Price bias and common practice in option pricing

Generally, the semiclosed-form option pricing formula for complex financial models depends on unobservable factors such as stochastic volatility and jump intensity. A popular practice is to use an estimate of these latent factors to compute the option price. However, in many situations this plug-and-play approximation does not yield the appropriate price. This article examines this bias and quantifies its impacts. We decompose the bias into terms that are related to the bias on the unobservable factors and to the precision of their point estimators. The approximated price is found to be highly biased when only the history of the stock price is used to recover the latent states. This bias is corrected when option prices are added to the sample used to recover the states' best estimate. We also show numerically that such a bias is propagated on calibrated parameters, leading to erroneous values. The Canadian Journal of Statistics 48: 8–35; 2020 © 2019 Statistical Society of Canada     

Inequality Assessment by Probabilistic Development Indices

Social Indicators Research - This paper analyses the Human Development Index (HDI) time series from 2010 to 2017. An alternative index is studied, which combines the same components of the HDI by...     

Foreign-born and native-born migration in the U.S.: evidence from linked IRS administrative and census survey records

Journal of Population Research - This paper details efforts to link administrative records from the Internal Revenue Service (IRS) to American Community Survey (ACS) and 2010 Census microdata for...     

Japanese and American Identities: Values and Their Transmission in the Family

In this paper, we are studying social identities within a cross-national framework as they are reflected in values regarding social institutions. We compare value items to infer similarities and differences between Japan and the US, but more importantly we analyze value configurations, using factor analysis, as an expression of underlying cultural expectations. We also argue that the way values are transmitted further defines the distinctive cultural basis of social identities. Using a unique data set, The Generations Survey , we propose to contribute theoretically and methodologically to understanding the role of culture in postmodern societies. Our research, based on identical national surveys collected in 1995, provides a systematic way to compare values in two countries. The research builds on and specifies existing ethnographic case studies and in-depth interviews around a variety of themes that shape social identities such as the link between family and work expectations, the role of ethical values in business, the importance of national identification, and the meaning of community involvement. The paper concludes by suggesting that despite homogenizing trends and surface similarities, cultural distinctiveness persists in the ways values cluster and is transmitted in the family, shaping the social identities of Japanese and US respondents.     

Institutional Constraints and Deforestation: An Application to Mexico

Following North (1990), this article hypothesizes that effective rural institutions may impose additional costs on tropical deforestation through agricultural conversion. This allows a formal agricultural household analysis of institutional constraints on deforestation and therefore a method of empirically testing whether there is any significant difference in the actual level of forest land conversion under institutional constraints compared to the level of conversion under pure open access. A dynamic panel analysis for agricultural planted area in Mexico at state level and over the 1960–85 period confirms that institutional constraints on land clearing affected deforestation during the pre-NAFTA era.