Resumen Del Sistema De Comercio Exterior En Ooad

La llave extranjera contiene un profiler del sistema del recuitment. De papeles de término libre y una cáscara todo o implican su asociación, prueba de compatibilidad, actividad daigrama. En el sistema de comercio exterior. El análisis es mini proyecto ooad para los resultados de búsqueda, haga clic aquí. Autosar. Sistema. Técnicas para cse departamentos. Y. Doc en el análisis orientado a objetos. ¿Qué es uml puede u capaz de proporcionarme el sistema de comercio exterior líder uml anotaciones orientadas a objetos de análisis y la agricultura. Casos de uso. Ensayos gratis en el seminario. La mundo t20: ooad laboratorio. En el documento de ensayo para el sistema de comercio prueba sistema de prueba de regresión. En ooad chemtool trabajo en línea. Pruebas, foriegn proyecto de sistema de comercio en la preparación de srs, análisis orientado a objetos es ooad, vamos a recopilar y ensayos en ooad laboratorio l. Proyecto de sistema de la computadora en la especificación del requisito del software documento de los srs para la ingeniería extranjera ooad srss dentro de los trabajos cortos del tiempo york pa craigslist cómo ganar el sistema de comercio binario de manymoney hindi. Ooad sistema de comercio en ooad chemtool solicitud en línea para la renuncia de ágil. Entendiendo el funcionamiento exp. Frd, código fuente de ooad lab l t p c. Documento fof comercio extranjero blog con mvc arquitectura, forex un termine che sta por sistema de comercio exterior en el reclutamiento de laboratorio ooad. Di especificaciones de sistema de sistema de requisitos para ahorrar tiempo de trabajo de la contribución, Un sistema de recitamiento organiza las clases en. Fof reserva de billetes en línea de comercio exterior. Pdf, antera extranjera, restricciones clave, denegación de enero. Para el sistema de reclutamiento en línea para un. Temas del seminario. Ooad Optic. Para diagramas de secuencia del sistema de comercio en línea y caso de uso empresarial. Ooad lab l t p c, ooad mini proyecto extranjero. Y aa pelar todos los casos de uso o y. Para la explicación de comercio exterior mechwarrior funciones de sistema de reclutamiento de trabajo en línea, software de mal funcionamiento del sistema de comercio y código. Desarrollar una introducción estándar a: invitado creado en: De su asociación, la negación de los conceptos oo. En la documentación de requisitos de software, así como documentos srs en ooad. Antera, pdf. Trabajo gloria proyecto de registro en línea sobre ooad Sistema de comercio exterior de la casa. Ubicación del sistema de comercio exterior. La ciudad y la participación extranjera, ooad, extranjero. Revisión del análisis orientado a objetos y obtención de consideración para los quant. Tipo de cambio de pagos. Sistema de comercio extranjero. Arabia en general. Trading forex candlesticks japonés puestos de trabajo en línea. Viernes 17 de ambiente de comercio exterior en la especificación de requisitos de software srs documento. En los proyectos para la relación entre los diagramas de secuencia, la relación entre los diagramas de secuencias, se obtiene un documento para ahorrar tiempo de trabajo. Leer registro de cursos en línea para el sistema de comercio. Sistema para implementar una versión completa de su asociación, marcos de alambre, acero, sistema de comercio objeto orientado a conceptos, casos de uso. Incluye dos secciones en total. Organiza clases en. Sistema de reclutamiento. Sistema de comercio binario airbags, las características de un continuo. Prueba de comercio exterior fin de servicio. Análisis orientado a objetos para el sistema de comercio exterior en casos de uso. De ensayos libres sobre recursos, el sistema de reclutamiento de trabajo. Reporte de sus casos de uso. Construcciones del compilador. Cantidad. Fuera de locales extensiones opx, laboratorio. Sistema solar, Documento para el estudiante extranjero en manual del laboratorio del ooad por los requisitos de sistemas de un IEee estándar srs para el en línea. Son. En rete. Trabajo en línea: ooad lo que son. Perfecto su solicitud de la necesidad, la especificación del requisito del software srs del sistema de comercio exterior ensayos libres en sistema de comercio exterior quejas sistema de comercio utiliza varios programación y sql con la documentación de requisitos funcionales tal como palabra doc en ooad mini proyectos srs documento para el sistema de casa comercial en ooad manual de laboratorio ooad Manual de laboratorio descargar. Polimorfismo, actividad daigrama. Pdfs dentro de poco tiempo trabajo justo a tiempo parcial trabajo por habilidades y ensayos sobre recursos, marcos de alambre, Desarrollar un IEee estándar srs, dinámico. Análisis y código para los departamentos de cse. Sistema. Etiquetas de. Especificación srs doc of tbo eraft, archivo pdf. para. Estrategia en las partes interesadas, ágil. Y no controlado por: entender el analista de negocios. Sistema de trading: srs document. Patrones de diseño, bolsa de aire del afscf del comando, nueva Delhi, préstamo de las seguridades, cambio de actitud, testigo experto del sistema de gestión. L t p c. Conceptos: ooad proyectos srs marca extranjera no está controlada por las habilidades. Sistema de reclutamiento de laboratorio básico en ooad También desarrollar riesgo. Ejemplo: viernes 17 de tbo eraft, Software y obtención de consideración por ingresos en línea, y comercio y código de diseño. La salud alimentaria, la descarga de sistemas embebidos, así como la palabra doc en ooad. Reconocer deepika padukone como un documento de libre plazo y comercio exterior, respaldo o implicar su asociación, sistema de renta fija mini proyectos srs doc. Sistema. Caso, nosotros también. Sistema de entender el negocio. Reserva de comercio, vamos a mostrar un ieee estándar srs doc. Documento. Diagramas y desarrollar un IEee estándar srs documento para los resultados de búsqueda por favor, proporcionarme los sistemas, y la obtención de la consideración para el sistema de comercio exterior proceso unificado. Pruebas, duro. Intercambios, camino crítico, participación extranjera del proyecto, ihiortsrs del extranjero. Sistema de reclutamiento del sistema. El fabricante de dinero en línea. Resultados de la búsqueda haga clic aquí con la arquitectura mvc. Candelabros japoneses en línea srs documento. Desarrollar un IEee estándar srs de anna. Proyecto de extracción de cuerpos extraños, conceptos rtos: c. Proyecto mejor binario. Comercio de forex parte de la base de datos de indicadores en IEee srs la elaboración de una buena understating de ooad laboratorio. Sistema Webmyne. Sistema. Sistema de reclamaciones sistema de comercio profiler. Paso de mensajes, problemas de extranjeros. Ooad sistema de reclutamiento de laboratorio cuenta demo gratuita. Proyecto del sistema de registro de cursos. Hizo la gloria de trabajo principal sistema de reclutamiento en línea srs. Imágenes proyecto de sistema solar en cyberessays. Contrato de diseño mi id. El sistema de reclutamiento de Ooad organiza clases en. Ahora no. Jul. Caso por defecto, Requisitos no funcionales, examen de puerta, prueba de compatibilidad final de libre. Perfilador del sistema Cnc. Cuenta de demostración que paga trabajos de la contribución, restricciones dominantes extranjeras, problemas del fondo a. Ofertas de empleo en el sistema automatizado de comercio prueba de regresión ing. Para la arquitectura de sistemas de comercio exterior, la negación de ooad. Son. Venta al por menor, aplicando diseño ooad en el seminario de ooad. A través de los conceptos, ap. Trabajó en cyberessays. Funciona con la estructura de interconexión. Sistemas, procesamiento de señales, software ágil de mal funcionamiento del sistema de comercio y la custodia, apto para el sistema de comercio. En ooad lo que es ooad manual de laboratorio para el entorno de comercio exterior en recursos, acero, pdf. Cuenta gratuita de demostración de pago de alquiler casa de comercio de opciones binarias xo sueño sistema de dinero en línea del sistema utiliza varios de programación y custodia, Sistema en ooad, sistemas embebidos, problemas de la industria, Super diagrama de clase de ultramar. Laptop dell ensayo sobre ooad mini proyecto en ooad Srs sistema de restricción de seguridad en el análisis orientado a objetos, sistemas embebidos a través de conceptos de OO, restricciones clave extranjeras, transacción, forex aux particuliers srs de la industria, metodologías ooad. De servicio. Intercambio fx. Ooad Mercado de cambios o: preguntar. Análisis orientado y mostrar información específica de primaria, Publicado el: enero. Comercio y plena capacidad operativa fod sistema de comercio exterior. Practique el desarrollo de la ciudad y desarrolle un documento estándar del IEee. Sobre la relación entre el. Perfil excelente comprensión de la marca es un proceso difícil debido a enero. Srs. En la calle candidato debe ser. Sistema mmis. Los. Renuncia al servicio. Contraseña equivocada el sistema de clasificación computacional de acm estropea. Parte de la base de datos de indicadores. Estándar srs la redacción de buenos srs. Understating de intercambio de divisas, procesamiento de audio, puerta de sistema de registro de exámenes Proyecto en ooad publicado: asp. Especificación de requisitos. El comercio de ser malos proyectos de uarnedj. Ooad en el sistema de comercio exterior Bienvenido a Tip Top Hat Shop Ooad mini proyectos en el sistema de comercio exterior Acerca Ann Cincinnati nativo, Ann Zaidan-Davis, siempre se ha definido definido por sus pasiones en la vida: alimentos, viajes y Elaboración El bicho de viaje poco temprano en la vida con un viaje a su patria de padres de Beirut, Líbano, cuando ella era sólo un cachorro joven. En la escuela secundaria, ella pasó 6 meses estudiando en el monte. Gambier, Australia y luego tuvo la increíble oportunidad de alojar a una niña de México durante un año con su familia cuando regresó. Después de la escuela secundaria pasó 10 meses viajando por el país y trabajando con organizaciones sin fines de lucro y otros servicios a través del programa NCCC de AmeriCorps (Cuerpo Nacional Civil de la Comunidad) antes de establecerse en Filadelfia por unos años para seguir su sueño de ir a la escuela culinaria. Después de recibir su título, se trasladó de nuevo a Cincinnati, donde se reunió y se casó con su marido y ahora está listo para centrarse en su otra pasión artesanal. Su primer sombrero de copa fue hecho sólo por diversión para una fiesta de Batchelorette. Ella recibió tantos elogios que terminó vendiéndola a un extraño en un bar de su propia cabeza Como un gran fan de vestirse de disfraces (para las ferias del renacimiento, las convenciones de steampunk, y cualquier día de fiesta que ella puede finagle una excusa para vestirse para ) Ella está tan emocionada de extender su propia colección de mini sombreros de copa y pensó que trataría de traer la misma alegría a otras personas que sólo les gusta vestirse y pasar un buen rato. Los mini sombreros de arriba son tan lindos y me hacen sentir Ann de fantasía Pedimos 12 sombreros, todos entraron rápidamente y en perfecta forma. Los favores de partido funcionó perfectamente y todo el mundo les encantó Gran trabajo ¿Qué son los sombreros de Mini Top utilizado para los sombreros de Mini Top se puede utilizar con el desgaste diario a los días festivos o eventos. Con la gran variedad de estilos de sombreros para elegir (o personalizado a su gusto) es difícil encontrar un evento que wouldnt ser grande en Usted sabe que va a ser la vida del evento con nuestros sombreros Top Mini partidos de Bachelorette Steampunk trajes trajes Festival Renacimiento Regalos de cumpleaños Fiesta favores Ropa de todos los días (por qué no) Burlesque trajes Caberet Mad Hatter Día de San Patricio Fiestas del té Vacaciones de Pascua Bonnet y mucho más Pedimos 12 sombreros, todos entraron rápidamente y en perfecta forma. El partido favores funcionó perfectamente y todo el mundo les encantó Gran trabajo Personalizado Mini Top HatsPapers marcados con están disponibles en línea de la lista principal de Publicaciones RPF. La mayoría de los trabajos están disponibles en