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1 – 10 of 518Bong-Gyu Jang and Hyeng Keun Koo
We present an approach for pricing American put options with a regime-switching volatility. Our method reveals that the option price can be expressed as the sum of two components…
Abstract
We present an approach for pricing American put options with a regime-switching volatility. Our method reveals that the option price can be expressed as the sum of two components: the price of a European put option and the premium associated with the early exercise privilege. Our analysis demonstrates that, under these conditions, the perpetual put option consistently commands a higher price during periods of high volatility compared to those of low volatility. Moreover, we establish that the optimal exercise boundary is lower in high-volatility regimes than in low-volatility regimes. Additionally, we develop an analytical framework to describe American puts with an Erlang-distributed random-time horizon, which allows us to propose a numerical technique for approximating the value of American puts with finite expiry. We also show that a combined approach involving randomization and Richardson extrapolation can be a robust numerical algorithm for estimating American put prices with finite expiry.
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Sérgio Kannebley Júnior, Diogo de Prince and Daniel Quinaud Pedron da Silva
Brazil uses the dollar as a vehicle currency to invoice its exports. This fact produces a tendency toward equalizing the prices of products in dollars in the international market…
Abstract
Purpose
Brazil uses the dollar as a vehicle currency to invoice its exports. This fact produces a tendency toward equalizing the prices of products in dollars in the international market and reducing the ability of firms to practice pricing-to-market (PTM). This study aims to evaluate the hypothesis by estimating error correction models in panel data, obtaining estimates of PTM for 25 manufacturing products exported by Brazil between 2010 and 2020.
Design/methodology/approach
This study uses the correlated common effect estimator proposed by Pesaran (2006) and Chudik and Pesaran (2015b) to estimate the PTM coefficients.
Findings
Results of this study indicate that exporters practice local-currency pricing stability for dollar prices. This study obtains that Brazilian exporters tend to stabilize their dollar price for exports, reducing heterogeneity between destination markets. The results are in agreement with the hypothesis of the prevalence of the coalescing effect of Goldberg and Tille (2008) and lower sensitivity of the markup adjustment to the specific market, as pointed out by Corsetti et al. (2018). The pricing of Brazilian exports in dollars reflects a profit maximization strategy that considers an international price system based on global demand for products.
Originality/value
In addition to analyzing the dollar role in the pricing of Brazilian exports through the triangular decomposition, this study also shows the importance of examining the cross-section dependence of errors, considering the heterogeneous cointegration in export pricing models and producing PTM estimates for short-term and long-term.
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Yi Ding and Zhonghua Yin
Rosewood, as the most internationally traded endangered species, is subject to a series of restrictive trade policies globally. China has historically been the largest importer of…
Abstract
Purpose
Rosewood, as the most internationally traded endangered species, is subject to a series of restrictive trade policies globally. China has historically been the largest importer of rosewood in the world. The fluctuation of China’s rosewood import prices will have a profound impact on the global rosewood trade pattern. This study, therefore, assessed the impact of restrictive trade policies on China’s rosewood import prices to explore the fluctuation rule of rosewood trade prices under restrictive policies.
Design/methodology/approach
The study built a partial equilibrium framework about the formation mechanism of rosewood import price bubbles under supply constraints. On this basis, with China’s daily import prices of major rosewood species, the generalized supremum augmented Dickey–Fuller (GSADF) and backward supremum augmented Dickey–Fuller (BSADF) tests were applied to explore the effect of restrictive trade policies on China’s rosewood import prices.
Findings
The empirical analysis revealed that there were multiple price bubbles for five of the seven rosewood species. The largest bubbles were always created before and after the deployment of supply constraints. The empirical results for the counterfactual examples implied that price bubbles would not have occurred if restrictive rosewood trade policies had not been implemented. The above findings indicated that these measures tended to trigger significant price bubbles in China’s rosewood imports.
Originality/value
The effect of restrictive rosewood trade policies on rosewood trade prices had not yet been explored in previous research studies. This study empirically analyzed the effect of restrictive trade policies on China’s rosewood import prices using econometric models.
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Florian Follert and Werner Gleißner
From the buying club’s perspective, the transfer of a player can be interpreted as an investment from which the club expects uncertain future benefits. This paper aims to develop…
Abstract
Purpose
From the buying club’s perspective, the transfer of a player can be interpreted as an investment from which the club expects uncertain future benefits. This paper aims to develop a decision-oriented approach for the valuation of football players that could theoretically help clubs determine the subjective value of investing in a player to assess its potential economic advantage.
Design/methodology/approach
We build on a semi-investment-theoretical risk-value model and elaborate an approach that can be applied in imperfect markets under uncertainty. Furthermore, we illustrate the valuation process with a numerical example based on fictitious data. Due to this explicitly intended decision support, our approach differs fundamentally from a large part of the literature, which is empirically based and attempts to explain observable figures through various influencing factors.
