relevance of information costs as a determinant of the observed price stickiness. In view of the “inattentive producers” literature, pointing that the source of price rigidity matters, this is suggestive of a large real effect of monetary policy.     

The Insurance Is the Lemon: Failing to Index Contracts

We model the widespread failure of contracts to share risk using available indices. A borrower and lender can share risk by conditioning repayments on an index. The lender has private information about the ability of this index to measure the true state that the borrower would like to hedge. The lender is risk-averse and thus requires a premium to insure the borrower. The borrower, however, might be paying something for nothing if the index is a poor measure of the true state. We provide sufficient conditions for this effect to cause the borrower to choose a nonindexed contract instead.     

Public Information and Coordination: Evidence from a Credit Registry Expansion

This paper provides evidence that lenders to a firm close to distress have incentives to coordinate: lower financing by one lender reduces firm creditworthiness and causes other lenders to reduce financing. To isolate the coordination channel from lenders' joint reaction to new information, we exploit a natural experiment that forced lenders to share negative private assessments about their borrowers. We show that lenders, while learning nothing new about the firm, reduce credit in anticipation of other lenders' reaction to the negative news about the firm. The results show that public information exacerbates lender coordination and increases the incidence of firm financial distress.     

Do People Always Pay Less Than They Say? Testbed Laboratory Experiments with IV and HG Values

Hypothetical bias is a long‐standing issue in stated preference and contingent valuation studies—people tend to overstate their preferences when they do not experience the real monetary consequences of their decision. This view, however, has been challenged by recent evidence based on the elicitation of induced values (IV) in the lab and homegrown (HG) demand function from different countries. This paper uses an experimental design to assess the extent and relevance of hypothetical bias in demand elicitation exercises for both induced (IV) and homegrown (HG) values. For testbed purpose, we use a classic second‐price auction to elicit preferences. Comparing the demand curve we elicit in both, hypothetical bias unambiguously (i) vanishes in an IV, private good context and (ii) persists in HG values elicitation context. This suggests hypothetical bias in preference elicitation appears to be driven by “preference formation” rather than “preference elicitation.” In addition, companion treatments highlight two sources of the discrepancy observed in the HG setting: the hypothetical context leads bidders to underestimate the constraints imposed by their budget limitations, whereas the real context creates pressure leading them to bid “zero” to opt out from the elicitation mechanism. As a result, there is a need for a demand elicitation procedure that helps subjects take the valuation exercise sincerely, but without putting extra pressure on them.     

Backcasting energy futures using industrial ecology

Backcasting has been widely used for developing energy futures. This paper explores the potential for using industrial ecology to guide the development of energy futures within a backcasting framework. Building on the backcasting work of Robinson [1], a seven step method is presented to embed industrial ecology principles within the development and assessment of future scenarios and transition paths toward them. The approach is applied to the case of backcasting regional energy futures in the Latrobe Valley, near Melbourne, Australia. This region has substantial brown coal deposits which are currently mined and used in coal-fired power stations to generate electricity. Bounded by a sustainability vision for the region in a carbon-constrained world, regional industrial ecologies in 2050 were backcast around three themes: bio-industries and renewables (no coal usage); electricity from coal with carbon capture and storage (low to high coal usage); and coal to products such as hydrogen, ammonia, diesel, methanol, plastics and char (demonstrating medium to high overall coal use relative to current levels). Potential environmental, technological, socio-political and economic impacts of each scenario across various life cycle stages were characterised. Results offer a platform for regional policy development to underpin deliberation on a preferred future by the community, industry and other stakeholders. Industrial ecology principles were found to be useful in backcasting for creatively articulating alternative futures featuring industrial symbiosis. However, enabling the approach to guide implementation of sustainable transition pathways requires further development and would benefit from integration within the Strategic Sustainable Development framework of Robèrt et al. [2].     

Valuation of ecosystem services provided by irrigated rice agriculture in Thailand: a choice experiment considering attribute nonattendance

This research investigates how the public of a middle‐income country, Thailand, values ecosystem services associated with irrigated rice agriculture using a choice experiment. The results show a significant willingness to pay for services such as drought mitigation, water quality and the environment and maintenance of rural lifestyles and rice landscapes. The iterative procedure developed to fully analyze the incidence of attribute nonattendance (ANA) improved the model fit when compared with a multinomial logit model or an ANA model with potentially only one attribute ignored at a time (ANA‐1). Moreover, the inferred probability of the class of respondents having attended all attributes was 45%, compared to 9% with ANA‐1 model. However, it also suggests that 55% of the respondents made their choices by considering only two of the five attributes. Finally, this research also suggests that failing to consider ANA does not change the public ranking of scenarios contrasted by the services they would provide but would overestimate the WTP for these scenarios.