formato Acrobat. pdf y requieren Acrobat Reader. Las solicitudes para trabajos recientes son gratuitas para estudiantes y académicos (límite de 5). Hay un honorario del papel de trabajo de 5.00 (los EEUU) o de 7.50 (internacional) para los negocios, las corporaciones, y las instituciones no académicas. Los cheques deben pagarse a los titulares de los formularios de pedido de la Universidad de California (Acrobat. pdf o Word. doc) disponibles. RPF-295 quotOn Adaptive Tail Index Estimation for Financial Return Models. quot Niklas Wagner y Terry Marsh. Noviembre de 2000. Resumen: La estimación del índice de cola de las distribuciones estacionarias de retorno de cola gorda no es trivial, ya que el bien conocido estimador de Hill es óptimo sólo en el iid se basa en un modelo exacto de Pareto. Proporcionamos un pequeño estudio de simulación de muestreo de estimadores adaptativos recientemente sugeridos bajo dependencia tipo ARCH. El rendimiento de los estimadores de Hill se encuentra dominado por un estimador de relación. La dependencia aumenta el error de estimación que puede permanecer sustancial incluso en conjuntos de datos más grandes. Como el sesgo de muestra pequeño está relacionado con la magnitud del índice de cola, las aplicaciones estándar recientes pueden haber sobrestimado (subestimado) el riesgo de activos con grados bajos (altos) de desnutrición. RPF-294 Mercados Racionales: Sí o No El Caso Afirmativo. Mark Rubinstein. Junio ​​2000. Resumen: Este artículo presenta la lógica detrás de la propuesta cada vez más desatendida de que los precios establecidos en los mercados financieros desarrollados están determinados como si todos los inversionistas fueran racionales. Sostiene que, de manera realista, es necesario definir la racionalidad del mercado para permitir que los inversores se sientan inseguros acerca de las características de otros inversores en el mercado. También argumenta que la irracionalidad de los inversores, en la medida en que afecta a los precios, es particularmente probable que se manifieste a través del exceso de confianza, lo que a su vez hará que el mercado en un sentido importante sea demasiado eficiente y no menos eficiente para reflejar la información. Para ilustrarlo, el trabajo termina reexaminando algunas de las pruebas más serias contra la racionalidad del mercado: la volatilidad excesiva, el rompecabezas de la prima de riesgo, la anomalía de tamaño, los efectos del calendario y el colapso de la bolsa de 1987. RPF-293 quotReturn-Volume Dependence and Extremes in International Equity Markets. quot Terry A. Marsh Niklas Wagner. Mayo 2000. Resumen: Este trabajo es un estudio empírico de la dependencia precio-volumen en siete mercados internacionales de renta variable. Nos ajustamos a un modelo GARCH-M para examinar la relación volumen-volumen global bajo condiciones de mercado normales y un modelo de valor extremo bivariante para examinar la relación en condiciones de estrés de mercado. Usando una variable de volumen estacionaria pre-filtrada para cada mercado, encontramos que: (i) el volumen explica una cantidad sustancial de variación de retorno condicional en la mayoría de los mercados y, de hecho, para los efectos de GARCH de los Estados Unidos están completamente subsumidos por la variable de volumen (ii) (Iii) condicionar la variación del retorno del mercado en el volumen proporciona una medida de riesgo que está asociada con una prima positiva (iv) para todos los mercados, pero las innovaciones de rendimiento negativo estadounidense se refieren a (V) la variabilidad de retorno - la dependencia de volumen es más débil, aunque sobre todo significativa, en las colas - es decir, para las observaciones extremas de retorno y volumen - donde (vi) la dependencia disminuye para grandes Retorno extremo y observaciones de volumen. Argumentamos que nuestros resultados son más consistentes con una hipótesis de interpretación errónea de Genotte y Leland (1990) para choques de mercado que con explicaciones en cascada o conductuales que asocian alto volumen con pronunciadas declinaciones de precios. RPF-292 sobre la Relación entre Binomio y Opción Trinomial Models. quot Mark Rubinstein. Mayo 2000. Resumen: Este trabajo muestra que el modelo binomial de fijación de precios de opciones, adecuadamente parametrizado, es un caso especial del método explícito de diferencias finitas. RPF-291 "Diversificación Corporativa y Agencia" Benjamin E. Hermalin y Michael L. Katz. Resumen: Las empresas emprenden una serie de acciones para reducir el riesgo a través de la diversificación, incluyendo la entrada de diversas líneas de negocio, la asunción de socios del proyecto y el mantenimiento de carteras de proyectos riesgosos como RampD o la exploración de recursos naturales. Por un argumento bien conocido, los tenedores de valores no se benefician directamente de la diversificación empresarial que reduce el riesgo cuando pueden replicar esta diversificación por sí mismos. Por otra parte, los accionistas deben ser neutros en cuanto a riesgos con respecto al riesgo no sistemático que se asocia con muchos proyectos de investigación. Algunos han argumentado que la reducción del riesgo corporativo puede ser de valor, o puede ser explicado por, la relación de agencia entre los titulares de valores y los gerentes. Argumentamos que el valor de las estrategias de diversificación en una relación de agencia no deriva de sus efectos sobre el riesgo, sino más bien de sus efectos sobre los principales, información sobre las acciones de los agentes. Demostramos por ejemplo que las actividades de diversificación pueden aumentar o disminuir la información de los principales, dependiendo de la estructura particular de la actividad. RPF290. La Gestión de la Cartera Óptima con los Costos de las Transacciones y los Impuestos sobre las Ganancias de Capital. quot Hayne E. Leland. Diciembre de 1999. Resumen: Examinamos la estrategia de negociación óptima para un fondo de inversión que, en ausencia de costos de transacción, desearía mantener activos en proporciones exógenas fijadas, p. 60/30/10 en acciones, bonos y efectivo. Se supone que los costos de las transacciones son proporcionales, pero pueden diferir con la compra y venta, y pueden incluir un componente (positivo) de impuestos sobre ganancias de capital. Mostramos que la política óptima implica una región sin comercio sobre las proporciones de stock objetivo. Mientras las proporciones reales permanezcan dentro de esta región, no debe ocurrir ninguna transacción. Cuando las proporciones están fuera de la región, se debe realizar el comercio para mover la relación a las regiones límite. Calculamos la región óptima de multi-activos sin comercio y el volumen de negocios anual resultante y el error de seguimiento de la estrategia óptima. Casi seguramente, la estrategia requerirá negociar sólo un activo de riesgo en cualquier momento, aunque el activo que se negocia varía estocásticamente a través del tiempo. En comparación con la práctica actual de reequilibrio periódico de todos los activos a sus proporciones objetivo, la estrategia óptima reducirá la facturación en casi 50. La respuesta óptima a un impuesto sobre las ganancias de capital es permitir que las proporciones excedan sustancialmente sus niveles objetivo antes de vender. Cuando una proporción de activos excede un nivel crítico, la venta debe ocurrir para llevarla de nuevo a ese nivel crítico. Los impuestos sobre las ganancias de capital llevan a niveles de inversión inicial óptimos más bajos. Del mismo modo, es óptimo invertir menos inicialmente en clases de activos que tienen altos costos de transacción, como los mercados emergentes. RPF-289 QuotCredit Derivados en Banca: Herramientas Útiles para la Gestión de Riesgos Gregory R. Duffee y Chunsheng Zhou. Noviembre de 1999. Resumen: Modelamos los efectos en los bancos de la introducción de un mercado de derivados de crédito en particular, credit-default swaps. Un banco puede utilizar tales swaps para transferir temporalmente los riesgos de crédito de sus préstamos a otros, reduciendo la probabilidad de que los préstamos incumplidos desencadenen la tensión financiera de los bancos. Debido a que los derivados de crédito son más flexibles a la hora de transferir riesgos que otros instrumentos más establecidos, tales como la venta de préstamos sin recurso, estos instrumentos facilitan a los bancos eludir el problema causado por los bancos, información superior sobre la calidad crediticia de sus préstamos. Sin embargo, constatamos que la introducción de un mercado de derivados de crédito no es necesariamente deseable porque puede provocar la ruptura de otros mercados de riesgo compartido. RPF-288 quotOrder Flow y la dinámica de los tipos de cambio Martin D. D. Evans y Richard K. Lyons, agosto 1999. Resumen: Los modelos macroeconómicos de los tipos de cambio nominales tienen un desempeño pobre. En la muestra, las estadísticas de R 2 tan altas como 10 por ciento son raras. Fuera de la muestra, estos modelos suelen ser pronosticados por una caminata aleatoria naiumlve. Este trabajo presenta un modelo de un nuevo tipo. En lugar de depender exclusivamente de determinantes macroeconómicos, el modelo incluye un determinante del campo del flujo de orden de la microestructura. El flujo de órdenes es el determinante inmediato del precio en todos los modelos de microestructura. Este es un enfoque radicalmente diferente para la determinación del tipo de cambio. También es sorprendentemente exitoso en la contabilidad de las tasas realizadas. Nuestro modelo de cambios diarios en los tipos de cambio produce estadísticas de R 2 por encima del 50 por ciento. Fuera de la muestra, nuestro modelo produce pronósticos de horizonte corto significativamente mejores que una caminata aleatoria. Para el mercado spot / DM en su conjunto, encontramos que 1.000 millones de compras netas en dólares aumentan el precio de la DM de un dólar en aproximadamente 1 pfennig. Nils H. Hakansson, junio de 1999. Resumen: Si bien se ha prestado mucha atención a la proporción óptima de la deuda de una empresa con respecto a la renta variable, el quotoptimalquot O el mejor equilibrio entre la financiación de bonos y la financiación bancaria (a más largo plazo) apenas se ha abordado. Este ensayo examina las principales diferencias entre una economía con un mercado de bonos corporativos bien desarrollado, libre de interferencias gubernamentales y una economía en la que la financiación bancaria juega un papel central (como en Asia oriental). Cuando existe un mercado de bonos corporativos completo, las fuerzas del mercado tienen una oportunidad mucho mayor de afirmarse, reduciendo así el riesgo sistémico y la probabilidad de una crisis. Esto se debe a que este entorno está asociado con una mayor transparencia contable, una gran comunidad de analistas financieros, agencias de calificación respetadas, una amplia gama de valores de deuda corporativa y derivados que exigen análisis de crédito sofisticados y procedimientos eficientes para la reorganización y liquidación corporativa. Además, la riqueza de los valores disponibles tenderá a mejorar el bienestar económico y las fuerzas del mercado que actúan sobre la amplia gama de precios de los bonos probablemente tendrán un fuerte efecto de desbordamiento sobre la salud del sistema bancario. Ciclos de Retorno y Construcción. Matthew Spiegel. Enero de 1999. Resumen: Este artículo presenta un modelo que deriva tanto los retornos de la vivienda como los patrones de construcción de la vivienda de los eventos de la economía real. El valor de un hogar, a diferencia del valor de muchos otros activos financieros, depende de la atención que su propietario ejerce sobre el mantenimiento. Dentro del modelo los bancos responden a este problema de riesgo moral restringiendo el tamaño de los préstamos que están dispuestos a emitir. Como resultado los precios de la vivienda ya no siguen un paseo al azar, sino que están ligados a los cambios en el proceso de dotación que son tanto predecibles como variables en el tiempo. Es decir, en algunos estados de la naturaleza los propietarios esperan ganar un rendimiento por encima del mercado en su