• Title, Summary, Keyword: general payoff

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VALUATION AND HEDGING OF OPTIONS WITH GENERAL PAYOFF UNDER TRANSACTIONS COSTS

  • Choi, Hyeong-In;Heath, David;Ku, Hye-Jin
    • Journal of the Korean Mathematical Society
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    • v.41 no.3
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    • pp.513-533
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    • 2004
  • We present the pricing and hedging method for options with general payoffs in the presence of transaction costs. The convexity of the payoff function-gamma of the options- is an important issue under transaction costs. When the payoff function is convex, Leland-style pricing and hedging method still works. However, if the payoff function is of general form, additional assumptions on the size of transaction costs or of the hedging interval are needed. We do not assume that the payoff is convex as in Leland 〔11〕 and the value of the Leland number is less (bigger) than 1 as in Hoggard et al. 〔10〕, Avellaneda and Paras 〔1〕. We focus on generally recognized asymmetry between the option sellers and buyers. We decompose an option with general payoff into difference of two options each of which has a convex payoff. This method is consistent with a scheme of separating out the seller's and buyer's position of an option. In this paper, we first present a simple linear valuation method of general payoff options, and also propose in the last section more efficient hedging scheme which costs less to hedge options.

The Advantageous Bargaining Sequence in Sequential Bargaining with Multiple Parties (다수의 상대방과 연속 거래시의 유리한 거래 순서에 대한 연구)

    • Journal of the Korean Operations Research and Management Science Society
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    • v.22 no.3
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    • pp.209-222
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    • 1997
  • In this paper, we study a bargaining order problem where one buyer sequentially bargains with two sellers whose reservation prices are unknown to the buyer but correlated. Our main question is who the buyer should bargain first with to maximize his expected payoff. This type of problem is widely applicable to business and political situations where one party negotiates with multiple parties sequentially. One of the most important element in a sequential bargaining is "linkage effect" which exists when the aggreement of the previous bargaining affects the outcome of the following bargaining. To examine "linkage effect", we assume that the sellers'objects are similar so that the sellers' reservation prices are correlated. In addition, to consider incomplete information aspect regarding reservation prices, it is assumed that the sellers' reservation prices are unknown to the buyer. That is, we deal with one sided incomplete information case. In our model, there are two stages in each of which the buyer meets one seller. Since we are concerned with the bargaining order, we consider two different bargaining orders. Using game theory, we find a perfect Bayesian equilibrium and compute the buyer's expected payoff for each bargaining order. Finally we identify the advantageous bargaining order for the buyer by comparing the expected payoffs obtained under two different bargaining orders. Our results are as follows: the advantageous bargaining order depends on the prior probability of the seller type. However, in general, the buyer should bargain first with the seller whose object is less valuable to the buyer. The basic reason for our result is that the buyer wants to experiment in the first stage to find out the sellers' reservation prices and in doing so, to minimize the experimental cost and maximize potential gain in case of negotiation failure in the first stage. in the first stage.

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Understanding and application of the social system based on the system thinking : Focus on the cooperation model using Cellular Automata (시스템적 사고에 기반한 사회 시스템의 이해와 응용 : Cellular Automata를 이용한 협력모형을 중심으로)

  • 고길곤
    • Korean System Dynamics Review
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    • v.1 no.1
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    • pp.133-157
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    • 2000
  • This paper deals with the social system from the point of system thinking consisting the fundamental construct of system dynamics. The Bertalanffy's general system theory, having been criticized because of its ambiguity, and the complex science theory, emerging system theory, are integrated by using the system thinking which is characterized with three concepts, 'feedback thinking', 'dynamic thinking', 'operational thinking'. In the integration, system thinking suggests the dynamic pattern of the social system have not only an equilibrium status but also complex status. The science of complexity gives an implication to system dynamics the important of the uncertainty and complexity if we interpret the social system as an open system. To show more concrete description, I simulate the cooperation model based on the iterated prisoner dilemma. The simulation results show the diverse patterns of cooperation and betrayal. Especially the sensitivity of initial payoff will cause the chaotic strategic landscapes as the game gose on. These results mean that we should not give the hasty prescription to control social system artificially. Because social system retains the self-organizing force in itself.

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A PRICING METHOD OF HYBRID DLS WITH GPGPU

  • YOON, YEOCHANG;KIM, YONSIK;BAE, HYEONG-OHK
    • Journal of the Korean Society for Industrial and Applied Mathematics
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    • v.20 no.4
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    • pp.277-293
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    • 2016
  • We develop an efficient numerical method for pricing the Derivative Linked Securities (DLS). The payoff structure of the hybrid DLS consists with a standard 2-Star step-down type ELS and the range accrual product which depends on the number of days in the coupon period that the index stay within the pre-determined range. We assume that the 2-dimensional Geometric Brownian Motion (GBM) as the model of two equities and a no-arbitrage interest model (One-factor Hull and White interest rate model) as a model for the interest rate. In this study, we employ the Monte Carlo simulation method with the Compute Unified Device Architecture (CUDA) parallel computing as the General Purpose computing on Graphic Processing Unit (GPGPU) technology for fast and efficient numerical valuation of DLS. Comparing the Monte Carlo method with single CPU computation or MPI implementation, the result of Monte Carlo simulation with CUDA parallel computing produces higher performance.

