Sub-Replication and Replenishing Premium: Efficient Pricing of Multi-State Lookbacks

The direct valuation procedure of performing discounted expectation to obtain the prices of multi-state lookback options may lead to insurmountable complexity and numerical difficulties. The computation may require numerical differentiation of the joint distribution function of the extremum values, then followed by numerical integration over a semi-infinite domain. In this paper, we illustrate the use of an alternative approach that significantly simplifies the calculations of multi-state lookback option prices. The financial intuition behind the new approach involves the choice of a sub-replicating portfolio and the adoption of the corresponding replenishing strategy to achieve the subsequent full replication of the derivative. The replenishing premium is obtained by performing the integration of an appropriate distribution function over the range of asset price within which under replication occurs. The sub-replication and replenishment procedures may be utilized as hedging strategies for the lookback options. The pricing and hedging properties of multi-state lookback options are also discussed. This revised version was published online in June 2006 with corrections to the Cover Date.     

Convergence analysis and optimal strike choice for static hedges of general path-independent pay-offs

In this paper, we propose a new algorithm to find the optimal static replicating portfolios for general path-independent nonlinear pay-off functions and give an estimate for the rate of convergence that is absent in the literature. We choose the static replication by designing an adaptation function arising in the error bound between the nonlinear pay-off function and the linear spline approximation and derive the equidistribution equation for selecting the optimal strikes. The numerical tests for variance swaps, swaptions, static quadratic hedges and also for a jump-diffusion process, allowing for the default of the underlying asset, show that the proposed iterative equidistribution equation algorithm is simple, fast and accurate. The paper generalizes and improves the results on static replication and approximation in the literature.     

Fetal Iodine Deficiency and Schooling: A Replication of Field,Robles, and Torero (2009)*

Scholars have theorized that congenital health endowment is an important determinant of economic outcomes later in a person's life. Field, Robles, and Torero (2009, American Economic Journal: Applied Economics 1, 140–169) find large increases in educational attainment caused by a reduction of fetal iodine deficiency following a set of iodine supplementation programs in Tanzania. We revisit the Tanzanian iodine programs with a narrow and wide replication of the study by Field et al. We are able to exactly replicate the original results. We find, however, that the findings are sensitive to alternative specification choices and sample restrictions. We try to address some of these concerns in the wide replication; we increase the sample size fourfold, and we improve the precision of the treatment variable by incorporating new institutional and medical insights. Despite the improvements, no effect is found. We conclude that the available data do not provide sufficient power to detect a possible effect, as treatment assignment cannot be measured with sufficient precision.     

Simplified Jackknife Variance Estimates for Fuzzy Measures of Multidimensional Poverty

In this paper, we present a practical methodology for variance estimation for multi‐dimensional measures of poverty and deprivation of households and individuals, derived from sample surveys with complex designs and fairly large sample sizes. The measures considered are based on fuzzy representation of individuals' propensity to deprivation in monetary and diverse non‐monetary dimensions. We believe this to be the first original contribution for estimating standard errors for such fuzzy poverty measures. The second objective is to describe and numerically illustrate computational procedures and difficulties in producing reliable and robust estimates of sampling error for such complex statistics. We attempt to identify some of these problems and provide solutions in the context of actual situations. A detailed application based on European Union Statistics on Income and Living Conditions data for 19 NUTS2 regions in Spain is provided.     

Did victories in certification contests affect the survival of organizations in the American automobile industry during 1895–1912? A replication study