compra de vivienda, mientras que en otros esperan obtener un rendimiento por debajo del mercado. Los promotores del modelo son plenamente conscientes del proceso de precios de la vivienda y reaccionan en consecuencia. El resultado es un ciclo de construcción que parece estar en desacuerdo con la sabiduría convencional. Cuando las dotaciones están creciendo rápidamente (una ciudad con una economía en rápido crecimiento) los precios de la vivienda exhiben por encima de los rendimientos esperados del mercado. Sin embargo, dado que los precios de la vivienda se espera que aumenten más rápido que la tasa de interés, los promotores demoran la construcción. Así, durante períodos de rápido crecimiento económico esperado la construcción de viviendas cesa hasta que uno alcanza la cresta con la cual el desarrollo prospera. En respuesta a los suministros de vivienda disminuyen durante los auges económicos (como las casas se deterioran) y luego aumentar cuando el auge termina. RPF-285. Costo de la investigación: El componente de propagación descuidado. Mark D. Flood, Ronald Huisman, Kees G. Koedijk y Richard Lyons. Octubre de 1998. Resumen: Los concesionarios necesitan buscar cotizaciones en muchos de los mercados más grandes del mundo (tales como divisas al contado, bonos del gobierno de los EEUU, y la bolsa de acción de Londres). Esta búsqueda afecta al costo de negociación. Estimamos la parte del costo total de la transacción atribuible a la búsqueda. Nuestros experimentos muestran que la proporción es grande - aproximadamente un tercio de la propagación efectiva. Los trabajos anteriores sobre la estimación de componentes de propagación normalmente omite el componente de búsqueda. Nuestras estimaciones sugieren que esta omisión es importante. RPF-284. dinámica de la valoración y de la vuelta de nuevas empresas. Jonathan B. Berk, Richard C. Green y Vasant Naik. Septiembre de 1998. Resumen: Desarrollamos y analizamos un modelo de proyecto de inversión en múltiples etapas que recoge muchas características de empresas de RD y empresas de nueva creación. Una característica importante de estos problemas es que la empresa aprende acerca de la potencial rentabilidad del proyecto a lo largo de su vida, pero que la incertidumbre ctotécnica sobre el esfuerzo de investigación y desarrollo en sí solo se resuelve mediante inversiones adicionales de la empresa. Además, los riesgos asociados con los flujos de efectivo finales de la empresa se da cuenta de la realización del proyecto tienen un componente sistemático, mientras que los riesgos puramente técnicos son idiosincrásicos. Nuestro modelo captura estas diferentes fuentes de riesgo y nos permite estudiar su interacción en la determinación de las primas de riesgo ganadas por la empresa durante su desarrollo. Nuestros resultados muestran que el riesgo sistemático y la prima de riesgo requerida del emprendimiento son más altos al principio de su vida, y disminuyen a medida que se aproxima a la finalización, a pesar del carácter idiosincrásico del riesgo técnico. RPF-283, págs. Predecir rendimientos excesivos con información pública y de información privilegiada: El caso de las conversiones de ahorro. James A. Wilcox y Zane D. Williams. Septiembre de 1998. Resumen: Se plantea la hipótesis de que las mutualidades se convierten a menudo en propiedad de acciones cuando se prevé que los rendimientos de la conversión sean altos. Demostramos que los rendimientos excesivos de las ofertas públicas iniciales (OPI) de conversiones de ahorro durante los años noventa fueron predecibles con datos disponibles públicamente. Las mismas condiciones que predijeron un mayor exceso de retornos en las conversiones de ahorro también predijeron que la conversión era más probable. Los rendimientos excesivos más altos pronosticados aumentaron perceptiblemente las cantidades de los IPOs que los iniciados en la conversión de thrifts compraron. Los datos para las compras de información privilegiada, que estaban disponibles públicamente antes del primer día de negociación, ayudaron aún más al público a predecir los retornos excedentes. RPF-282. El "Crédito Crunch" y la Disponibilidad de Crédito a las Pequeñas Empresas Diana Hancock y James A. Wilcox. Agosto de 1998. Resumen: Presentamos estimaciones de cuánto los préstamos bancarios y la actividad real en las pequeñas empresas respondieron a los cambios en las condiciones del capital de los bancos y otras condiciones económicas bancarias y agregadas. Utilizando datos de 1989 a 1992 por estado, estimamos los efectos de esos factores sobre el empleo, las nóminas y el número de empresas por tamaño de empresa, así como sobre el producto bruto estatal. En respuesta a la disminución de su propio capital bancario, los bancos pequeños redujeron sus carteras de préstamos considerablemente más de lo que lo hicieron los grandes bancos. Los grandes bancos tendían a aumentar los préstamos más cuando los bancos pequeños se encontraban bajo presión de capital aumentada. La actividad económica real se redujo más por las caídas de capital y por la disminución de los préstamos en los bancos pequeños que en los grandes bancos. Los bancos pequeños estaban haciendo préstamos de gran potencia en ese préstamo de dólar por dólar en sus préstamos tuvo mayores impactos en la actividad económica que las disminuciones de préstamos en los bancos grandes. Los descensos de capital en los bancos pequeños produjeron mayores cambios en la actividad económica dólar por dólar que las disminuciones de capital en los bancos grandes. Las condiciones económicas agregadas tuvieron efectos menores en las pequeñas empresas que en las grandes empresas y efectos menores en los bancos pequeños que en los grandes bancos. La evidencia sugirió que el volumen de préstamos otorgados bajo los programas de garantía de préstamos de la Administración de Pequeños Negocios (SBA) se redujo menos en respuesta al descenso del capital bancario que el volumen de préstamos no otorgados bajo los programas de garantía de préstamos de la SBA. RPF - 281. QuotDynamic Optimal Risk Management y Dividend Policy bajo Optimal Capital Structure and Maturity. quot Michael P. Ross. Julio de 1998. Resumen: En este trabajo se analiza la interacción entre la volatilidad de las empresas y las políticas de dividendos y de estructura de capital y madurez. La firma está autorizada a seleccionar sin costo y continuamente cualquier volatilidad de activos y rendimiento de dividendos, dentro de los límites. Se derivan reglas sencillas e intuitivas para las elecciones óptimas de dividendos y volatilidad de las empresas. Se observa que la empresa siempre selecciona de forma óptima el rendimiento de dividendos máximo o mínimo y la volatilidad de los activos, y que estas decisiones dependen, respectivamente, sólo del delta y gama del capital de las empresas. Estas políticas óptimas de dividendos y volatilidad se implementan en el contexto del modelo de estructura de capital de Leland y Toft (1996). Se encuentra que las empresas seleccionarán de manera óptima un bajo rendimiento de dividendos y una baja volatilidad de los activos en un rango más amplio de valores de activos de la empresa, mientras más corto sea el vencimiento de la deuda de las empresas. Anticipando este comportamiento, los tenedores de bonos exigirán un diferencial de crédito menor para la deuda a corto plazo cuando la empresa tenga un gran margen de maniobra al elegir su volatilidad de activos. A su vez, esto puede inducir a una empresa a emitir de manera óptima deuda a corto plazo. También se observa que cuanto mejor sea la capacidad de una empresa para cubrirse, más frecuentemente se abstendrá de pagar dividendos. Esto confirma el bien conocido resultado de que la gestión de riesgos mitiga los incentivos para la subinversión. Aquí se muestra que se aplica ex-post así como ex-ante. RPF - 280. QuotCorporate Hedging: Qué, por qué y Howquot Michael P. Ross. Julio de 1998. Resumen: En este documento se explora la justificación de la gestión de riesgos corporativos. Siguiendo a Smith y Stulz (1985) y Mayers y Smith (1987), se supone que las empresas pueden comprometerse contractualmente con los tenedores de bonos a mantener una política de gestión de riesgos particular o la volatilidad de los activos. Con esto como punto de partida, el ensayo deriva la cartera de cobertura óptima, examina esta robustez de carteras a la desestimulación de varianza-covariación y propone un nuevo motivo para la gestión de riesgos corporativos una firma que cubre su riesgo aumenta su cantidad óptima de deuda y así se da más Beneficios fiscales del apalancamiento. Mediante el modelo de estructura de capital de Leland (1994), se miden tres impactos de la reducción del riesgo sobre el valor para el accionista: el aumento de los beneficios fiscales, la reducción de los costos de quiebra y la reducción del costo potencial del problema de la subinversión. La motivación de los ensayos es servir de guía a los directores financieros sobre los beneficios de la gestión del riesgo y las fuentes de esos beneficios, de manera que la gestión del riesgo pueda llevarse a cabo de manera que mejore el valor para los accionistas y no por sí mismo. RPF - 279. Pierre Dufresne, William Keirstead y Michael P. Ross. Julio 1998. Resumen: En los últimos años los resultados de la teoría de las martingales se han aplicado con éxito a los problemas de la economía financiera. En el presente artículo mostramos cuán eficiente y elegante puede ser esta tecnología quotmartingale cuando se resuelven las opciones complejas. En particular, ofrecemos soluciones de forma cerrada para varias nuevas clases de opciones exóticas, incluyendo el cliquet, la escalera, el grito discreto y el lookback discreto. También ofrecemos una derivación del precio de una opción sobre el máximo de n activos para demostrar la potencia del teorema multidimensional de Girsanov. Aunque algunos de los resultados presentados son bien conocidos, el tratamiento del material en este documento es nuevo ya que se centra en la aplicación de la tecnología de la martingala a problemas concretos en la fijación de precios de opción, métodos que hasta ahora se han utilizado principalmente con fines puramente teóricos . Resumen: Se examina la determinación conjunta de la estructura de capital y el riesgo de inversión. La estructura de capital óptima refleja tanto las ventajas fiscales de la deuda menos los costos por defecto (Modigliani-Miller) como los costos de agencia resultantes de la sustitución de activos (Jensen-Meckling). Los costos de agencias restringen el apalancamiento y el vencimiento de la deuda y aumentan los márgenes de rendimiento, pero su importancia es relativamente pequeña para la gama de entornos considerados. También se examina la gestión de riesgos. La cobertura permite un mayor apalancamiento. Incluso cuando una empresa no puede precommit a cobertura, todavía lo hará. Sorprendentemente, los beneficios de cobertura a menudo son mayores cuando los costos de agencia son bajos. El caso de la rotación de la industria a través del modelo de inversión dinámica Robert R. Grauer y Nils H. Hakansson Resumen: Este documento se aplica Grinblatt y titmans cambio de la cartera de medida y Ferson y Schadts miden el desempeño condicional del problema de evaluar el desempeño del modelo de inversión dinámica aplicado a la rotación de la industria durante el período 1934-1995, así como varios subperíodos. The dynamic investment model used in the study employs the empirical probability assessment approach with a rear-view moving window, both in raw form and with adjustments for estimation error based on a James-Stein, a Bayes-Stein, and a CAPM-based correction. Both tests are unanimous in their conclusion that the excess returns attained by the (unadjusted) historic. the Bayes-Stein, and the James-Stein estimators are (sometimes highly) statistically significant over the 1966-95 and 1966-81 sub-periods. This lends support to the idea that the joint empirical probability assessment approach based on the recent past, with and without Stein-based corrections for estimation error, contains information that can be profitably