An Empirical Study on Motivation Factors and Reward Structure for User's Createve Contents Generation: Focusing on the Mediating Effect of Commitment (창의적인 UCC 제작에 영향을 미치는 동기 및 보상 체계에 대한 연구: 몰입에 매개 효과를 중심으로)

  • Kim, Jin-Woo;Yang, Seung-Hwa;Lim, Seong-Taek;Lee, In-Seong
    • Asia pacific journal of information systems
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    • v.20 no.1
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    • pp.141-170
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    • 2010
  • User created content (UCC) is created and shared by common users on line. From the user's perspective, the increase of UCCs has led to an expansion of alternative means of communications, while from the business perspective UCCs have formed an environment in which an abundant amount of new contents can be produced. Despite outward quantitative growth, however, many aspects of UCCs do not meet the expectations of general users in terms of quality, and this can be observed through pirated contents and user-copied contents. The purpose of this research is to investigate effective methods for fostering production of creative user-generated content. This study proposes two core elements, namely, reward and motivation, which are believed to enhance content creativity as well as the mediating factor and users' committement, which will be effective for bridging the increasing motivation and content creativity. Based on this perspective, this research takes an in-depth look at issues related to constructing the dimensions of reward and motivation in UCC services for creative content product, which are identified in three phases. First, three dimensions of rewards have been proposed: task dimension, social dimension, and organizational dimention. The task dimension rewards are related to the inherent characteristics of a task such as writing blog articles and pasting photos. Four concrete ways of providing task-related rewards in UCC environments are suggested in this study, which include skill variety, task significance, task identity, and autonomy. The social dimensioni rewards are related to the connected relationships among users. The organizational dimension consists of monetary payoff and recognition from others. Second, the two types of motivations are suggested to be affected by the diverse rewards schemes: intrinsic motivation and extrinsic motivation. Intrinsic motivation occurs when people create new UCC contents for its' own sake, whereas extrinsic motivation occurs when people create new contents for other purposes such as fame and money. Third, commitments are suggested to work as important mediating variables between motivation and content creativity. We believe commitments are especially important in online environments because they have been found to exert stronger impacts on the Internet users than other relevant factors do. Two types of commitments are suggested in this study: emotional commitment and continuity commitment. Finally, content creativity is proposed as the final dependent variable in this study. We provide a systematic method to measure the creativity of UCC content based on the prior studies in creativity measurement. The method includes expert evaluation of blog pages posted by the Internet users. In order to test the theoretical model of our study, 133 active blog users were recruited to participate in a group discussion as well as a survey. They were asked to fill out a questionnaire on their commitment, motivation and rewards of creating UCC contents. At the same time, their creativity was measured by independent experts using Torrance Tests of Creative Thinking. Finally, two independent users visited the study participants' blog pages and evaluated their content creativity using the Creative Products Semantic Scale. All the data were compiled and analyzed through structural equation modeling. We first conducted a confirmatory factor analysis to validate the measurement model of our research. It was found that measures used in our study satisfied the requirement of reliability, convergent validity as well as discriminant validity. Given the fact that our measurement model is valid and reliable, we proceeded to conduct a structural model analysis. The results indicated that all the variables in our model had higher than necessary explanatory powers in terms of R-square values. The study results identified several important reward shemes. First of all, skill variety, task importance, task identity, and automony were all found to have significant influences on the intrinsic motivation of creating UCC contents. Also, the relationship with other users was found to have strong influences upon both intrinsic and extrinsic motivation. Finally, the opportunity to get recognition for their UCC work was found to have a significant impact on the extrinsic motivation of UCC users. However, different from our expectation, monetary compensation was found not to have a significant impact on the extrinsic motivation. It was also found that commitment was an important mediating factor in UCC environment between motivation and content creativity. A more fully mediating model was found to have the highest explanation power compared to no-mediation or partially mediated models. This paper ends with implications of the study results. First, from the theoretical perspective this study proposes and empirically validates the commitment as an important mediating factor between motivation and content creativity. This result reflects the characteristics of online environment in which the UCC creation activities occur voluntarily. Second, from the practical perspective this study proposes several concrete reward factors that are germane to the UCC environment, and their effectiveness to the content creativity is estimated. In addition to the quantitive results of relative importance of the reward factrs, this study also proposes concrete ways to provide the rewards in the UCC environment based on the FGI data that are collected after our participants finish asnwering survey questions. Finally, from the methodological perspective, this study suggests and implements a way to measure the UCC content creativity independently from the content generators' creativity, which can be used later by future research on UCC creativity. In sum, this study proposes and validates important reward features and their relations to the motivation, commitment, and the content creativity in UCC environment, which is believed to be one of the most important factors for the success of UCC and Web 2.0. As such, this study can provide significant theoretical as well as practical bases for fostering creativity in UCC contents.