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     

Gender and the Politics of Death: Female Representation,Political and Developmental Context,and Population Health in a Cross-National Panel

There is considerable speculation that female political empowerment could improve population health. Yet, evidence to date is limited, and explanations for why political empowerment would matter and the conditions under which this might be enhanced or muted are not well understood. In this article, we draw on theoretical work on the politics of representation to frame an investigation of whether increases in the percentage of females in a country’s parliament influence mortality rates. We further examine whether the relationship is conditioned by extent of democracy and economic and social development. Through multivariate longitudinal regression, we analyze four indicators of mortality in 155 countries spanning 1990 to 2014 with controls for initial country conditions, time-stable structural predispositions to higher mortality, and a number of time-varying potential confounders. Results indicate that a high level of female representation—30 % or greater in our models—has large negative associations with mortality, that these are particularly strong in lesser developed and weak democratic contexts, that high female political representation effectively offsets liabilities associated with low development, and that the relationships are robust to various operationalizations of social development. In the end, our research provides a particularly thorough accounting of the relationship between female political representation and population health, particularly by specifying the conditions under which female representation is most salient. In doing so, the research suggests important links between issues of female empowerment, political context, and developmental trajectories of countries more generally.     

Constrained vs unconstrained labor supply: the economics of dual job holding

This paper develops a unified model of dual and unitary job holding based on a Stone-Geary utility function. The model incorporates both constrained and unconstrained labor supply. Panel data methods are adapted to accommodate unobserved heterogeneity and multinomial selection into six mutually exclusive labor supply regimes. We estimate the wage and income elasticities arising from selection and unobserved heterogeneity as well as from the Stone-Geary Slutsky equations. The labor supply model is estimated with data from the British Household Panel Survey 1991–2008. Among dual job holders, our study finds that the Stone-Geary income and wage elasticities are much larger for labor supply to the second job compared with the main job. When the effects of selection and unobserved heterogeneity are taken account of, the magnitudes of these elasticities on the second job tend to be significantly reduced.     

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...     

Decision-making: from neuroscience to neuroeconomics—an overview

Theory and Decision -     

The intergenerational education spillovers of pension reform in China

Economic theory establishes that pension privatization weakens the link between old and young and so reduces the incentive to invest in public education in an economy with lower return rate of capital than growth rate of wage. However, empirical studies of the link change are few. In this paper, we investigate the effects of pension privatization and the central government’s subsidy to individual accounts on public education spending in a three-period overlapping generation model. And then, we take contemporary pension reforms in a number of Chinese provinces as offering natural experiment conditions. Using a difference-in-difference framework and 282 municipal districts panel data over years 1998–2009, we test the pension-education theoretical link change. Both our theoretical and empirical results confirm that pension privatization is adversely associated with local public spending on education in China. Private pension subsidies, moreover, magnify this effect. Our study supports the theoretical assertion and selective empirical findings of a negative intergenerational effect of pension privatization.     

Book Review: Restless Nation: Starting Over in America. By James M. Jasper. Chicago: University of Chicago Press, 2000. 296 pages,hardcover, ISBN: 0-226-39478-6

Qualitative Sociology -