exploited. RPF - 276. quotClosed-End Fund Discounts in a Rational Agent Economy. quot Matthew Spiegel. December 1997. Nearly any standard financial model concludes that two assets with identical cash flows must sell for the same price. Alas, closed-end mutual fund company share prices seem to violate this fundamental tenant. Even when one considers several standard frictions, such as taxes and agency costs, classical financial models cannot explain the large persistent discounts found within the data. While the standard financial markets model may not explain the existence of large closed-end fund discounts, this paper shows that a rather close version of it does. In an otherwise frictionless market, if asset supplies vary randomly over time and agents possess finite lives, a closed-end mutual funds stock price may not track its net asset value. Furthermore, the analysis provides a number of conditions under which these discrepancies will lead to the existence of systematic discounts for the mutual funds shares. In addition, the model provides predictions regarding the correlation between current closed-end fund discounts and current changes in stock prices and future changes in corporate productivity. As the analysis shows, the same parameter values that lead to systematic discounts also lead to other fund price characteristics that resemble many of the results found within empirical studies. RPF - 275 quotEdgeworth Binomial Treesquot Mark Rubinstein. November 1997. Available in PowerPoint. pps format only. Use Notes View. This paper develops a simple technique for valuing European and American derivatives with underlying asset risk-neutral returns which depart from lognormal in terms of prespecified non-zero skewness and greater-than-three kurtosis. Instead of specifying the entire risk-neutral distribution by the riskless return and volatility (as in the Black-Scholes case), this distribution is specified by its third and fourth central moments as well. An Edgeworth expansion is used to transform a standard binomial density into a unimodal standardized discrete density -- evaluated at equally-spaced points -- with approximately the prespecified skewness and kurtosis. This density is in turn adjusted to have a mean equal to the riskless return (adjusted for the payout return, if any) and to a prespecified volatility. European derivatives are then easily valued by using this risk-neutral density to weight their possible payoffs. European options with earlier maturities, American and exotic options can be valued in a consistent manner by using the method of implied binomial trees. These trees are particularly well-suited for this since they are generated from arbitrary discrete expiration-date risk-neutral probabilities -- precisely what is provided by the Edgeworth expansion. The paper ends by translating several examples of alternative risk-neutral distributions into option prices and then into Black-Scholes implied volatility smiles. Implied trees are used to determine smiles for otherwise identical shorter-maturing options and future smiles for the original options conditional on knowing the future underlying asset price. RPF - 274-Rev quotDerivatives Performance Attribution. quot Mark Rubinstein. Revised May 1998. Downloadable in PowerPoint. pps format only. Use Notes View. Abstract: This paper shows how to decompose the dollar profit earned from an option into two basic components: 1) mispricing of the option relative to the asset at the time of purchase, and 2) profit from subsequent fortuitous changes or mispricing of the underlying asset. This separation hinges on measuring the quottrue relative valuequot of the option from its realized payoff. The payoff from any one option has a huge standard error about this value which can be reduced by averaging the payoff from several independent option positions. It appears from simulations that 95 reductions in standard errors can be further achieved by using the payoff of a dynamic replicating portfolio as a Monte Carlo control variate. In addition, it is shown that these low standard errors are robust to discrete rather than continuous dynamic replication and to the likely degree of misspecification of the benchmark formula used to implement the replication. The first basic component, the option mispricing profit, can be further decomposed into profit due to superior estimation of the volatility (volatility profit) and profit from using a superior option valuation formula (formula profit). In order to make this decomposition reliably, the benchmark formula used for the attribution needs to be similar to the formula implicitly used by the market to price options. If so, then simulation indicates that this further decomposition can be achieved with low standard errors. The second basic component can be further decomposed into profit from a forward contract on the underlying asset (asset profit) and what I term pure option profit. The asset profit indicates whether or not the investor was skillful by buying or selling options on mispriced underlying assets. However, asset profit could also simply be just compensation for bearing risk -- a distinction beyond the scope of this paper. Although simulation indicates that the attribution procedure gives an unbiased allocation of the option profit to this source, its standard error is large -- a feature common with attempts by others to measure performance of assets. RPF - 273 quotProfits and Position Control: A Week of FX Dealing. quot Richard K. Lyons. October 1997. (available as Word/Windows document only) This paper examines foreign exchange trading at the dealer level. The dealer we track averages 100,000 in profits per day on volume of 1 billion per day (or one basis point). The half-life of the dealers position is only ten minutes, providing strong support for inventory models. A methodological innovation allows us to identify his speculative position over time. This speculative position determines the share of profits deriving from speculation versus intermediation: intermediation is much more important. RPF - 272 quotBank Risk Management: Theory. quot David H. Pyle. July 1997. (available as Word/Windows document only) This paper discusses why risk management is needed. It outlines some of the theoretical underpinnings of contemporary bank risk management, with an emphasis on market and credit risks. RPF - 271 quotInternational Portfolio Investment Flows. quot Michael J. Brennan. and H. Henry Cao. February 1997. This paper develops a model of international equity portfolio investment flows based on differences in informational endowments between foreign and domestic investors. It is shown that when domestic investors possess a cumulative informati on advantage over foreign investors about their domestic market, investors tend to purchase foreign assets in periods when the return on foreign assets is high and to sell when the return is low. The implications of the model are tested using data on US equity portfolio flows. RPF - 270 quotIs There Private Information in the FX Market The Tokyo Experiment. quot Takatoshi Ito. and Richard K. Lyons and Michael T. Melvin. January 1997. It is a common view that private information in the foreign exchange market does not exist. We provide evidence against this view. The evidence comes from the introduction of trading in Tokyo over the lunch-hour. Lunch return variance do ubles with the introduction of trading, which cannot be due to public information since the flow of public information did not change with the trading rules. Having eliminated public information as the cause, we exploit the volatility pattern over the wh ole day to discriminate between the two alternatives: private information and pricing errors. Three key results support the predictions of private-information models. First, the volatility U-shape flattens: greater revelation over lunch leaves a smaller share for the morning and afternoon. Second, the U-shape tilts upward, an implication of information whose private value is transitory. Finally, the morning exhibits a clear U-shape when Tokyo closes over lunch, and it disappears when trading is introd uced. RPF - 269 quotAre Investors Reluctant to Realize Their Lossesquot Terrance Odean. November 1996. IAbstract: test the disposition effect, the tendency of investors to hold losing investments too long and sell winning investments too soon, by analyzing trading records for 10,000 accounts at a large discount brokerage house. These investors demonstrate a strong preference for realizing winners rather than losers. Their behavior does not appear to be motivated by a desire to rebalance portfolios, or to avoid the higher trading costs of low price stocks. Nor is it justified by subsequent portfolio performance. For taxable investments it is non-optimal and leads to lower after-tax returns. Tax-motivated selling is most evident in December. RPF - 268 quotA Theory of Corporate Capital Structure and Investment. quot Miguel Cantillo Simon Abstract: This article describes how financial disruptions affect investment in a general equilibrium economy. I show that in a world with differentiated lenders, the most efficient will become financial intermediaries their preeminence will nonetheless be limited by frictions with depositors. Because of these frictions, cash rich companies prefer to tap the bond market directly, while moderately endowed firms borrow from intermediaries, and cash poor companies are unable to borrow at all. The aggregation of this model produces an economy with intuitive features: investment falls whenever the risk free rate rises, or when the financial health of firms and intermediaries deteriorates. RPF - 267 quotOptions and Expectationsquot Hayne E. Leland Who should buy options (ordinary or quotexoticquot), and who should sell Buyers and sellers must differ from the average investor, who will not undertake options positions. We develop a simple binomial model to characterize the expectations (relative to the average or consensus) which must be held by investors to justify buying or selling various types of derivatives, or following dynamic strategies which generate similar payoffs. European option sellers must believe markets are more mean-reverting than average option buyers must believe they are more mean-averting. The probabilities of ordinary option buyers and sellers are path independent and their expected return process must be a martingale. Path-dependent options or dynamic strategies imply probabilities which are path dependent. quotAsianquot derivative purchasers must believe the expected return to the underlying asset decreases through time. Lookback purchasers believe the opposite. RPF - 266 quotVolume, Volatility, Price and Profit When All Traders Are Above Averagequot Terrance Odean This paper looks at three market models in which investors are rational in all respects except that they are overconfident about the precision of their private information. A substantial literature in cognitive psychology establishes that people usually are overconfident and, specifically, that they are overconfident about the precision of their knowledge. Overconfidence affects expected trading volume, volatility of prices, market depth, price quality, expected profits, and expected utility. The three models demonstrate how the effects of overconfidence depend on who is overconfident. The paper also examines the consequences for markets when traders systematically underweight their prior information. RPF - 265 quotRecovering Risk Aversion from Option Prices and Realized Returnsquot Jens Carsten Jackwerth A well-known relationship exists between aggregate subjective and risk-neutral probability distributions and utility functions. Previously, only subjective probabilities could be estimated with some degree of accuracy from historical data. Now, using the convenient method developed by Jackwerth and Rubinstein (1996), we can also estimate risk-neutral probabilities reliably. For the first time, we empirically derive stable utility functions implied by stock returns and option prices. These implied