valuing asian and portfolio options by conditioning on the geometric mean price the valuation of asian or a average price options and of european options on portfolios in a black scholes environment has given researchers trouble the difficulty with these problems is that the probability distribution of the variable which determines the option payoff at expiration a sum of correlated lognormal random variables has no closed form representation for the asian case the approach generally taken has been to approximate the distribution of the arithmetic average price while for the portfolio option case attempts have focused on discretizing the joint distribution of the terminal prices of the assets comprising the portfolio and approximating the expected risk neutral option payoff with a discrete sum these approaches are not entirely satisfactory the distribution approximating procedures for asian options are not very accurate for some cases while the computational requirements for obtaining a reasonably accurate estimate using the discretizing or multinomial approaches for por

measuring the affordability of home ownership typical measures of the affordability of home ownership are based on aggregate data that ignore the distribution of incomes and wealth and the range of house prices an analysis of household survey

pricing european average rate currency options abstract this paper develops a simple methodology that yields closed form analytical approximations for valuing european option claims involving the arithmetic average of future foreign exchange rates the main advantage of the approach is that it avoids the need to adopt time consuming numerical procedures the precision of the resulting formula and the distributional assumption that underlies it is examined by way of monte carlo simulations jel f31

theories of share tenancy a critical survey for the past 2 decades the problems of agricultural tenancy have attracted a great deal of attention not only from agricultural economists but also from economists in general as a typical example of agencyprincipal contract relations despite the prolific growth of literature both theoretical and empirical there has been little convergence in opinions on tenancy contracts the divergence has been especially great on the understanding of the causes and the effects of sharecropping tenancy much confusion underlying the widely divergent perspectives has stemmed from partial treatments of contractual choice which unduly limit the optimizing behavior of contracting parties and the options of contract forms this essay aims at clarifying the sources of the confusion by reviewing the past literature in light of the more general theory of agency principal relations the agency theory in order to examine the problems of various theoretical models in a unified framework in section ii we first develop the basic framework of a general model of tenancy contract in section iii we clarify in terms of the general model contradictions latent in the traditional marshallian theory which asserts that share tenancy is inefficient because of the disincentive effect of cropsharing on the tenant s work effort in section iv we attempt to show that recent efforts to reconstruct the theory based on the traditional assumption have not yet been quite successful section v draws implications and testable hypotheses from more general theories incorporating the aspects of risk and uncertainty section vi tests allocational and distributional implications of those alternative hypotheses based on the summary of evidence col

a pricing method for options based on average asset values abstract in this paper we present a new strategy for pricing average value options i e options whose payoff depends on the average price of the underlying asset over a fixed period leading up to the maturity date such options are of particular interest and importance for thinly traded assets e g crude oil since price manipulation is inhibited and both the investor and issuer enjoy a welcome degree of protection from the vagaries of the market these options are often implicit in a bond contract although they also appear in a straightforward form our results suggest that the price of an average value option will always be lower than that of a standard european option our pricing strategy involves monte carlo simulation with variance reduction elements and offers an enhanced pricing method to both arbitragers and hedgers as well as to the issuers of such bonds

a dynamic programming procedure for pricing american style asian options pricing european style asian options based on the arithmetic average under the black and scholes model involves estimating an integral a mathematical expectation for which no easily computable analytical solution is available pricing their american style counterparts which provide early exercise opportunities poses the additional difficulty of solving a dynamic optimization problem to determine the optimal exercise strategy a procedure for pricing american style asian options of the bermudan flavor based on dynamic programming combined with finite element piecewise polynomial approximation of the value function is developed here a convergence proof is provided numerical experiments illustrate the consistency and efficiency of the procedure theoretical properties of the value function and of the optimal exercise strategy are also established

monte carlo methods for security pricing the monte carlo approach has proved to be a valuable and flexible computational tool in modern finance this paper discusses some of the recent applications of the monte carlo method to security pricing problems with emphasis on improvements in efficiency we first review some variance reduction methods that have proved useful in finance then we describe the use of deterministic low discrepancy sequences also known as quasi monte carlo methods for the valuation of complex derivative securities we summarize some recent applications of the monte carlo method to the estimation of partial derivatives or risk sensitivities and to the valuation of american options we conclude by mentioning other applications

