Public Firms in a Dynamic Third Market Model

We set the third market model in a dynamic context to decide whether a country can achieve benefits by subsidizing a public rm's exports. We use calculus of variations with the constraint that the welfare is either maximized or grows at constant rate, reflecting the public concern of the firm. We conclude that a subsidy can be a good strategy for the country in some instances, even though only over a finite period of time. The duration of this period depends on the output strategy of the public firm as well as on exogenous factors.public firms, strategic trade policy, third market model, calculus of variations

Waiting times between orders and trades in double-auction markets

In this paper, the survival function of waiting times between orders and the corresponding trades in a double-auction market is studied both by means of experiments and of empirical data. It turns out that, already at the level of order durations, the survival function cannot be represented by a single exponential, thus ruling out the hypothesis of constant activity during trading. This fact has direct consequences for market microstructural models. They must include such a non-exponential behaviour to be realistic.Comment: 19 pages, 3 figures, paper presented at the WEHIA 2005, Colchester, U

A Common Market Measure for Libor and Pricing Caps, Floors and Swaps in a Field Theory of Forward Interest Rates

The main result of this paper that a martingale evolution can be chosen for Libor such that all the Libor interest rates have a common market measure; the drift is fixed such that each Libor has the martingale property. Libor is described using a field theory model, and a common measure is seen to be emerge naturally for such models. To elaborate how the martingale for the Libor belongs to the general class of numeraire for the forward interest rates, two other numeraire's are considered, namely the money market measure that makes the evolution of the zero coupon bonds a martingale, and the forward measure for which the forward bond price is a martingale. The price of an interest rate cap is computed for all three numeraires, and is shown to be numeraire invariant. Put-call parity is discussed in some detail and shown to emerge due to some non-trivial properties of the numeraires. Some properties of swaps, and their relation to caps and floors, are briefly discussed.Comment: 28 pages, 4 figure

The Effects of Financing on Enterprise Performance

In this paper we are proposing to approach a theme very topical in our country: choose of the most profitable and comfortable sources of financing. The major objective of research in this work is the foundation of essential decisions in the enterprise activity that faces one of the most pressing problems: the search for a reliable source of funding. This foundation is based on the compared calculation to a series of financial indicators. Also, we are reflecting the impact of the operational leasing compared to the banking credit on the enterprise's financial situation, assessing the financial indicators, static and in dynamics by discounting of the financial flows generated, and choice of financing source considered the best and most advantageous to the enterprise “SCENT”. In the end of the paper are presented synthetic the main conclusions drawn from the analysis, related on operational leasing and its benefits and limits compared with the banking loan.financing sources, financial performance, banking loan, operational leasing, static and dynamic financial analyze, business administration

Pricing and hedging of Asian options: Quasi-explicit solutions via Malliavin calculus

We use Malliavin calculus and the Clark-Ocone formula to derive the hedging strategy of an arithmetic Asian Call option in general terms. Furthermore we derive an expression for the density of the integral over time of a geometric Brownian motion, which allows us to express hedging strategy and price of the Asian option as an analytic expression. Numerical computations which are based on this expression are provided

Quantifying Flexibility Real Options Calculus

We expose a real options theory as a tool for quantifying the value of the operating flexibility of real assets. Additionally, we have pointed out that this theory is an appropriated methodology for determining optimal operating policies, and provide an example of successful application of our approach to power industries, specifically to valuate the power plant of electricity. In particular by increasing the volatility of prices will eventually lead to higher assets values.real options, Black-Scholes Approach, Wiener processes, stochastic processes, Quantifying Flexibility, volatility

Local Strategy Improvement for Parity Game Solving

The problem of solving a parity game is at the core of many problems in model checking, satisfiability checking and program synthesis. Some of the best algorithms for solving parity game are strategy improvement algorithms. These are global in nature since they require the entire parity game to be present at the beginning. This is a distinct disadvantage because in many applications one only needs to know which winning region a particular node belongs to, and a witnessing winning strategy may cover only a fractional part of the entire game graph. We present a local strategy improvement algorithm which explores the game graph on-the-fly whilst performing the improvement steps. We also compare it empirically with existing global strategy improvement algorithms and the currently only other local algorithm for solving parity games. It turns out that local strategy improvement can outperform these others by several orders of magnitude