Option Pricing of Twin Assets

How to price and hedge claims on nontraded assets are becoming increasingly important matters in option pricing theory today. The most common practice to deal with these issues is to use another similar or "closely related" asset or index which is traded, for hedging purposes. Implicitly, traders assume here that the higher the correlation between the traded and nontraded assets, the better the hedge is expected to perform. This raises the question as to how \textquoteleft{}closely related\textquoteright{} the assets really are. In this paper, the concept of twin assets is introduced, focusing the discussion precisely in what does it mean for two assets to be similar. Our findings point to the fact that, in order to have very similar assets, for example identical twins, high correlation measures are not enough. Specifically, two basic criteria of similarity are pointed out: i) the coefficient of variation of the assets and ii) the correlation between assets. From here, a method to measure the level of similarity between assets is proposed, and secondly, an option pricing model of twin assets is developed. The proposed model allows us to price an option of one nontraded asset using its twin asset, but this time knowing explicitly what levels of errors we are facing. Finally, some numerical illustrations show how twin assets behave depending upon their levels of similarities, and how their potential differences will traduce in MAPE (mean absolute percentage error) for the proposed option pricing model

On the Enforcement of Territorial Use Rights Regulations: A Game Theoretic Approach

Territorial Use Rights (commonly known as TURFs in the literature) consists in the allocation of fishing rights to individuals and/or groups to fish in certain geographical locations. A requisite for these communities to be granted fishing rights is the formulation of a management and exploitation plan (MEP). While thus far the literature on TURFs has been centred on the biological and technical aspects of it, to our knowledge there is no work squarely dealing with the issue of enforcement of the MEP that the community, once granted the fishing use rights, have to comply with. We formally explore this issue from an economic perspective by formulating a static game of norm compliance in a regime of common property resource exploitation. The key characteristic of this game is a monitoring and sanctioning mechanism, where fishermen monitor and sanction one another. We found that in the absence of any endogenous regulation from the part of the fishing community, TURFs can not avoid the economic overexploitation of the fishery. We discuss the importance of economic incentives (and disincentives) in the formulation of endogenous regulations aimed at ensuring compliance of the MEP. Our results on the relevance of economic incentives in the context of a TURF regulation can also be used to highlight the importance of less conventional enforcement tools.Territorial Use Rights, Enforcement, Game Theory, Chile

Zero Jordan product determined Banach algebras

A Banach algebra $A$ is said to be a zero Jordan product determined Banach algebra if every continuous bilinear map $\varphi\colon A\times A\to X$, where $X$ is an arbitrary Banach space, which satisfies $\varphi(a,b)=0$ whenever $a$, $b\in A$ are such that $ab+ba=0$, is of the form $\varphi(a,b)=\sigma(ab+ba)$ for some continuous linear map $\sigma$. We show that all $C^*$-algebras and all group algebras $L^1(G)$ of amenable locally compact groups have this property, and also discuss some applications

SPECIFIC INHIBITION OF LYMPHOID COMPLEMENT RECEPTORS BY ANTI-H-2 SERA: EVIDENCE FOR A NEW H-2 LINKED POLYMORPHISM

Certain anti-H-2 sera contain an antibody-like activity which specifically inhibits EAC rosette formation by lymphoid (and not myeloid) cells of certain mouse strains. Studies in congenic recombinant mouse strains strongly indicate that at least part of the control of susceptibility to inhibition by these antisera is mediated by H-2 linked genes, mapping in the I-C subregion or the S region. The strain distribution of the trait CRIS indicates that certain H-2 identical mice behave differently from one another, pointing toward a component of non-H-2 modulation of the H-2 linked gene (or to a previously unsuspected H-2 difference). Positive sera were usually raised across differences in the D end of the H-2 complex. The complex implications of this system must be considered in the light of known S region involvement in complement metabolism.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/73055/1/j.1744-313X.1975.tb00549.x.pd