can pay won t pay or economic principles of affordability the term afford ability has been gaining currency in housing policy debates but neither government nor academic researchers have given much consideration to defining it this paper considers what meanings have been given to the term affordability in practice and suggests a range of analytically more useful definitions it argues from economic first principles that it is more logical to use some form of residual income definition than one based on a prescribed ratio of housing costs to income most researchers have been using a ratio definition the paper then uses data from a household survey in the glasgow travel to work area in 1988 89 to examine the incidence of unaffordability of housing costs according to a variety of definitions

an analysis of growth of u s farmland prices 1963 82 increases in expected inflation or real growth in net rental income to land have been proposed as alternative explanations of the dramatic real growth in u s farmland prices in the 1970s in this paper the effect of inflation is shown to be theoretically ambiguous an empirical analysis using u s and international farmland prices suggests that most of the real land price growth can be explained by real growth in net rental income to land increases in expected inflation have had a negative effect on real land prices but the effect of inflation has been comparatively small

the impacts of borrowing constraints on home ownership in australia the analysis reported in this article incorporates direct measures of borrowing constraints into an otherwise standard model of the home ownership decision in australia borrowing constraints take into account mortgage underwriting criteria household incomes and wealth and the household s optimal level of consumption of housing services models containing borrowing constraint measures are estimated for households with heads ages 25 34 the age group that is most likely to be moving into home ownership consistent with previous findings in the us and canada borrowing constraints are significant determinants of the probability of ownership including borrowing constraints in the tenure choice model results in a reduction in the independent impacts of household income and the relative costs of owning and renting implying that in the standard model these variables are at least in part proxies for borrowing constraints as wealth is the binding constraint for most constrained renters the article concludes

land quality and prices although land values reflect land quality the quality characteristics that determine values are only partly related to agricultural uses the results of estimating a reduced form equation explaining differences in land prices among states suggest that nearly two thirds of this variation is attributed to nonagricultural uses therefore a land quality index based on raw land prices will be biased which in turn will result in biased coefficients in a production function or its dual a cross section land quality index which excludes the influence of nonagricultural uses is constructed the main purpose of this paper is to construct a state level cross section land quality index for land used in agricultural pursuits the index is designed to adjust the land input for quality differences among states in aggregate agricultural production functions or short run profit or cost functions where land is held constant the weights employed to construct the index can also be used to construct a quality constant land price index for use in long run agricultural profit or cost functions having land price as an argument

pricing american style securities using simulation abstract we develop a simulation algorithm for estimating the prices of american style securities i e securities with opportunities for early exercise our algorithm provides both point estimates and error bounds for the true security price it generates two estimates one biased high and one biased low both asymptotically unbiased and converging to the true price combining the two estimators yields a confidence interval for the true price the proposed algorithm is especially attractive compared with lattice and finite difference methods when there are multiple state variables and a small number of exercise opportunities preliminary computational evidence is given

the pricing of forward starting asian options abstract asian options are path dependent options whose payoff is based on an average in some cases the underlying asset of the option is an average in others the strike price itself is computed as an average of the underlying asset recent prices asian currency options as an example allow corporate users to cover seasonal and so called strategic foreign exchange positions averages are also found in some recent warrant issues where they are mostly used as poison pills to preclude hostile takeovers this paper derives a closed form solution for the valuation of european asian options whose strike price is an average both plain vanilla average options i e those for which the time interval taken into account for the strike average calculation is the life of the option and forward starting average options are considered the valuation formula is obtained by relying upon a slight linear approximation although some previous contributions in the literature already use approximation techniques our approach contrary to others allows the derivation of a formal upper bound to the approximation error the numerical values given by this formula are then compared to those generated by an antithetic variate monte carlo method based on this comparison and the computation of an upper bound to the approximation error it is shown that the closed form solution performs quite well and is obviously computationally efficient