Research summary: We successfully replicate the highly influential study: “The social construction of reputation…,”(Rao, 1994 ) which reports that cumulative victories in certification contests are negatively associated with firm failure. The replication is robust to the inclusion of additional controls. As in the original, tests of whether the theory is most powerful under higher uncertainty are not supported. Further, placing second, third, or merely participating in races also negatively predicts firm failure, and there is insufficient information in the data to tease out the importance of these predictors versus race victories. We discuss the assumptions under which the evidence can be interpreted as supportive of a more general argument of “loose coupling”, where affiliation with certification contests reduces firm failure. Managerial summary: We successfully replicate a study that related victories in races to the survival of early automobile firms. This result was interpreted as evidence that rank‐order certification contests legitimized firms and led to survival. We then demonstrate that there is insufficient information to tease out the relative importance of victories, as opposed to placing second, third, or merely participating in predicting survival. Our result is consistent with an argument that affiliation with certification contests, not only winning them, increases a firm's chances of survival. It is also consistent with an argument that firms with better quality automobiles won races and survived. An implication of our work is that there is insufficient evidence to determine if firms in new industries should expend finite resources on participation in certification contests or improvement of product quality.     

Option Pricing in Discrete‐Time Incomplete Market Models

Various aspects of pricing of contingent claims in discrete time for incomplete market models are studied. Formulas for prices with proportional transaction costs are obtained. Some results concerning pricing with concave transaction costs are shown. Pricing by the expected utility of terminal wealth is also considered.     

数字图书馆容灾系统的分析与构建

在高校数字图书馆建设过程中，如何充分利用资源优势，建设符合高校图书馆的数据容灾系统，从而提高数字图书馆信息化应用的服务水平。本文针对数字图书馆容灾的现状和存在的主要问题，分析了数字图书馆数据灾难的种类和容灾技术的基本原理，提出了相应的容灾解决方案。     

Toward Greater Validation of Supply Chain Management Theory and Concepts: The Roles of Research Replication and Meta‐Analysis

Although researchers have been working for over three decades to identify, construct, and test the critical concepts and theories that comprise the supply chain management (SCM) discipline, the field’s theoretical basis has yet to be thoroughly vetted through repetitive, rigorous study. Emerging theories in SCM offer great explanatory potential, but if they are to stand the tests of time, place, and reason, research findings must be accumulated and synthesized. For the field to prosper, we advocate the execution of multiple studies that replicate findings across contexts while simultaneously encompassing relevant theoretical extensions. Furthermore, as SCM research streams mature, scholars should then employ meta‐analytic techniques to gain consensus across studies, such that findings can be more confidently extolled to both academic and practitioner constituencies. In this article, we evaluate the progress of replication and meta‐analysis to date within the SCM field and provide some prospects for thematic research that could perpetuate accelerated validation.     

Replicating Text: The Cumulation of Knowledge in Social Science

Obtaining a statistically significant result does not necessarily tell us whether we would obtain significant results in other, similar studies, particularly if the original sample sizes were small. This is why we are supposed to replicate experiments. The present study concerns social science events that cannot be repeated by virtue of their being historically situated. Among social science events, many textual data are datable and, by definition, unrepeatable. One solution to this quandary lies in bootstrap replications, which are based on the original data. A case in point is that of founding political speeches such as those that buoy the European construction. We analyze and compare 82 speeches made by President Delors over the period 1988–1994, and 28 by President Santer over the period 1995–1997. We have all these speeches (N = 110) concorded as to which words are used, how often, where, and when, with the help of a computer-aided content analysis package. We then test various hypotheses using replication bootstrap estimates, that is, by replicating the original sample a large number of times and recreating several thousand samples from the population so created.     

ROBUST BOUNDS FOR FORWARD START OPTIONS

We consider the problem of finding a model‐free upper bound on the price of a forward start straddle with payoff . The bound depends on the prices of vanilla call and put options with maturities T₁ and T₂ , but does not rely on any modeling assumptions concerning the dynamics of the underlying. The bound can be enforced by a super‐replicating strategy involving puts, calls, and a forward transaction. We find an upper bound, and a model which is consistent with T₁ and T₂ vanilla option prices for which the model‐based price of the straddle is equal to the upper bound. This proves that the bound is best possible. For lognormal marginals we show that the upper bound is at most 30% higher than the Black–Scholes price. The problem can be recast as finding the solution to a Skorokhod embedding problem with nontrivial initial law so as to maximize .