Asset Management

This paper compares the performance of standard-cost with negotiated transfer pricing under asymmetric information. Negotiated transfer pricing generally achieves higher expected contribution margins, as this method tends to be more efficient in aggregating private information into a single transfer price. Standard-cost transfer pricing confers more bargaining power to the supplier and therefore generates better incentives for this division to undertake specific investments. The opposite holds for buyer investments.

Rapid comprehensive change in the physical pattern of a city is a minor revolution — as is the transformation of 42nd Street and Times Square. Two decades ago the agenda for change posed two big questions: Is it possible for cities to reshape what the market is likely to deliver in an area? Is large-scale redevelopment even a plausible political objective, especially when aggressive actions such as condemnation are deemed a necessary part of the strategy?

Technical analysis, also known as "charting," has been a part of financial practice for many decades, but this discipline has not received the same level of academic scrutiny and acceptance as more traditional approaches such as fundamental analysis. One of the main obstacles is the highly subjective nature of technical analysis — the presence of geometric shapes in historical price charts is often in the eyes of the beholder.

We study the economic consequences of alternative hedge accounting rules in terms of managerial hedging decisions and wealth effects for shareholders. The rules we consider include the "fair-value" and "cash-flow" hedge accounting methods prescribed by the recent SFAS No. 133. We illustrate that the accounting method used influences the manager's hedge decision. We show that under no-hedge accounting, the hedge choice is different from the optimal economic hedge the firm would make under symmetric and public information.

This paper introduces a class of state dependent jump (SDJ) models in which the arrival intensity and jump sizes depend on a given set of state variables, including lagged jumps. With this model, we investigate the structure of jumps to U.S. equity indices, concentrating on the predictability of jumps times if found for all of the indices considered: Standard and Poor's 500 and Mid-Cap, the Russell 1000, 2000, and 3000 indices, the Wilshire 5000 and the Nasdaq 100 (NDX).

We provide a comprehensive treatment of option pricing with particular emphasis on the valuation of American options on dividend-paying assets. We begin by reviewing principles for European contingent claims in a financial market in which the underlying asset price follows an Ito process and the interest rate is stochastic. Then this analysis is extended to the valuation of American contingent claims. In particular, the early exercise premium and the delayed exercise premium representations of the American option price are presented.

In this paper we provide valuation formulas for several types of American options on two or more assets. Our contribution is twofold. First, we characterize the optimal exercise regions and provide valuation formulas for a number of American option contracts on multiple underlying assets with convex payoff functions. Examples include options on the maximum of two assets, dual strike options, spread options, exchange options, options on the product and powers of the product, and options on the arithmetic average of two assets.