a p d e approach to asian options analytical and numerical evidence abstract we first derive a one state variable partial differential equation easy to implement which characterizes the price of a european type asian option this result is explained and related to previous literature we then derive new results on the hedging of an asian option and propose analytical and numerical analysis on the comparison between asian and european options our methodology which applies to fixed strike asian options as well as to floating strike asian options completes and clarifies various results in the literature in this paper we focus on backward starting asian options our approach is quite general however and we explain how to adapt our main results to the case of forward starting asian options

land prices land rents and technological change evidence from pakistan abstract the intertemporal behavior of land prices and land rents in two production environments of pakistan is investigated empirical analyses indicate that a agricultural technology adoption has had a strong positive impact on real land rents over the past 30 years in both irrigated and rainfed areas b capitalization of rents into land prices has accounted for approximately 70 of observed increases in land prices during this period c expected capital gains have been an important additional factor driving up land prices and d neither expected inflation nor inflows of remittance income from abroad have had a significant effect on land prices

parental wealth and first time homeownership a cohort study of family background and young adults housing situation in sweden this paper investigates whether family background seems to have any influence on first time homeownership recent studies have indicated that it has become more difficult to become established in the housing market and such situations may increase the importance of parental wealth in this study parental wealth is estimated as family background information on parents homeownership father s socioeconomic status and single parenting unique cohort data for three birth cohorts suggest that there is a significant cohort effect in young adults tenure decision furthermore the results imply that parents homeownership has become a more important predictor of the transition to first time homeownership for those young adults facing increasing problems in the housing market

optimal exercise policies and simulation based valuation for american asian options american asian options are average price options that allow early exercise in this paper we derive structural properties for the optimal exercise policy which are then used to develop an efficient numerical algorithm for pricing such options in particular we show that the optimal policy is a threshold policy the option should be exercised as soon as the average asset price reaches a characterized threshold which can be written as a function of the asset price at that time by exploiting this and other structural properties we are able to parameterize the exercise boundary and derive gradient estimators for the option payoff with respect to the parameters of the model these estimators are then incorporated into a simulation based algorithm to price american asian options computational experiments carried out indicate that the algorithm is very competitive with other recently proposed numerical algorithms

numerical valuation of high dimensional multivariate european securities we consider the problem of pricing a contingent claim whose payoff depends on several sources of uncertainty using classical assumptions from the arbitrage pricing theory the theoretical price can be computed as the discounted expected value of future cash flows under the modified risk neutral information process although analytical solutions have been developed elsewhere for a few particular option pricing problems computing the arbitrage prices of securities under several sources of uncertainty is still an open problem in many instances in this paper we present efficient numerical techniques based upon monte carlo simulation for pricing european contingent claims depending on an arbitrary number of risk sources we introduce in particular the method of quadratic resampling qr a new powerful error reduction technique for monte carlo simulation quadratic resampling can be efficiently combined with classical variance reduction methods such as importance sampling our numerical experiments show th

the green revolution revisited as i left the united states in may 1979 for 3 months of field study in india i wondered whether my article the green revolution and rural social structure in india then being published would be consistent with what i was about to observe from a home based vantage point working with data published up to 1976 covering the period to 1972 or 1973 i had found first that small as well as large farmers had gained economically from the new high yield varieties hyv smaller farms were becoming more viable because of greater productivity of land second that agricultural labor tended to gain from the much greater volume of crop activity but this might have been offset by mechanization to shed light on the latter question there were wage rate data but income data for agricultural laborers were virtually nonexistent i concluded from my findings that hyv should be further supported by government policies promoting water and fertilizer use but that mechanization should be limited to necessary support for hyv such as pump sets for irrigation but not tractorization of farm processes further i thought that resumption of tenanted lands by owners should not be impeded but that a fixed land ceiling of 10 acres should be implemented so that mechanization would be discouraged and the owner cultivator class enlarged while tenantry and agricultural labor would be decreased bold views would they be supported by what i was to observe

