Browsing by Author "Shih, Pai-Ta"

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ON THE RATE OF CONVERGENCE OF BINOMIAL GREEKS
(2011-06-01)
Chung, San-Lin
;
Hung, Weifeng
;
Lee, Han-Hsing
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Shih, Pai-Ta
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資訊管理與財務金融系註：原資管所+財金所
This study investigates the convergence patterns and the rates of convergence of binomial Greeks for the CRR model and several smooth price convergence models in the literature, including the binomial Black-Scholes (BBS) model of Broadie M and Detemple J (1996), the flexible binomial model (FB) of Tian YS (1999), the smoothed payoff (SPF) approach of Heston S and Zhou G (2000), the GCRR-XPC models of Chung SL and Shih PT (2007), the modified FB-XPC model, and the modified GCRR-FT model. We prove that the rate of convergence of the CRR model for computing deltas and gammas is of order O(1/n), with a quadratic error term relating to the position of the final nodes around the strike price. Moreover, most smooth price convergence models generate deltas and gammas with monotonic and smooth convergence with order O(1/n). Thus, one can apply an extrapolation formula to enhance their accuracy. The numerical results show that placing the strike price at the center of the tree seems to enhance the accuracy substantially. Among all the binomial models considered in this study, the FB-XPC and the GCRR-XPC model with a two-point extrapolation are the most efficient methods to compute Greeks. (C) 2010 Wiley Periodicals, Inc. Jrl Fut Mark 31:562-597, 2011
Real options and earnings-based bonus compensation
(2012-08-01)
Huang, Hsing-Hua
;
Huang, Hongming
;
Shih, Pai-Ta
;
資訊管理與財務金融系註：原資管所+財金所
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Department of Information Management and Finance
This study extends the works of Mauer and Sarkar (2005) and Andrikopoulos (2009) by incorporating a regime-dependent earnings-based bonus into managerial compensation. Examining the individual effects of ownership shares and earnings-based bonus compensation, we find that the former provides managers with incentives to issue debt, whereas the latter induces the opposite result, although consistent impacts are found for the two types of compensation on both agency costs and the optimal investment decisions of managers. When managerial compensation comprises both ownership shares and an earnings-based bonus, there are significant differences in the effects of these two types of performance compensation on managers' optimal investment and financing decisions, agency costs, optimal debt ratios and credit spreads, as a result of the specific interactions between the investment and financing decisions. (C) 2012 Elsevier B.V. All rights reserved.