Correlation products and risk management issues

Unlike standard derivatives instruments, correlation products contain nonseparable risk, meaning that the price sensitivity of one risk factor is a function of the level of another risk factor. This article outlines the pricing and hedging of one type of correlation product, the differential swap, to show how nonseparable risk may escape traditional methods of assessing the risk of institutions' portfolios. The article considers the implications of correlation products for supervisory and institutional practices and concludes with a brief discussion of some ways nonseparable risk may be managed.Derivative securities ; Risk ; Swaps (Finance) ; Hedging (Finance)

Estimability and efficiency in nearly orthogonal 2[m1] x 3[m2] deletion designs

This article considers single replicate factorial experiments in incomplete blocks. A single replicate 2^m1 x 3^m2 deletion design in 3 incomplete blocks is obtained from a single replicate 3^m, where m = m_1 + m_2, preliminary design by deleting all runs (or treatment combinations) with the first m_1 factors at the level two. A systematic method for determining the unbiasedly estimable (u.e.) and not unbiasedly estimable (n.u.e.) factorial effects is provided. It is shown that for m_2 > 0 all factorial effects of the type F( α_1 · · · α_m_1 , α_(m_1 +1) · · · α_m), where α_i; = 0, l for i = 1, · · ·, m_1, α_i; = 0, 1, 2 for i = m_(1+1), · · ·, m, with (α_1 · · · α_m) != (0 · · · 0), and (α_m,+l · · · _m) != α(l · · · 1) for a= 1, 2, are u.e. and the remaining factorial effects are n.u.e. It is noted that (2^m_1 - 1) factorial effects of 2^m_1 factorial experiments and (3^m_2) factorial effects of 3^m, factorial experiments, which are embedded in 2^m_1 x 3^m, factorial experiments, are u. e. The 2 x 3m-l deletion designs were considered in the work of Voss (1986). Defining factorial effects of a 2^m_1 x 3^m, factorial experiment in a form different than in Voss (1986), we develop a simple representation of u.e. and n. u. e. factorial effects. In this representation, there are (2^(m_1 + 1) + 1) n. u. e. factorial effects of the type F( α_1 · · · α_m_1, α· · · α). This number is smaller than the corresponding number of n. u. e. factorial effects in the representation of Voss (1986). The relative efficiency expressions, and their bounds, in the estimation of factorial effects of 2^m_1 x 3^m_2 deletion designs are also given

Management Control Systems and Contextual Variables in the Hospitality Industry

Purpose – The paper examined management control systems (MCS) in Indonesian hospitality sector. This study examines the impact of six contextual factors at one time to determine the importance of each factor on the design of MCS. Design/methodology/approach – The paper is based upon data collected through a survey sent to “star” hotels in Central Java, Indonesia. Using Chenhall (2003) design, a regression equation is run to examine the relationship between MCS and the contextual variables of environment, technology, structure, size, strategy and culture. Findings – The paper finds that higher levels of the contextual variables of technology, structure, and culture are related to more sophisticated MCS while size is related to more traditional MCS. Research limitations/implications –These findings are related to the hospitality industry in Indonesia. Future research could examine different settings (i.e. country, industry, etc) and investigate the effect of each contextual variable on the relationships between MCS and firm performance. Originality/value – The present study extends the scope of MCS system in accounting literature by testing Chenhall (2003) works on the relationship between contextual variables and MCS. It attempts to fill the gap in contingency-based studies that have previously focused on one aspect of contingency by considering six contextual factors. Furthermore, this paper also contributes to a fuller understanding of MCS practices in Indonesia and the hospitality industry and helps management in determining its most effective design. Keywords Hospitality management, Management Control Systems, Indonesia, Contextual Variable

Pricing and Welfare in Health Plan Choice

Prices in government and employer-sponsored health insurance markets only partially reflect insurers' expected costs of coverage for different enrollees. This can create inefficient distortions when consumers self-select into plans. We develop a simple model to study this problem and estimate it using new data on small employers. In the markets we observe, the welfare loss compared to the feasible efficient benchmark is around 2-11% of coverage costs. Three-quarters of this is due to restrictions on risk-rating employee contributions; the rest is due to inefficient contribution choices. Despite the inefficiency, we find substantial benefits from plan choice relative to single-insurer options.healthcare costs, health insurance, government-sponsered health insurance, employer-sponsored health insurance

The Interdependence of Private and Public Interests

The predominant focus in research on organizations is either on private or public institutions without consistent consideration of their interdependencies. The emphasis in scholarship on private or public interests has strengthened as disciplinary and professional knowledge has deepened: management scholars, for example, tend to consider the corporation as the unit of analysis, while scholars of public policy in government, public health, social science and education often analyze governmental, multilateral, community and non-profit organizations. This article advocates a partial merging of these research agendas on the grounds that private and public interests cannot be fully understood if they are conceived independently. We review three major areas of activity today in which public and private interests interact in complex ways, and maintain that current theories of organization science can be deployed to understand better these interactions. We also suggest that theories of public-private interaction also require development and describe a concept called "global sustainable value creation," which may be used to identify organizational and institutional configurations and strategies conducive to worldwide, intertemporal efficiency and value creation. We conclude that scholarship on organizations would advance if private-public interactions were evaluated by the criterion of global sustainable value creation.