Findings
We propose a semi-investment-theoretical valuation approach that is based on a two-step model, namely, a first valuation at the club level and a final calculation to determine the decision value for an individual player. In contrast to the previous literature, we do not rely on an econometric framework that attempts to explain observable past variables but rather present a general, forward-looking decision model that can support managers in their investment decisions.
Originality/value
This approach is the first to show managers how to make an economically rational investment decision by determining the maximum payable price. Nevertheless, there is no normative requirement for the decision-maker. The club will obviously have to supplement the calculus with nonfinancial objectives. Overall, our paper can constitute a first step toward decision-oriented player valuation and for theoretical comparison with practical investment decisions in football clubs, which obviously take into account other specific sports team decisions.
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Mohammadreza Tavakoli Baghdadabad
We propose a risk factor for idiosyncratic entropy and explore the relationship between this factor and expected stock returns.
Abstract
Purpose
We propose a risk factor for idiosyncratic entropy and explore the relationship between this factor and expected stock returns.
Design/methodology/approach
We estimate a cross-sectional model of expected entropy that uses several common risk factors to predict idiosyncratic entropy.
Findings
We find a negative relationship between expected idiosyncratic entropy and returns. Specifically, the Carhart alpha of a low expected entropy portfolio exceeds the alpha of a high expected entropy portfolio by −2.37% per month. We also find a negative and significant price of expected idiosyncratic entropy risk using the Fama-MacBeth cross-sectional regressions. Interestingly, expected entropy helps us explain the idiosyncratic volatility puzzle that stocks with high idiosyncratic volatility earn low expected returns.
Originality/value
We propose a risk factor of idiosyncratic entropy and explore the relationship between this factor and expected stock returns. Interestingly, expected entropy helps us explain the idiosyncratic volatility puzzle that stocks with high idiosyncratic volatility earn low expected returns.
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Karunamunige Sandun Madhuranga Karunamuni, Ekanayake Mudiyanselage Kapila Bandara Ekanayake, Subodha Dharmapriya and Asela Kumudu Kulatunga
The purpose of this study is to develop a novel general mathematical model to find the optimal product mix of commercial graphite products, which has a complex production process…
Abstract
Purpose
The purpose of this study is to develop a novel general mathematical model to find the optimal product mix of commercial graphite products, which has a complex production process with alternative sub-processes in the graphite mining production process.
Design/methodology/approach
The network optimization was adopted to model the complex graphite mining production process through the optimal allocation of raw graphite, byproducts, and saleable products with comparable sub-processes, which has different processing capacities and costs. The model was tested on a selected graphite manufacturing company, and the optimal graphite product mix was determined through the selection of the optimal production process. In addition, sensitivity and scenario analyses were carried out to accommodate uncertainties and to facilitate further managerial decisions.
Findings
The selected graphite mining company mines approximately 400 metric tons of raw graphite per month to produce ten types of graphite products. According to the optimum solution obtained, the company should produce only six graphite products to maximize its total profit. In addition, the study demonstrated how to reveal optimum managerial decisions based on optimum solutions.
Originality/value
This study has made a significant contribution to the graphite manufacturing industry by modeling the complex graphite mining production process with a network optimization technique that has yet to be addressed at this level of detail. The sensitivity and scenario analyses support for further managerial decisions.
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Siti Hajar Hussein, Suhal Kusairi and Fathilah Ismail
This study aims to develop an educational tourism demand model, particularly in respect to dynamic effects, university quality (QU) and competitor countries. Educational tourism…
Abstract
Purpose
This study aims to develop an educational tourism demand model, particularly in respect to dynamic effects, university quality (QU) and competitor countries. Educational tourism has been identified as a new tourism sub-sector with high potential, and is thus expected to boost economic growth and sustainability.
Design/methodology/approach
This study reviews the literature on the determinants of educational tourism demand. Even though the existing literature is intensively discussed, mostly focusing on the educational tourism demand from an individual consumer's perspective, this study makes an innovation in line with the aggregate demand view. The study uses data that consist of the enrolment of international students from 47 home countries who studied in Malaysia from 2008 to 2017. The study utilised the dynamic panel method of analysis.
Findings
This study affirms that income per capita, educational tourism price, price of competitor countries and quality of universities based on accredited programmes and world university ranking are the determinants of educational tourism demand in both the short and the long term. Also, a dynamic effect exists in educational tourism demand.
Research limitations/implications
The results imply that government should take the quality of services for existing students, price decisions and QU into account to promote the country as a tertiary education hub and achieve sustainable development.
Originality/value
Research on the determinants of the demand for educational tourism is rare in terms of macro data, and this study includes the roles of QU, competitor countries and dynamic effects.