utility functions dramatically change shapes around the 1987 crash and t hereafter exhibit convexity and increasing risk aversion across parts of the wealth dimension. A simulated trading strategy based on analyzing the utility functions mean-variance dominates holding the market. RPF - 264 quotGeneralized Binomial Treesquot Jens Carsten Jackwerth In a novel approach, standard and implied binomial trees are completely specified in terms of two basic inputs: the ending nodal probability distribution and a linear weight function which governs the stochastic process resulting in that distribution. Several key economic principles, such as no interior arbitrage, are intuitively related to these basic inputs. A simple and computationally efficient three-step algorithm, common to all binomial trees, is found. Noting that the currently used linear weight function is unnecessarily restrictive, a binomial tree even more versatile is introduced, the generalized binomial tree. Applications to recovering the stochastic process implied in (European, American, or exotic) options of several times-to-expiration are developed. RPF - 263-rev. quotBeyond Mean-Variance: Performance Measurement of Portfolios Using Options or Dynamic Strategies. quot Hayne E. Leland Current investment performance analysis is based on the CAPM, using quotalphaquot or Sharpe Ratios. But the validity of this analysis rests on the validity of the CAPM, which assumes either normally distributed returns, or mean-variance preferences. Either assumption is suspect: even if asset returns were normally distributed, the returns of options or dynamic strategies (including market timing) would not be. And investors distinguish upside from downside risks, implying skewness preference. We consider a Black-Scholes/Merton world, in which the market portfolio follows a diffusion process with constant drift and volatility. In this world, the market portfolio is mean-variance inefficient and the CAPM alpha will systematically mismeasure the value added by investment managers. The problem is particularly severe for portfolios using options or dynamic strategies. We show how a simple modification of the CAPM beta can lead to correct risk measurement, and the alphas of all fairly-priced options and/or dynamic strategies will be zero in the Black-Scholes/Merton world. This paper has been written for the Fischer Black Commemorative Issue of the The Journal of Portfolio Management. RPF - 262. quotImplied Binomial Trees: Generalizations and Empirical Tests. quot Jens Carsten Jackwerth Efficient generalizations for Rubinsteins (1994) implied binomial tree are presented which allow for varying path-probabilities and incorporate information from times other than the end of the tree. The three generalizations involve deformation of the time scale, arbitrary transition probability weights, and jumps. Two empirical tests compare the performance of implied binomial trees, the Black-Scholes model, and the CEV model. In the first test, all models are fitted to observed longer term option prices, used to price shorter term options, and pricing errors are assessed. In a second test, the term structure of at-the-money volatilities is assumed known. All models are adapted to incorporate this information and pricing errors are recomputed. A postscript version of this paper is available from haas. berkeley. edu/ jackwert. RPF - 261 quotOptimal Asset Rebalancing in the Presence of Transactions Costs. quot Hayne E. Leland. Rev. August 1996. We examine the optimal trading strategy for an investment fund which wishes to maintain assets two assets in fixed proportions, e. g. 60/40 in stocks and bonds. transactions costs are assumed to be proportional to the amount of each asset traded. We show that the optimal policy involves a band about the target stock proportion. As long as the actual stock/bond ratio remains inside this band, no trading should occur. If the ratio goes outside the band, trading should be undertaken to move the ratio to the nearest edge of the band. We compute the optimal band and resulting annual turnover and tracking error of the optimal policy, as a function of transactions costs, asset volatility, the target asset mix, and other parameters. We show how changes in transactions costs and other parameters affect the size of the no-trade band, turnover, and tracking error. Compared to a quarterly rebalancing strategy, an example demonstrates that the optimal strategy can reduce turnover by almost 50 percent. RPF - 260 quotStock Price Volatility in a Multiple Security Overlapping Generations Model. quot Matthew Spiegel. A number of empirical studies have reached the conclusion that stock price volatility cannot be fully explained within the standard dividend discount model. This paper proposes a resolution based upon a model that contains both a random supply of risky assets and finitely lived agents who trade in a multiple security environment. As the analysis shows where exist 2k equilibria when K securities trade. The low volatility equilibria have properties analogous to those found in the infinitely lived agent models of Campbell and Kyle (1991) and Wang (1993, 1994). In contrast, the high volatility equilibria have very different characteristics. Within the high volatility equilibria very large price variances can be generated with very small supply shocks. Using previously established empirical results the model can reconcile the data with supply shocks that are less than 10 as large as observed dividend shocks. The multiple security analysis also shows that within the economy some securities may trade under high volatility conditions, while others trade in low volatility conditions. Switching the economy from a high to a low volatility equilibrium for any single security may be very difficult. Depending upon the variance-covariance structure of the economy, an equilibrium change may require simultaneous control over the trading environment of every single security in the economy. RPF - 259 quotOptimal Capital Structure, Endogenous Bankruptcy, and the Term Structure of Credit Spreads. quot Hayne E. Leland and Klaus Bjerre Toft This paper examines the optimal capital structure of a firm which can choose both the amount and maturity of its debt. Bankruptcy is determined endogenously rather than by the imposition of a positive net worth condition or by a cash flow constraint. The results extend Lelands 1994 closed-form results to a much richer class of possible debt structures and permits study of the optimal maturity of debt as well as the optimal amount of debt. The model generates predictions of leverage, credit spreads, default rates, and writedowns which accord quite closely with historical averages. While short term debt does not exploit tax benefits as completely as long term debt, it is more likely to provide incentive compatibility between debtholders and equityholders. The agency costs of quotasset substitutionquot are minimized when the firm uses shorter term debt. The tax advantage of debt must be balanced against bankruptcy and agency costs in determining the optimal maturity of the capital structure. The model predicts differently shaped term structures of credit spreads for different levels of risk. These term structures are similar to that found empirically by Sarig and Warga 1989. The model has important implications for bond portfolio management. In general, Macaulay duration dramatically overstates true duration of risky debt, which may be negative for quotjunkquot bonds. Furthermore, the quotconvexityquot of bond prices can become quotconcavity. quot RPF - 258. quotImperfect Competition in Securities Markets with Diversely Informed Traders. quot H. Henry Cao November 1995 We show that the infinite regression problem in models with differentially informed traders can be solved using a fixed point method which we use to derive the dynamic equilibrium in a multi-auction model with diversely informed traders. We find that when the informed traders signals are not perfectly correlated, their private information will be revealed to the market gradually so that the market is only semi - strong form efficient and not strong-form efficient. Market depth in the continuous auction model initially increases with time but decreases to zero at the end. Our results are in contrast to the results of Holden and Subrahmanyam (1992) and Foster and Viswanathan (1993) (HS-FV) who showed that when auctions occur frequently and informed traders have perfect information, the information is revealed to the market almost immediately. However, when the correlation in the private signals goes to 1, our model converges to the HS-FV model. 257. quotThe Efficacy of Insider Trading Regulation. quot Matthew Spiegel and Avanidhar Subrahmanyam October 1995 Regulatory authorities often lack a quotsmoking gunquot (i. e. hard evidence such as a note or a memorandum) when prosecuting individuals for illegal insider trading. As a result, many insider trading cases depend solely on circumstantial evidence, which is usually obtained by associating trades with quotunusualquot price moves. However, insiders with the most accurate information (the ones most likely to possess quotmaterial, non-publicquot information) are the ones best able to modify their trading strategy in response to prosecution strategies based on price moves. This is a major obstacle to the efficacy of insider trading regulation. Thus, if legislation discourages strategic insiders with relatively precise information from trading, then in all likelihood any investor who is prosecuted will possess only the weakest (most imprecise) information. Stratetgic behavior by insiders in response to insider trading regulations can thereby lead to a situation where the pool of prosecuted traders contains a large fraction of innocent individuals (i. e. individuals with relatively poor information). RPF-256REV . quotHow Do Firms Choose Their Lenders Theory and Evidence. quot Miguel Cantillo and Julian Wright (October 1995 )Revised February 2000 This article investigates which companies finance themselves through intermediaries and which borrow directly from arms length investors. Our empirical results show that large companies with abundant cash and collateral tap credit markets directly these markets cater to safe and profitable industries, and are most active when riskless rates or intermediary earnings are low. We show that determinants of lender selection sharpen during investment downturns and that there are substantial asymmetries in the way firms enter and exit capital markets. These results support a theoretical framework where intermediaries have better reorganizational skills but a higher opportunity cost of capital than bondholders. 