asymmetry in retail wholesale and shipping point pricing for fresh vegetables the linkage among retail wholesale and shipping point prices for a select group of fresh vegetables is measured using wolffram s asymmetry model procedures for dealing with discontinuous time series are shown and granger s causality test is used to show the direction of the price linkage wholesale prices are shown to lead both retail and shipping point prices asymmetry in the retail wholesale response indicates that wholesale price decreases are reflected at the retail more so than are wholesale price increases wholesale price decreases are more fully passed through to the shipping point relative to wholesale increases

the early exercise of options on treasury bond futures this paper presents a test of the theory of rational option exercise exercise data from the market for options on treasury bond futures are used to test the model of rational early exercise developed by barone adesi and whaley 1987 baw the results show that the baw model underestimates the futures price that will trigger exercise for calls and overestimates this price for puts the exercise bias is observed to change across option maturities and the direction of the bias is consistent with the direction of the model pricing bias observed by whaley 1986

the american put option valued analytically an analytic solution to the american put problem is derived herein the hedge ratio and other derivatives of the solution are presented the formula derived implies an exact duplicating portfolio for the american put consisting of discount bonds and stock sold short the formula is extended to consider put options on stocks paying cash dividends a polynomial expression is developed for evaluating these formulae values and hedge ratios for puts on both dividend and nondividend paying stocks are calculated tabulated and compared with values derived by numerical integration and binomial approximation as with european options evaluating an analytic formula is more efficient than approximating the stock price process or the partial differential equation by binomial or finite difference methods finally applications of this american put solution are discussed

the use of the control variate technique in option pricing this paper presents a generalized version of the lattice approach to pricing options it shows how the control variate technique can produce significant improvements in the effi ciency ofthe approach the control variate technique is illustrated using american puts on dividend and nondividend paying stocks

implied interest rates one of the most important assumptions in financial economics models is the existence of a risk free rate available for borrowing and lending in any economy however the borrowing rate does not coincide with the lending rate even for the short run the difference between the rates is considered a compensation for intermediation that is necessary in the imperfect real world in a well functioning financial market this difference would be small and the smaller it is the better off is the economy the two short term rates that best approximate riskless lending and borrowing rates are the treasury bill rate and the brokers loan call rate respectively with the introduction of put and call options a new risk free instrument has been created using options alone or options combined with the underlying asset one could turn to these markets for his borrowing or lending needs thereby with the introduction of put and call options a new risk free asset has been created the objective of this study is to estimate the rate implied in option prices and compare it to other riskless instruments we have used transactions data on chicago board options exchange options taking into account the american feature of these options we find that options markets provide rates that are competitive with other short term rates these rates are closer to the borrowing rate than to the lending rate

investigation of production sales and inventory relationships using multicointegration and non symmetric error correction models the accumulated sum of a stationary series is called integrated if a linear combination of some of the integrated series is stationary it is said to be cointegrated this paper presents empirical results on inventories to consider the possibility of a deeper form of cointegration called multicointegration which is introduced in granger and lee 1989 a vector integrated series is multicointegrated if the accumulated sum of its stationary cointegrated linear combination is again cointegrated with itself inventory which is the accumulated sum of production minus sales is probably cointegrated with production and sales the empirical results generally support the presence of multicointegration of production and sales in many u s industries and industrial aggregates the results also favour the non symmetric error correction model providing evidence that the strength of attraction is different on both sides of the attractor a modified s s rule for inventory control is investigated in the context of a non symmetric error correction model and the results generally do not support the s s rule sufficient evidence is found to conclude that multicointegration is a useful concept in the area of inventory determination

nonparametric estimation of american options exercise boundaries and call prices abstract unlike european type derivative securities there are no simple analytic valuation formulas for finite lived american options even when the underlying asset price has constant volatility the early exercise feature considerably complicates the valuation of american contracts the strategy taken in this paper is to rely on nonparametric statistical methods using market data to estimate the call prices and the exercise boundaries a comparison is made with parametric constant volatility model based prices and exercise boundaries the paper focuses on assessing the adequacy of conventional formulas by comparing them to nonparametric estimates we use daily market option prices and exercise data on the s p100 contract the most actively traded american option contract we find large discrepancies between the parametric and nonparametric call prices and exercise boundaries we also find remarkable similarities of the nonparametric estimates before and after the crash of october 1987

comparative performance of the black scholes and roll geske whaley option pricing models the original black scholes bs 2 european call option pricing model does not take account of divided payments on the underlying stock and does not allow for the possibility of early exercise that may be optimal when the stock pays dividends black 1 has suggested that the original bs model can be modified to take account of dividends and sharpe 14 predicts that this modified or pseudo american bs approach while not exact is probably sufficient for many listed options

privatizing and liberalizing electricity the case of hungary abstract hungary a forerunner in eastern reforms has boldly privatized its energy sector with foreign capital while in the west liberalization resulted in electricity abundance and dramatical tariff cuts in hungary as a result of asymmetric market opening it brought excess capacites transparent cost base prices but lower tariffs are still ahead foreign investors made the branch profitable and are planning to expand capacities

