The Valuation of Volatility Options

This paper examines the valuation of European- and American-style volatility options based on a general equilibrium stochastic volatility framework. Properties of the optimal exercise region and of the option price are provided when volatility follows a general diffusion process. Explicit valuation formulas are derived in four particular cases. Emphasis is placed on the MRLP (mean-reverting in the log) volatility model which has received considerable empirical support. In this context we examine the properties and hedging behavior of volatility options. Unlike American options, European call options on volatility are found to display concavity at high levels of volatility. Cet article examine l'évaluation des options sur volatilité, de type européen ou américain, dans le cadre d'un modèle d'équilibre général avec volatilité stochastique. Certaines propriétés de la région d'exercise optimal et du prix de l'option sont établies lorsque la volatilité suit un processus général de diffusion. Des formules d'évaluation explicites sont ensuite dérivées dans quatre cas particuliers. Nous étudions en détail le cas d'un processus de volatilité de type MRLP (mean-reverting in the log) qui semble être conforme à l'évidence empirique. Les propriétés et le comportement de couverture des options sur volatilité sont examinées dans ce cadre. ¸ l'opposeé d'une option d'achat américaine, le prix d'une option d'achat européenne sur volatilité s'avère être une fonction concave lorsque le niveau de volatilité s'élève.Stochastic volatility, European options, American options, optimal exercise, early exercise premium, hedging, viability, Volatilité stochastique, options européennes, options américaines, exercice optimal, prime d'exercice anticipé, couverture de risque, viabilité

The Relative Importance of Academic Activities: Autonomous Values from the Canadian Professoriate

In this paper, we report findings on the contemporary idea of a university as defined by the relative importance of teaching, research, service, and collegiality in teaching-intensive universities. We also investigate Boyer’s model of scholarship relative to the research–teaching–service nexus. Our findings show that while research is embraced as a key academic responsibility of professors, there is general agreement on the primacy of teaching. Equally, awareness of Boyer’s model exposes faculty to diverse opportunities for scholarship and has the potential to open up faculty members to a new idea of the university.  Dans cet article, nous présentons les résultats d’une recherche portant sur l’idée contemporaine de l’université, telle que définie par l’importance relative de l’enseignement, de la recherche, du service et de la collégialité dans des établissements d’enseignement intensif de niveau collégial ou universitaire. Notre recherche porte également sur le modèle boursier de Boyer, relatif au lien entre recherche, enseignement et service. Nos résultats démontrent que tandis qu’on voit la recherche comme une responsabilité académique des professeurs, il existe une entente générale quant à l’importance de l’enseignement. De même, le fait de connaître le modèle de Boyer, ouvre aux facultés d’enseignement la porte aux diverses opportunités d’obtention de bourses, et amène aussi à sensibiliser le personnel à une nouvelle pensée universitaire

Incentive Compatible Decision Making: Real Options with Adverse Incentives

In this paper, we examine the real options approach to capital budgeting decision making in the presence of managerial adverse incentives. We show that real options have the potential to be value enhancing or value destroying depending on the managerial incentives that may result from having objectives different from firm value maximization. We further examine the possibility of using a generic residual income based rule of managerial compensation to induce the proper investment incentives and we seek to determine the cost-of-capital that must be employed in such a rule. Using numerical examples it is demonstrated that in general, a range of incentive compatible costs-of-capital exists across all managerial investment horizons but not across all managerial hurdle rates

Incentive Compatible Decision Making: Real Options with Adverse Incentives

In this paper, we examine the real options approach to capital budgeting decision making in the presence of managerial adverse incentives. We show that real options have the potential to be value enhancing or value destroying depending on the managerial incentives that may result from having objectives different from firm value maximization. We further examine the possibility of using a generic residual income based rule of managerial compensation to induce the proper investment incentives and we seek to determine the cost-of-capital that must be employed in such a rule. Using numerical examples it is demonstrated that in general, a range of incentive compatible costs-of-capital exists across all managerial investment horizons but not across all managerial hurdle rates

Assessment of r-process sensitivity studies and metrics

Understanding the r-process is essential to understanding the early Universe. Sensitivity studies are important to developing this understanding, but they are hindered by discrepancies in how their results are reported. The fundamentals of the r-process and sensitivity studies are described. These discrepancies are explored in detail. We primarily discuss the way sensitivity is quantified and the normalization of results. The need for consistent results is asserted, and the issues with inconsistent results are made evident. The discrepancies themselves suggest various future avenues of study. We conclude with several recommendations for consistent reporting of sensitivity studies

Essays on security design

The proposed thesis comprises three essays on the design of financial securities in the presence of frictions. The first essay develops a dynamic model of the impact of security designs on investment behavior and examines the adverse incentives created by debt and by equity when information is ex ante symmetric, inside agents cannot engage in perquisite consumption, and when there are no corporate taxes. A dynamic precommitment equilibrium is constructed and the choice between using risky debt and equity to raise capital is investigated. The second essay extends the above dynamic precommitment equilibrium approach to examine the behavior of the term structure of risky debt and characterizes the agency cost of adverse incentives as a spread. Assuming a fixed economic life of assets, the optimal maturity for debt is then investigated. The third essay develops a general equilibrium stochastic volatility framework and seeks to understand the structure of volatility risk. With a notion to develop tools to manage such risk, it considers the proper specification of the volatility of stocks, and the valuation of options written directly on this volatility

25. Experiences of New Faculty in a Transitional Institution

This research project studies the induction and socialization of new faculty at Mount Royal University, recently transitioned from college to undergraduate university status. There is extensive documentation in the literature on issues faced by new faculty in post-secondary institutions; however, very little is published on how a culture in flux may complicate this socialization. This project uses interpretive inquiry to study the experience over three successive years of new faculty experience. We use themes found in the prior literature of stress, time, socialization, and evaluation to structure our initial findings, but propose that a more complex framework is required to understand new faculty experience under these conditions of institutional transformation

Option Pricing for Pure Jump Processes with Markov Switching Compensators

Jump process, Markov switching, Compensator, Characteristic function, European options, Hedging, 91B28, 60G10, 60G44, 60G51, G12, G13, D52,