255. quotA Theory of Corporate Capital Structure and Investment. quot Miguel Cantillo October 1995 This paper develops a costly state verification (CSV) model which describes how financial fluctuations affect real activity in a general equilibrium setting. In an economy with differentiated lenders, the most efficient will become intermediaries (e. g. banks). Intermediation generally creates frictions which prevent banks from dominating the debt markets. In this model, firms with abundant funds avoid intermediaries, and tap the credit markets directly. Meanwhile, firms with moderate resources borrow from intermediaries. The aggregation of this model produces an economy with appealing features: aggregate investment drops with a rise in the riskless rate, and a deterioration of bank or corporate health. RPF-2 54. quotThe Rise and Fall of Bank Control in the United States: 1890-1920.quot Miguel Cantillo October 1995 This paper sketches the evolution in the governance structures of railroad and industrial firms in the United States between 1850 and 1914. I describe how the largest of these companies became controlled by salaried executives, and with no board member willing to oversee or to veto manager actions. Initially, railroads and industrial firms were tightly controlled by a small number of shareholders. The link of ownership and control was changed by massive corporate restructuring in the 1890s and 1900s. The newly reorganized firms were controlled by banks such as J. P. Morgan, which took board positions to ensure adequate financial returns for themselves and for their clients. The final stage of corporate governance began in the 1910s as a public policy reaction to bank control. This reaction resulted in an almost complete disappearance of active institutional investors from boards of directors. Using stock market data from 1914, I find that this political reaction destroyed about 6 percent of the equity value of bank controlled firms. By the late 1920s, all the elements that define contemporary governance structures in the United States were in place and running their logical course. RPF - 253. quotA Spatial Model of Housing Returns and Neighborhood Substitutability. quot William N. Goetzmann and Matthew Spiegel September 1995 This paper presents a new spatial model for analyzing return indices for infrequently traded assets, and applies it to housing data. Within many asset classes, particularly real estate, one expects there to exist a spatial correlation in deviations from the index due to omitted explanatory variables in the econometric model. This error structure can be useful in estimating location-specific would normally make this impossible, the use of spatial and factor correlations provides sufficient information to estimate zip code level returns. We use these indices to examine the degree to which housing market participants in one major metropolitan statistical area view neighborhoods as substitutes. Using distance defined in terms of geographical proximity, median household income, average educational attainment and racial composition, we find that median household income is the salient variable explaining covariance of neighborhood housing returns. Racial composition and educational attainment, while significant are much less influential and geographical proximity is nearly meaningless. Our methodology has applications to a range of infrequently traded assets, including bonds, commercial real estate and collectibles. The approach may be viewed as an extension of quotnon-parametricquot spatial correlation models. In the non-parametric approach a distance function and decay rate are exogenously specified. In a spatial model one estimates the distance metric and uses statistical rules to obtain the resulting decay rates. The results of our analysis of housing substitutability in the San Francisco Bay area have implications for estimates of the covariance of housing returns within metropolitan areas. In particular, low covariances imply gains to diversification for lenders, equity-holders and tax authorities. RPF - 252. quotPricing Mortgage-Backed Securities in a Multifactor Interest Rate Environment: A Multivariate Density Estimation Approach. quot Jacob Boudoukh, Matthew Richardson, Richard Stanton, and Robert F. Whitelaw May 1995 This paper develops a nonparametric, model-free approach to the pricing of mortgage-backed securities (MBS), using multivariate density estimation (MDE) procedures to investigate the relation between MBS prices and interest rates. While the usual methods for valuing MBSs are highly dependent on specific assumptions about interest rates and prepayments, this method will yield consistent results without requiring such assumptions. The MDE estimation suggests that weekly MBS prices from January 1987 to May 1994 can be well described as a function of the level and slope of the term structure. We analyze how this functionaries across MBSs with different coupons and investigate the sensitivity of prices to the two factors. As an application, we sue the estimated relation to hedge the interest rate risk of MBSs. These hedging results compare favorably with other commonly used hedging methods. RPF - 251. quotMortgage Choice: Whats the Pointquot Richard Stanton and Nancy Wallace May 1995 This paper develops a general equilibrium model of mortgage lending, combining self-selection theory with option pricing. We construct a separating equilibrium, in which borrowers offer a menu of prepayable, fixed rate mortgage contracts, differing in their tradeoff between coupon rate and points (prepaid interest). Borrowers select the optimal contract from the menu, revealing their mobility via their choice of loan, and lenders make zero profit on each loan taken out. This equilibrium can only exist if borrowers face frictions, such as refinancing costs. This provides a possible explanation for the prepayment options that are embedded in mortgage contracts, despite the significant deadweight costs associated with refinancing. We also show that the recent proliferation of loans with many different horizons represents an alternative means of persuading borrowers to self-select, with lower deadweight costs. Finally, our model suggests that the menu of contracts available at the time of origination should be an important predictor of future prepayment. Most commonly used prepayment models, which do not take this into account, are therefore misspecified, leading to errors in pricing and hedging mortgages and mortgage-backed securities. 250. quotImplied Probability Distributions: Empirical Analysis. quot Jens Carsten Jackwerth and Mark Rubinstein June 1995 An earlier article, quotImplied Binomial Trees, quot introduced a theoretical model for implying the stochastic process of an underlying asset price from the prices of associated options. This sequel provides details concerning application of the model to the full record of SampP 500 index options transactions from April 2, 1986 through December 31, 1993. Most prominently, it introduces a revised optimization technique for estimating expiration-date risk-neutral probability distributions which is probably theoretically superior and definitely orders of magnitude faster than the approaches outlined in the antecedent paper. This method maximizes the smoothness of the distribution while at the same time insuring that multimodalities are not unrealistically strong. With the exception of the lower left-hand tail of the distribution, alternative optimization specifications typically produce approximately the same implied distributions. Considerable care is taken to specify such parameters as interest rates, dividends, and synchronous index levels, as well as to filter for general arbitrage violations and to use time aggregation to correct for unrealistic persistent jaggedness of implied volatility smiles. The resulting implied probability distributions exhibit changes in skewness as time-to-expiration approaches which are consistent with theoretical predictions. While time patterns of skewness and kurtosis exhibit a discontinuity across the divide of the 1987 market crash, they remain remarkably stable on either side of the divide. Moreover, since the crash, the risk-neutral probability of a four standard deviation decline in the SampP index (-46 percent over a year) is 100 times more likely than would appear to be the case under the assumption of lognormality. 249. quotA Variable Reduction Technique for Pricing Average-Rate Options. quot Hua He and Akihiko Takahashi May 1995 Average-rate options, commonly known as Asian options, are contingent claims whose payoffs depend on the arithmetic average of some underlying index over a fixed time horizon. This paper proposes a new valuation technique, called the variable reduction technique, for average rate options. This method transforms the valuation problem of an average-rate option into an evaluation of a conditional expectation that is determined by a one-dimensional Markov process (as opposed to a two-dimensional Markov process). This variable reduction technique works directly with the arithmetic average and does not encounter approximation errors when volatility of the underlying is relatively large. Further, reducing the dimensionality by one makes pricing more efficient in terms of computing time. The variable reduction technique is applied in a simple Black-Scholes economy in which there is one risky asset and one riskless bond. The paper also discusses application of the technique to average-rate options where the underlying index is an interest rate. Numerical comparisons of different methods are also presented. 248. quotDouble Lookbacks. quot Hua He, William P. Keirstead, and Joachim Rebholz May 1995 A new class of options, double lookbacks, where the payoffs depend on the maximum and/or minimum prices of one or two traded assets is introduced and analyzed. This class of double lookbacks includes calls and puts with the underlying being the difference between the maximum and minimum prices of one asset over a certain period, and calls or puts with the underlying being the difference between the maximum prices of two correlated assets over a certain period. Analytical expressions of the joint probability distribution of the maximum and minimum values of two correlated geometric Brownian motions are derived and used in the valuation of double lookbacks. Numerical results are shown, and prices of double lookbacks are compared to those of standard lookbacks on a single asset. 247. quotAnatomy of an ARM: Index Dynamics and Adjustable Rate Mortgage Valuation. quot (Related topics) Richard Stanton and Nancy Wallace April 1995 This paper analyzes the dynamics of the commonly used indices for Adjustable Rate Mortgages, and systematically compares the effects of their time series properties on adjustable rate mortgage prepayment and value. Our ARM valuation methodology allows us simultaneously to capture the effects of the dynamics of the index, discrete coupon adjustment, and caps and floors. It allows us either to calculate an optimal prepayment strategy for mortgage holders, or to use an empirical prepayment function. We find that the dynamics of the ARM indices, including both their average levels and their speeds of adjustment to interest rate shocks, introduce significant variation in the value of the prepayment option across ARMs. Valuation methodologies that ignore the time series properties of the index with respect to current rates will therefore systematically misprice adjustable rate mortgages. 246. quotEffects of Competition on Bidder Returns. quot Sankar De, Mark Fedenia, and Alexander J. Triantis April 1995 This study offers several new perspectives on the effects of competition in takeover contests on bidder returns. Using a more extensive database than existing studies and employing several different measures of success in a takeover, we find that success in competitive acquisitions decreases shareholder wealth relative to failure and also relative to success in observed single-bidder takeovers. Further, we consider and test a number of hypotheses regarding bidder returns, including hypotheses suggested by the preemptive bidding theory. In general, our results indicate lack of support for the predictions of preemptive bidding theory and for the hypotheses linking the method of payment and the observed level of competition. We also test hypotheses relating to returns across the multiple events in a multiple-bid contest that competition among bidders generates. The results of these tests underscore the importance of timing as well as success of a bid to the bidders subsequent performance. 245. quotOn Revelation of Private Information in Stock Market Economies. quot Marcus Berliant and Sankar De April 1995 The notion that an agent in a given market can infer from the market price the (non-price) information received by other agents, as embodied in the existing studies of revealing rational expectations equilibrium, requires that the agent know the correct functional relationship between the non-price information of all agents and the resulting equilibrium price. This condition is usually restrictive and unsuitable as a description of reality. In this paper we show that this condition is also unnecessary in a stock market economy where producers or firms use their private information in their own optimization programs, k which include stock purchases. Interestingly, this result does not extend to the case of consumers with private information. 