dynamic properties of energy affordability measures measures of affordability are applied in practice e g to assess the affordability of energy services water or housing they can be interpreted as measures of deprivation in a specific domain of consumption the large body of literature on affordability measure has little overlap with the existing literature on poverty measurement a comprehensive assessment of the response of affordability measures as a result of changes in the distribution of income or expenditure is missing this paper aims to fill this gap by providing a conceptual discussion on the dynamics of energy affordability measures several types of measures are examined in a microsimulation framework to assess their dynamic properties our results indicate that some measures exhibit odd dynamic behavior this includes measures used in practice such as the low income high cost measure and the double median of expenditure share indicator odd dynamic behavior is attributed to definitions made with respect to higher moments of the expenditure distribution definitions that rely on a percentage share of expenditure relative to income or an absolute or relative income poverty line fare well from a dynamic perspective

behavioural and material determinants of production relations in agriculture in this essay we develop a framework for analysing the major institutions governing the production and exchange of output and the primary factors of production in rural areas the analysis incorporates general considerations of risk and information constraints jointly with the principal material attributes of agriculture and of agricultural production factors the framework is used to analyse barriers to the existence of the major intertemporal and factor markets it is applied specifically to land scarce environments for which it provides an internally consistent explanation for many of the well documented institutional features of such settings in addition the analysis provides new implications for among other phenomena the inter relationships among ownership holdings operational scale family size and factor productivity for the scarcity of animal rental markets and use of animals as collateral for the renting out of land by small landowners and for the existence of plantations for certain crops

path dependent options extending the monte carlo simulation approach monte carlo simulation has been used to value options since boyle s seminal paper monte carlo simulation however has not been used to its fullest extent for option valuation because of the belief that the method is not feasible for american style options this paper demonstrates how to incorporate optimal early exercise in the monte carlo method of valuing options by linking forward moving simulation and the backward moving recursion of dynamic programming through an iterative search process to demonstrate the potential of this method we use it to value american style options on the average price or asian options the computational experience reveals a flexible valuation technique with potential for application to a range of securities and financial decision problems

assessing the accessibility of the homeownership market in this paper an examination is made of the accessibility of the homeownership market using measures that include both supply and demand characteristics of regional housing markets these measures are applied empirically on an extensive dataset that covers the dutch housing market the analysis quantifies the extent to which the position of first time buyers on the homeownership market has weakened over time and identifies the driving factors of this change it is found that smaller portions of the housing market are becoming affordable due to financial constraints of young households however more importantly first time buyers today need to contend with a much larger group of competing bidders on every house that suits their financial situation than ever before

farm real estate price components 1920 78 the research reported demonstrates that farm real estate price involves important components in addition to the capitalized value of rent for the services of land and buildings in farm production develops an expectations model for the farm real estate market and compares predictions from the expectations model with farm real estate prices for the 1920 78 period capitalized rent explains only about half of real estate values both in the 1970s and over the longer 1920 78 period the remainder can be explained by the capitalization of capital gains including real gains or losses from price level changes

numerical valuation of high dimensional multivariate american securities we consider the problem of pricing an american contingent claim whose payoff depends on several sources of uncertainty several efficient numerical lattice based techniques exist for pricing american securities depending on one or few up to three risk sources however these methods cannot be used for high dimensional problems since their memory requirement is exponential in the number of risk sources we present an efficient numerical technique that combines monte carlo simulation with a particular partitioning method of the underlying assets space which we call stratified state aggregation ssa using this technique we can compute accurate approximations of prices of american securities with an arbitrary number of underlying assets our numerical experiments show that the method is practical for pricing american claims depending on up to 400 risk sources

explaining the spatial variation in homeownership rates results for german regions lerbs o w and oberst c a explaining the spatial variation in homeownership rates results for german regions regional studies this paper employs cross sectional data on ninety six german regions to investigate the interregional variability of homeownership rates among the explanatory variables the analysis includes important regional housing market indicators as well as regional socio demographic composition urbanization and labour market performance an estimation strategy is chosen which accounts for different forms of spatial dependence between the regional units it is found that regional differences in the relative price of owning versus renting and the affordability of owner occupied housing play a key role in explaining why homeownership rates vary so substantially across the country the results indicate significant neighbourhood effects for several variables

path dependent options the case of lookback options lookback options are path dependent contingent claims whose payoffs depend on the extrema of a given security s price over a certain period of time using probabilistic tools we derive explicit formulas for various european lookback options and provide some results about their american counterparts