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Hanan Naser, Fatima Al-aali, Yomna Abdulla and Rabab Ebrahim
Over the last decade, investments in green energy companies have witnessed noticeable growth rates. However, the glacial pace of the world economic restoration due to COVID-19…
Abstract
Purpose
Over the last decade, investments in green energy companies have witnessed noticeable growth rates. However, the glacial pace of the world economic restoration due to COVID-19 pandemic placed a high degree of uncertainty over this market. Therefore, this study investigates the short- and long-term relationships between COVID-19 new cases and WilderHill New Energy Global Innovation Index (NEX) using daily data over the period from January 23, 2020 to February 1, 2023.
Design/methodology/approach
The authors utilize an autoregressive distributed lag bounds testing estimation technique.
Findings
The results show a significant positive impact of COVID-19 new cases on the returns of NEX index in the short run, whereas it has a significant negative impact in the long run. It is also found that the S&P Global Clean Energy Index has a significant positive impact on the returns of NEX index. Although oil has an influential effect on stock returns, the results show insignificant impact.
Practical implications
Governments have the chance to flip this trend by including investment in green energy in their economic growth stimulation policies. Governments should highlight the fundamental advantages of investing in this type of energy such as creating job vacancies while reducing emissions and promoting innovation.
Originality/value
First, as far as the authors are aware, the authors are the first to examine the effect of oil prices on clean energy stocks during COVID-19. Second, the authors contribute to studies on the relationship between oil prices and renewable energy. Third, the authors add to the emerging strand of literature on the impact of COVID-19 on various sectors of the economy. Fourth, the findings of the paper can add to the growing literature on sustainable development goals, in specific the papers related to energy sustainability.
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Tianyu Pan, Rachel J.C. Fu and James F. Petrick
This study aims to examine consumer perception during COVID-19 and identifies cruise industry marketing strategies to fill a gap in crisis management and product pricing…
Abstract
Purpose
This study aims to examine consumer perception during COVID-19 and identifies cruise industry marketing strategies to fill a gap in crisis management and product pricing literature.
Design/methodology/approach
This study developed and validated two-factor measurement scales (vaccine perception and protective behavior), which predicted cruise intents well. This study revealed how geo-regional factors affect consumer psychology through spatial analysis.
Findings
This study recommended pricing 7-day cruises at $1,464 (the most preferred length). The results also showed that future price hikes would not affect demand and that coastal marketing would help retain customers.
Originality/value
This study contributed to the business, hospitality and tourism literature by identifying two new and unique factors (vaccine perception and protective behaviors), which were found to affect consumers’ intention to travel by cruise significantly. The result provided a better understanding of cruise tourists’ pricing preferences and the methods utilized could easily be applied to other cruise markets or tourism entities.
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Sina Ahmadi Kaliji, Seyed Mojtaba Mojaverian, Hamid Amirnejad and Maurizio Canavari
The authors propose a dairy bundle, integrating strategies to jointly maximise producer revenue and consumer utility according to the latter's preferences.
Abstract
Purpose
The authors propose a dairy bundle, integrating strategies to jointly maximise producer revenue and consumer utility according to the latter's preferences.
Design/methodology/approach
An algorithm based on a nested logit model identifies the bundle maximising producer revenue based on factors affecting consumer purchase behaviour. The data are drawn from a mall-intercept survey administered in Iran, with consumers stating a hypothetical choice among a comprehensive set of dairy products.
Findings
Demographic characteristics and marketing mix elements significantly affect consumers' preferences. An algorithm based on the estimated dissimilarity parameter determines the best bundle of dairy products, simultaneously obtaining the highest utility and the highest expected revenue.
Originality/value
Consumer preference and maximum producer or retail seller income are considered simultaneously. The bundling promotion strategy is widely used for food offerings and fresh foods and can be extended to other products.
研究目的
我們擬根據消費者偏好,提出一個整合了多個策略的捆綁包,以使生產製作者得到最高的收入和最佳的消費者效用。
研究設計/方法/理念
研究人員根據巢式Logit 模型的演算法確認了一個捆綁包,以使生產製作者能得到最高的收入,而這均建基於會影響消費者購買行為的各個因素。有關的數據取自於伊朗的商場內進行的攔截調查,而回應的消費者須假想他們從一整套乳製品中選擇他們會購買的產品。
研究結果
研究結果顯示,人口特徵和市場營銷組合元素均會顯著地影響消費者的偏好,一個基於估算的相異性參數而建立的演算法可確認最佳的乳製品捆綁包,這演算法同時也可取得最佳的裨益和最高的預期收入。
研究的原創性/價值
於本研究中,研究人員同時考慮消費者的偏好和生產製作者或零售賣家的最高收入。捆綁式的促銷策略在食物供品和新鮮食品方面被廣泛使用,這策略可擴展至其他產品。
關鍵詞
乳製品捆綁包、消費者偏好、最佳化演算法、巢式Logit 模型.
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