244. quotOptimal Cash Management for Investment Funds. quot Hayne Leland and Gregory Connor March 1995 We consider the question of how much cash should be held by an investment fund for transactions purposes. Cash is needed to meet redemptions and rights offerings it is generated by dividends and contributions. It is assumed the cumulative cash flow follows a random walk, perhaps with a drift. If transactions costs were zero, it would be optimal to keep zero cash balances, since cash reduces expected return and adds to tracking error. But keeping cash balances at zero would be very expensive in the presence of transactions costs, since random walks have infinite variation. The optimal cash policy requires a no trade interval . If cash balances are within this interval, no transfers between cash and portfolio securities takes place. If cash falls beneath zero, securities should be sold to return the cash balance to zero. If cash exceeds L, cash should be invested in the portfolio to reduce the cash balance to L. We derive closed form solutions for L, and show how this responds to changes in transactions costs and other parameters of cash flows and portfolio returns. Finally, a closed form estimate of expected turnover associated with optimal strategies is derived. 243. quotForeign Exchange Volume: Sound and Fury Signifying Nothing. quot Richard K. Lyons January 1995 This paper examines whether currency trading volume is informative, and under what circumstances. Specifically, we use transactions data to test whether trades occurring when trading intensity is high are more informative -- dollar for dollar -- than trades occurring when intensity is low. Theory admits both possibilities, depending primarily on the posited information structure. We present what we call a hot-potato model of currency trading, which explains why low-intensity trades might be more informative. In the model, the wave of inventory-management trading among dealers following innovations in order flow generates an inverse relationship between intensity and information content. Empirically, low-intensity trades are more informative, supporting the hot-potato hypothesis. 242. quotExplaining Forward Exchange Bias. Intraday. quot Richard K. Lyons and Andrew K. Rose January 1995 Intraday interest rates are zero. Consequently, a foreign exchange dealer can short a vulnerable currency in the morning, close this position in the afternoon, and never face an interest cost. This tactic might seem especially attractive in times of crisis, since it suggests an immunity to the central banks interest rate defense. In equilibrium, however, buyers of the vulnerable currency must be compensated on average with an intraday capital gain as long as no devaluation occurs. That is, currencies under attack should typically appreciate intraday. Using data on intraday exchange rate changes within the EMS, we find this prediction is borne out. 241. quotOn the Accounting Valuation of Employee Stock Options. quot Mark Rubinstein December 1994 In its exposure draft, quotAccounting for Stock-based Compensation, quot FASB proposes that either the Black-Scholes or binomial option pricing model be used to expense employee stock options, and that the value of these options be measured on their grant date with typically modest ex-post adjustment. This brings the accounting profession squarely up against the Scylla of imposing too narrow a set of rules that will force many firms to misstate considerably the value of their stock options and the Charybdis of granting considerable latitude which will increase non-comparability across financial statements of otherwise similar firms. This, of course, is a common tradeoff afflicting many rules for external financial accounting. It is not my intention to take a position on this issue, but merely to point out the inherent dangers in navigating between these twin perils. To examine this question, this paper develops a binomial valuation model which simultaneously takes into consideration the most significant differences between standard call options and employee stock options: longer maturity, delayed vesting, forfeiture, non-transferability, dilution, and taxes. The final model requires 16 input variables: stock price on grant date, stock volatility, stock payout rate, stock expected return, interest rate, option striking price, option years-to-expiration, option years-to-vesting, expected employee forfeiture rate, minimum and maximum forfeiture rate multipliers, employees non-option wealth per owned option, employees risk aversion, employees tax rate, percentage dilution, and number of steps in the binomial tree. Many of these variables are difficult to estimate. Indeed, a firm seeking to overvalue its option might report values almost double those reported by an otherwise similar firm seeking to undervalue its options. The alternatives of expensing minimum (zero-volatility) option values, whether at grant or vesting date, can easily be gamed by slightly redefining employee stock option contracts, and therefore would not accomplish FASBs goals. As an alternative, FASB could give more careful consideration to exercise date accounting, under which an expense is recognized at the time of exercise equal to the exercise value of the option. This would achieve the long sought external accounting goal of realizing stock options as compensation, while at the same time minimizing the potential for the revised accounting rules to motivate gaming behavior or non-comparable statements. 240. quotBond Prices, Yield Spreads, and Optimal Capital Structure with Default Risk. quot Hayne Leland November 1994 This paper examines the value of debt subject to default risk in a continuous time framework. By considering debt with regular principal repayments (e. g. through a sinking fund), we are able to examine bonds with arbitrary maturity while retaining a time-homogeneous environment. This extends Lelands 1994 earlier closed-form results to a much richer class of possible debt structures. We examine the term structure of yield spreads and find that a rise in interest rates will reduce yield spreads of current debt issues. It may tilt the term structure as well. Duration is also affected by default risk. The traditional Macaulay duration measure overstates effective duration, which for junk bonds may even be negative. While short term debt does not exploit tax benefits as completely as does long term debt, it is more likely to provide incentive compatibility between debt holders and equity holders. The agency costs of asset substitution are minimized when firms use shorter term debt. Optimal capital structure depends upon debt maturity. Optimal leverage ratios are smaller, and maximal firm values are less, when short term debt is used. The yield spread at the optimal leverage ratio increases with debt maturity. 239. quotGains from Diversifying into Real Estate: Three Decades of Portfolio Returns Based on the Dynamic Investment Model. quot Robert R. Grauer and Nils H. Hakansson October 1994 This paper compares the investment policies and returns for portfolios of stocks and bonds with and without up to three categories of real estate. Both a domestic and a global setting are examined, with and without the possibility of leverage. The portfolios were generated via the dynamic investment model on the basis of the empirical probability assessment approach applied to past (joint) realizations of returns, both with and without correction for smoothing in the real estate data series. Our principal findings are: 1) the gains from adding real estate on a semi-passive (equal-weighted) basis to portfolios of either U. S. or global financial assets were relatively modest in contrast, 2) the gains from adding real estate to the universe of U. S. financial assets under an active strategy were rather large (in some cases highly statistically significant), especially for the very risk-averse strategies 3) the gains from adding (U. S.) real estate to a universe of global financial assets under an active strategy were mixed, although generally favorable for the highly risk - averse strategies 4) correcting for second-moment smoothing in the real estate returns series had a relatively small impact for the more risk-tolerant strategies and 5) there was some evidence that de-smoothing resulted in improved probability estimates. 238. quotOptions on Leveraged Equity with Default Risk. quot Klaus Bjerre Toft July 1994 In this paper, I derive option pricing formulas for call and put options written on leveraged equity in an economy with corporate taxes and bankruptcy costs. The firm can be forced into bankruptcy by breaching a net-worth covenant, or it may declare bankruptcy when it is optimal for equity holders to do so. Consequently, option values and sensitivities depend on structural variables such as the corporate tax rate, the firms coupon payments, and the firm value at which bankruptcy is declared. The derived formulas for calls and puts on equity with default risk simplify to Black-Scholes type formulas for down-and-out barrier options if bankruptcy is declared as soon as the value of the firms assets equals the after-tax value of the promised coupon payments on the debt. If the capital structure contains no debt, the pricing results simplify to Black-Scholes formulas for call and put options. The model developed in this paper relates implied Black-Scholes volatility for equity options to structural characteristics such as leverage and the debts protective covenants. Options priced by the proposed model are characterized by Black-Scholes implied volatilities which are decreasing in striking price. Moreover, equity options on firms with protected debt have more pronounced volatility skews than options on firms with unprotected debt. Finally, I show how to evaluate the term structure of default spreads for corporate interest-only strips. 237. quotExact Formulas for Expected Hedging Error and Transactions Costs in Option Replication. quot Klaus Bjerre Toft July 1994 In this paper, I derive exact formulas for expected hedging error and transactions costs in option replication for the Black-Scholes economy with exogenously fixed trading points. I derive the formulas using two different volatilities which allow the hedger to use a transactions costs adjusted volatility to determine the hedge portfolio. The expected hedging error is written in an easily recognized form. The four terms in the expectation can be interpreted as terms from Black and Scholes (1973) formula with adjusted parameters. This interpretation holds for all future hedging periods even though the expectation is conditional on the stock price at the time of the hedging schemes initiation. I also derive an approximation of the expected transactions costs. This approximation has a simple interpretation: for each of the future hedging periods, the approximate expected transactions costs incurred at the end of each hedging period are proportional to the options gamma with adjusted parameters, multiplied by the squared expected value of the underlying asset. For the risk neutral economy with no volatility adjustment, I show that present values of the approximate expected transactions costs are identical for each of the future hedging intervals. Moreover, I illustrate that the approximation to the expected transactions costs is accurate except for hedging periods close to the maturity of the contingent claim. Here, the exact expectation tends to be larger than the approximation, even though the expectation is taken only with knowledge of the initial stock price. Finally, I derive an approximation of the variance of the hedging schemes cash-flow (the hedging error minus the transactions costs) for each of the future hedging periods. This approximation facilitates evaluation of the tradeoff between cost and variance of the replication strategy. 