an analytic approximation for the american put price black and scholes 1 derived the pricing equation for a european put when the stock price follows geometric brownian motion for this same case merton 5 derived the pricing equation for an american put with infinite time to maturity brennan and schwartz 2 rubinstein and cox 7 and parkinson 6 have developed numerical solutions for the price of an american put numerical solutions are expensive and do not provide much intuition naturally an analytic solution would be much preferred unfortunately pricing the american put requires solving a formidable and presumably intractable boundary value problem

asymmetric price transmission in the hungarian retail electricity market abstract the article compares the market power of hungarian electricity traders during the partially liberalised transitional market model from 2004 to 2008 and the fully liberalised period lasting since 2008 in our empirical work we use an econometric modelling technique based on asymmetric price transmission apt theory to measure the market power of traders in the electricity market the aim of our work is to conduct a quantitative analysis of the hungarian electricity trading market by applying the apt modelling technique used widely in agro economic analyses to electricity markets the intuition behind the method is the assumption that asymmetric price transmission refers to deviations from perfect competition the research has found that different regulation regimes lead to different patterns of asymmetry in price transmission and the results underline that the market position of electricity traders have improved since the introduction of the liberalised market model by mapping the results of the apt model to the actual policy and market changes we argue that the apt method is a useful tool for analysing the competition on electricity markets

corporate bond price data sources and return risk measurement to date a number of studies involving the use of bond prices and or returns have utilized the published prices of trades on the new york and other exchanges these exchange quotes reflect the odd lot activities of individual investors and account for only a negligible portion of the trading in listed issues in contrast the vast majority of listed corporate trading occurs over the counter and involves round lot trades between institutions given differences in market characteristics odd lot exchange prices may differ substantially from those in the round lot institutional market this study compares exchange quotations from moody s bond record with prices assigned by merrill lynch s institutional pricing service and uses each set of prices to calculate return and risk measures institutional merrill lynch bond prices are shown to be systematically greater than exchange moody s prices in addition bond returns based on merrill lynch prices are shown to yield significantly higher beta and r 2 estimates as well as significantly lower standard deviation and residual risk estimates

the value of early exercise in option prices an empirical investigation previous studies in the valuation of american options apparently undervalue the right of early exercise this study uses actual prices from the cboe s s p 100 option instead of model generated values deviations from the theoretical put call parity relationship are caused by the possibility of early exercise these deviations are used to infer the value of early exercise the actual value of early exercise is both statistically and economically significant as expected from theoretical considerations the value of early exercise for put options is greater than for call options

option pricing when the variance is changing the monte carlo method is used to solve for the price of a call when the variance is changing stochastically

an empirical examination of the pricing of american put options this study is an ex post performance test comparing the accuracy of an american model to a european model for valuing listed options specifically the geske and johnson american put valuation model is compared with the black and scholes european put model on average both models undervalue relative to market prices put options however the geske and johnson model values are significantly closer to market prices than are the black and scholes values

first evidence of asymmetric cost pass through of eu emissions allowances examining wholesale electricity prices in germany abstract we test the hypothesis that rising prices of emission allowances have a stronger impact on wholesale electricity prices than falling prices asymmetric cost pass through using an autoregressive distributed lag model we confirm this hypothesis for the german market

price transmission and asymmetric adjustment in the spanish dairy sector asymmetric threshold vector error correction models are applied to monthly price data to analyse price relationships and patterns of transmission among farm and retail markets for a variety of dairy products in spain the results suggest that asymmetries affect a conspicuous part of the raw milk processed in spain implications for the organizational structure of spanish dairy markets are offered

on valuing american call options with the black scholes european formula empirical papers on option pricing have uncovered systematic differences between market prices and values produced by the black scholes european formula such biases have been found related to the exercise price the time to maturity and the variance we argue here that the american option variant of the black scholes formula has the potential to explain the first two biases and may partly explain the third it can also be used to understand the empirical finding that the striking price bias reverses itself in different sample periods the expected form of the striking price bias is explained in detail and is shown to be closely related to past empirical findings the black scholes european option pricing model tends to exhibit systematic empirical biases when used to value american call options the reported biases

adoption of pollution prevention techniques the role of management systems and regulatory pressures this paper investigates the extent to which firm level technological change that reduces unregulated emissions is driven by regulatory pressures and firms technological and organizational capabilities using a treatment effects model with panel data for a sample of s p 500 firms over the period 1994 1996 we find that organizational change in the form of total quality environmental management leads firms to adopt pollution prevention practices after controlling for the effects of various regulatory pressures and firm specific characteristics we find that the threat of anticipated regulations and the presence of complementary assets is important for creating the incentives and an internal capacity to undertake incremental adoption of pollution prevention techniques

valuation of american call options on dividend paying stocks empirical tests abstract this paper examines the pricing performance of the valuation equation for american call options on stocks with known dividends and compares it with two suggested approximation methods the approximation obtained by substituting the stock price net of the present value of the escrowed dividends into the black scholes model is shown to induce spurious correlation between prediction error and 1 the standard deviation of stock return 2 the degree to which the option is in the money or out of the money 3 the probability of early exercise 4 the time to expiration of the option and 5 the dividend yield of the stock a new method of examining option market efficiency is developed and tested