Behavioral Preferences for Individual Securities: The Case for Call Warrants and Call Options

Since 1998, large investment banks have flooded the European capital markets with issues of call warrants.This has led to a unique situation in the Netherlands, where now call warrants, traded on the stock exchange, and long-term call options, traded on the options exchange, exist.Both entitle their holders to buy shares of common stock.We use the long-term call options in order to price the call warrants.Using the model of Black and Scholes (1973), the Square Root model version of the Constant Elasticity of Variance model of Cox and Ross (1976), and the Binomial model of Cox et al.(1979) we find that the call warrants are strongly overvalued durin the first five tradin days.The average overvaluation is between 25 and 30 percent for all three models.Only a small part of this overvaluation can be explained by rational arguments such as transaction costs.We conclude that the overvaluation can be attributed to a behavioral preference of private investors for call warrants.securities;options;option pricing models

Dynamic Decomposition of Total Factor Productivity Change in the EU Food, Beverages, and Tobacco Industry: The Effect of R&D

The main objective of this paper is to generate measures of TFP change for the food, beverages, and tobacco industry in the EU. Explicitly taking into account the fact that some of the inputs used in the industry are fixed in the short run, the generated measures of TFP change reflects the dynamic nature of the problem. The second objective is to analyse TFP change into its components and explicitly examine the effect of Research and Development (R&D) effort on TFP growth. Data are collected from EU KLEMS and the OECD Structural Analysis database. The data contain country-level information on output volume, input prices and capital stock, as well as R&D expenditure for the food, beverages, and tobacco industry for the 15 “old” EU Member States. They cover the 1970-2005 but most series contain gaps. The results show that for the period under consideration TFP in the industry grew on average at an annual rate of almost 2%. TFP growth was much faster in the 1970s and 1980s, with a considerable slowdown in the 1990s. This growth is driven primarily by growth in output and secondly by the reduction in labour input. Expenditure on R&D has a positive but relatively small effect on TFP.TFP change, Food Industry, R&D., Agricultural and Food Policy,

How tangents solve algebraic equations, or a remarkable geometry of discriminant varieties

Let $\mathcal D_{d,k}$ denote the discriminant variety of degree $d$ polynomials in one variable with at least one of its roots being of multiplicity $\geq k$. We prove that the tangent cones to $\mathcal D_{d,k}$ span $\mathcal D_{d,k-1}$ thus, revealing an extreme ruled nature of these varieties. The combinatorics of the web of affine tangent spaces to $\mathcal D_{d,k}$ in $\mathcal D_{d,k-1}$ is directly linked to the root multiplicities of the relevant polynomials. In fact, solving a polynomial equation $P(z) = 0$ turns out to be equivalent to finding hyperplanes through a given point P(z)\in \mathcal D_{d,1} \approx \A^d which are tangent to the discriminant hypersurface $\mathcal D_{d,2}$. We also connect the geometry of the Vi\`{e}te map \mathcal V_d: \A^d_{root} \to \A^d_{coef}, given by the elementary symmetric polynomials, with the tangents to the discriminant varieties $\{\mathcal D_{d,k}\}$. Various $d$-partitions $\{\mu\}$ provide a refinement $\{\mathcal D_\mu^\circ\}$ of the stratification of \A^d_{coef} by the $\mathcal D_{d,k}$'s. Our main result, Theorem 7.1, describes an intricate relation between the divisibility of polynomials in one variable and the families of spaces tangent to various strata $\{\mathcal D_\mu^\circ\}$.Comment: 43 pages, 12 figure

An experimental determination of dynamic coefficients for the Basic Finner missile by means of the angular dynamic balance

Equipment developed in this Laboratory permits the determination of eight of the dynamic coefficients useful in describing the force and moment reactions on a submerged body moving in water. These coefficients comprise the partial derivatives of moment (about the yaw axis) and of force (in the horizontal plane, and perpendicular to the longitudinal axis) with respect to velocity and acceleration components in specified directions. So long as the instantaneous angles of attack are small and scale effects are absent, these coefficients have constant values. A complete list of coefficients is given in Ref. (1), as are definitions, sign conventions and formulas for making the coefficients nondimensional. The eight coefficients tabulated below are those pertinent to lateral translation and rotation about the yaw axis for a body of revolution: Nr' coefficient of rotary moment derivative Nr[dot]' virtual moment of inertia coefficient (angular acceleration) Nv' coefficient of static moment derivative Nv[dot]' virtual moment of inertia coefficient (lateral acceleration) Yr' coefficient of rotary force derivative Yr[dot]' virtual inertia coefficient (angular acceleration) Yv' coefficient of static force derivative Yv[dot]' virtual inertia coefficient (lateral acceleration) where the prime indicates that the coefficients are in dimensionless form. It is the purpose of the experimental program undertaken at this Laboratory to determine the numerical values of the above quantities for the Basic Finner missile (Fig. 1). Because of the required differences in the experimental methods, however, the program was divided into two parts. This report deals only with Part 1, and is restricted to the following quantities: Nr[dot]', Nv', Yr[dot]', Yv', and the linear combinations Nr' - Nv[dot]' and Yr' - Yv[dot]'. Remaining quantities will be the subject of another report

Why Farmers Opt Not to Enroll in Payment-for-Environmental-Services Programs

Payment-for-environmental-services (PES) programs are the focus of increasing attention globally. While existing PES programs can observe who participates and who does not, the reasons for nonparticipation can be opaque. Taking advantage of a unique stated preference data set that includes a follow-up question on conditions for participation, this study differentiates two types of non-participants, those deterred by insufficient payments, and those deterred by fundamental incompatibility with the farm operation. Survey weighted and spatially weighted probit models are applied to examine the determinants of farmers’ willingness to enroll in PES programs and their willingness to consider enrollment at the same or a high payment. Results suggest the decision to enroll relies more on farm benefit-cost factors, such as program payment, total land area and current farming practice, while the decision to consider enrolling depends more on farm and operator characteristics, such as environmental attitudes, soil traits, current government program enrollment or commitment to organic farming. Both decisions also show evidence of spatial dependence that suggest spill-over effects due to natural resources, interpersonal communication, or other socio-economic factors. These findings elucidate reasons for non-participation in PES programs and provide insights for future program design and targeting.Payment-for-environmental-services, agricultural policy, non-participation, working land, stated preference, spatial probit, Agricultural and Food Policy, Environmental Economics and Policy, Production Economics, Q18, Q51, Q57,