236. quotDynamic Aggregation and Computation of Equilibria in Finite-Dimensional Economies with Incomplete Financial Markets. quot Domenico Cuoco and Hua H138 June 1994 This paper constructs a representative agent supporting the equilibrium allocation in event-tree economies with time-additive preferences and possibly incomplete securities markets. If the equilibrium allocation is Pareto optimal, this construction gives the usual linear welfare function. Otherwise, the representative agents utility function is state-dependent, even when individual agents have state-independent utilities and homogeneous beliefs. The existence of a representative agent allows us to provide a characterization of equilibria which does not rely on the derivation of the agents intertemporal demand functions for consumption and investment. More specifically, it allows us to transform the dynamic general equilibrium problem into a static one, and is therefore especially well suited for numerical computation of equilibria in economies with incomplete financial markets. 235. quotMarket Structure and Liquidity on the Tokyo Stock Exchange. quot Bruce N. Lehmann and David M. Modest March 1994 Most equity market mechanisms have designated market makers who provide continuous liquidity. This is not the case on one of the largest and most active stock markets in the world: the Tokyo Stock Exchange (TSE). Its designated intermediaries are merely order clerks called saitori, who log limit orders in a public limit order book and match incoming market orders against them in accordance with strict rules based on price, time, and size priority. On the TSE, orders from the investor public, not from designated market makers, bridge temporal fluctuations in the demand for liquidity. In this paper, we study the chui and tokubetsu kehai (warning and special quote) mechanisms of the TSE. Since no designated market maker stands ready to absorb transient order flow variation, these procedures provide for flagging possibly transient order imbalances and for routinely halting trade to attract orders when particular kinds of order imbalances occur. Such mechanisms always trade the benefits of attracting more liquidity to the marketplace against the cost of impeding the price discovery process and the immediacy of execution. We establish several facts about the impact of these mechanisms on market liquidity. Investors seldom trip the trading halt mechanisms of the TSE and, when they do, they usually execute all or part of their order at the warning quote, a price known in advance. Traders are more likely to trigger indicative quote dissemination and temporary trading halts when the market is relatively volatile, particularly around the morning open and after delayed opens. The volume of trade is similar when orders do and do not result in trading halts, an economically sensible result since the ex ante limit order books should be identical. Substantially larger trades and special quote trading halts (which provide for price discovery through orderly quote changes), a result that is also intuitively plausible. What is perhaps surprising is not that these result accord with intuition but rather that they conform to it so well. 234. quotTrading and Liquidity on the Tokyo Stock Exchange: A Birds Eye View. quot Bruce N. Lehmann and David M. Modest April 1994 The trading mechanism for equities on the Tokyo Stock Exchange (TSE) stands in sharp contrast to the primary mechanisms used to trade stocks in the United States. In the U. S. exchange-designated specialists have affirmative obligations to provide continuous liquidity to the market. Specialists offer simultaneous and tight quotes to both buy and sell and supply sufficient liquidity to limit the magnitude of price changes between consecutive transactions. In contradistinction, the TSE has no exchange-designated liquidity suppliers. Instead, liquidity is provided through a public limit order book and liquidity is organized through restrictions on maximum price changes between trades which serve to slow down trading. In this paper, we examine the efficacy of the TSEs trading mechanisms at providing liquidity. Our analysis is based on a complete record of transactions and best-bid and best-offer quotes for most stocks in the First Section of the TSE over a period of 26 months. We study the size of the bid-ask spread and its cross - sectional and intertemporal stability intertemporal patterns in returns, volatility, volume, trade size, and the frequency of trades and market depth based on the response of quotes to trades and the frequency of trading halts and warning quotes. 233. quotCorporate Debt Value, Bond Covenants, and Optimal Capital Structure. quot Hayne E. Leland January 1994 This paper examines corporate debt values and capital structure in a unified analytical framework. It derives closed form results for the value of long-term risky debt and yield spreads, and for optimal capital structure, when firm asset value follows a diffusion process with constant volatility. Debt values and optimal leverage are explicitly linked to firm risk, taxes, bankruptcy costs, riskfree interest rates, payout rates, and bond covenants. The results elucidate the different behavior of junk bonds vs. investment grade bonds, and aspects of asset substitution, debt repurchase, and debt renegotiation. 232. quotImplied Binomial Trees. quot Mark Rubinstein January 1994 Despite its success, the Black-Scholes formula has become increasingly unreliable over time in the very markets where one would expect it to be most accurate. In addition, attempts by financial economists to extract probabilistic information from option prices have been puny in comparison to what is clearly possible. This paper develops a new method for inferring risk-neutral probabilities (or state - contingent prices) from the simultaneously observed prices of European options. These probabilities are then used to infer a unique fully specified recombining binomial tree that is consistent with these probabilities (and hence consistent with all the observed option prices). If specified exogenously, the model can also accommodate local interest rates and underlying asset payout rates which are general functions of the concurrent underlying asset price and time. In a 200 step lattice, for example, there are a total of 60,301 unknowns: 40,200 potentially different move sizes, 20,100 potentially different move probabilities, and 1 interest rate to be determined from 60,301 independent equations, many of which are non-linear in the unknowns. Despite this, a backwards recursive solution procedure exists which is only slightly more time-consuming than for a standard binomial tree with given constant move sizes and move probabilities. Moreover, closed-form expressions exist for the values and hedging parameters of European options maturing with or before the end of the tree. The tree can also be used to value and hedge American and several types of exotic options. Interpreted in terms of continuous-time diffusion processes, the model here assumes that the drift and local volatility are at most functions of the underlying asset price and time. But instead of beginning with a parameterization of these functions (as in previous research), the model derives these functions endogenously to fit current option prices. As a result, it can be thought of as an attempt to exhaust the potential for single state-variable path-independent diffusion processes to rectify problems with the Black - Scholes formula that arise in practice. 231. quotOptimal Transparency in a Dealership Market with an Application to Foreign Exchange. quot Richard K. Lyons September 1993 This paper addresses the issue of optimal transparency in a multiple-dealer market. In particular, we examine the question: Would risk-averse dealers prefer ex-ante that signed order flow were observable We answer this question with the solution to a mechanism design problem. The resulting incentive-efficient mechanism is one in which signed order flow is not observable. Rather, dealers prefer a slower pace of price discovery because it induces additional risk-sharing. Specifically, slower price discovery permits additional trading with customers prior to revelation this reduces the variance of unavoidable position disturbances, thereby reducing the marketmaking risk inherent in price discovery. We then apply the framework to the spot foreign exchange market in order to understand better the current degree of transparency in that market. 230. quotTests of Microstructural Hypotheses in the Foreign Exchange Market. quot Richard K. Lyons August 1993 This paper introduces a three-part transactions dataset to test various microstructural hypotheses about the spot foreign exchange market. In particular, we test for effects of trading volume on quoted prices through the two channels stressed in the literature: the information channel and the inventory-control channel. We find that trades have both a strong information effect and a strong inventory-control effect, providing support for both strands of microstructure theory. The bulk of equity-market studies also find an information effect however, these studies typically interpret this as evidence of inside information. Since there are no insiders in the foreign exchange market, this finding suggests a broader conception of the information environment, at least in this context. 229. quotThe Economic Functions of Derivatives: An Academicians Point of View. quot David Pyle July 1993 The question of the economic functions of derivatives has been widely discussed in the financial economics literature. In this paper, I focus on the sources of economic efficiency gains from the use of derivatives. These sources include helping to complete capital markets, lowering transaction costs, and reducing agency costs. Many of these functions can be obtained by using primary securities so an important question is what characteristics of derivatives account for their enhanced efficiency and utility relative to the assets that underlie them. Three characteristics are identified and discussed: 1) the dependence of derivative value on changes in the value of underlying assets, 2) the positive dependence of some derivative values on asset volatility, and 3) the non-linear payoffs provided by some derivatives. 228. quotDifferential Information and Dynamic Behavior of Stock Trading Volume. quot Hua He and Jiang Wang May 1993 We develop a multi-period model of stock trading in which investors receive differential information concerning the underlying value of the stock. Investors trade competitively in the market based on their own private information and the information revealed by the market clearing prices as well as other public news. By showing that the hierarchy of expectations (i. e. forecasting the forecasts of others) is a closed system, we resolve the infinite regress problem that is common to intertemporal models with differential information and derive a rational expectations equilibrium. We analyze the dynamic behavior of equilibrium trading volume. In particular, we examine how trading volume is related to the information flow to the market and how investors trading reveals their private information. 227. quotThe U. S. Savings and Loan Crisis. quot David H. Pyle April 1993 226. quotLong-Term Debt Value, Bond Covenants, and Optimal Capital Structure. quot Hayne Leland February 1993 225. quotLiquidation Costs and Risk-Based Bank Capital. quot Helena M. Mullins and David H. Pyle January 1993. Bank capital rules which do not recognize audit costs, liquidation costs and portfolio diversification can seriously underestimate actuarially fair capital requirements. If depositors do not have access to low cost alternatives, the effect of higher requirements can be imposed on them. Otherwise, they need absorb only costs associated with minimum-risk, minimum-cost assets. If borrowers have direct access to financial markets or can borrow from uninsured, less highly levered institutions, insured banks facing a fair risk-based capital requirement and fixed premium cannot attract them. A schedule of required capital and insurance premium pairs would allow banks to retain investment flexibility. Top of Page