In Joon Kim, Suk Joon Byun and Yuen Jung Park
This paper presents a numerical procedure for pricing collateralized bond obligations (CBO) and analyze the impact of default correlations for the prices of collateralized bond…
Abstract
This paper presents a numerical procedure for pricing collateralized bond obligations (CBO) and analyze the impact of default correlations for the prices of collateralized bond obligations. Specifically, we adopt default correlation model of Zhou (2001) and first passage time model of Black and Cox (1976). The model of Black and Cox is used for estimating the value of the firm and the volatility of the firm value which are unobservable variables. We find that the impact of default correlations on the prices of collateralized bond obligations is generally quite large. This can be tested by carrying out Monte-Carlo simulations for firm value processes, assuming first no default correlations and second modeling default correlations between the processes. We also compare the model prices and recently issued CBO market price and find that no default correlation model over prices the issued CBO and default correlation model under prices the issued CBO. These results in this paper emphasize that modeling default correlations is very important in analyzing CBO and a more complicated further analysis is required.
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Da Hea Kim, Tai-Yong Roh, Suk Joon Byun and Jung Soon Hyun
This study examines the empirical performance of emission allowance option pricing models, concentrating on the EU-ETS markets. For option pricing, we use parameters estimated…
Abstract
This study examines the empirical performance of emission allowance option pricing models, concentrating on the EU-ETS markets. For option pricing, we use parameters estimated from option market data whereas few papers in the extant literature use parameters from underlying asset data. As results, it is shown that the most appropriate is the one-factor model in which the EUA logarithmic spot prices follow the mean-reverting process of Ornstein-Uhlenbeck type. Also, the addition of jumps is not shown to make any significant improvement in the model performance. These results are quite striking in the sense that existing papers report the addition of jumps is necessary to improve option pricing on the EU-ETS markets. In sum, this paper is meaningful in the sense that it extends the growing empirical literature on the behavior of emission allowance spot prices
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In Kampen et al.(2008), Monte Carlo estimators obtained by the WKB (Wentzel, Brillouin, Kramers) approximation had better results than Monte Carlo estimators obtained by the…
Abstract
In Kampen et al.(2008), Monte Carlo estimators obtained by the WKB (Wentzel, Brillouin, Kramers) approximation had better results than Monte Carlo estimators obtained by the lognormal approximation for European swaptions and Bermudan swaptions. We compare the WKB estimators with the lognormal estimators and the pathwise derivative estimators for ratchet caplets and sticky caplets with various maturities. The results show that the WKB estimators have similar performance compared with the lognormal estimators and the pathwise derivative estimators for ratchet caplets. However, the WKB estimators show worse performance than both the lognormal estimators and the pathwise derivative estimators for sticky caplets. These results indicate that the WKB estimators would be hard to substitute for the lognormal estimators for various derivatives.
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Suk Joon Byun, Dong Woo Rhee and Sol Kim
The purpose of this paper is to examine whether the superiority of the implied volatility from a stochastic volatility model over the implied volatility from the Black and Scholes…
Abstract
Purpose
The purpose of this paper is to examine whether the superiority of the implied volatility from a stochastic volatility model over the implied volatility from the Black and Scholes model on the forecasting performance of future realized volatility still holds when intraday data are analyzed.
Design/methodology/approach
Two implied volatilities and a realized volatility on KOSPI200 index options are estimated every hour. The grander causality tests between an implied volatility and a realized volatility is carried out for checking the forecasting performance. A dummy variable is added to the grander causality test to examine the change of the forecasting performance when a specific environment is chosen. A trading simulation is conducted to check the economic value of the forecasting performance.
Findings
Contrary to the previous studies, the implied volatility from a stochastic volatility model is not superior to that from the Black and Scholes model for the intraday volatility forecasting even if both implied volatilities are informative on one hour ahead future volatility. The forecasting performances of both implied volatilities are improved under high volatile market or low return market.
Practical implications
The trading strategy using the forecasting power of an implied volatility earns positively, in particular, more positively under high volatile market or low return market. However, it looks risky to follow the trading strategy because the performance is too volatile. Between two implied volatilities, it is hardly to say that one implied volatility beats another in terms of the economic value.
Originality/value
This is the first study which shows the forecasting performances of implied volatilities on the intraday future volatility.
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After the Korean War, South Korean politics was dominated by national security concerns. Reversing Carl von Clausewitz's well-known dictum, in South Korea, “politics is the…
Abstract
After the Korean War, South Korean politics was dominated by national security concerns. Reversing Carl von Clausewitz's well-known dictum, in South Korea, “politics is the continuation of war by other means.” Until the late 1980s, politics in South Korea was far from democratic. South Korea had five direct presidential elections (1987, 1992, 1997, 2002, and 2007) and six national assembly elections (1988, 1992, 1996, 2000, 2004, and 2008) after the democratic transition of 1987. In 1992, a civilian candidate, Young Sam Kim, was elected president. Young Sam Kim (1993–1998) prosecuted and punished former generals turned presidents Doo Hwan Chun (1980–1988) and Tae Woo Roh (1988–1993) for corruption, mutiny and treason in 1995. Dae Jung Kim (1998–2003) was elected president in 1997. For the first time in South Korean political history, regime change occurred between a ruling party and an opposition party.
In this chapter, the change and continuity of civil–military relations through the fluctuating dynamics of the democratic transition and consolidation in South Korea is examined. A positive consolidation of democratic reform is one that, while securing indisputable civilian supremacy, grants the military enough institutional autonomy for the efficient pursuit of its mission. Civilian supremacy should be institutionalized not only by preventing military intervention in civilian politics but also by ensuring civilian control over the formation and implementation of national defense policy.
In sum, despite three terms of civilian presidency, civilian supremacy has not yet fully institutionalized. Although significant changes in civil-military relations did occur after the democratic transition, they were not initiated by elected leaders with the intention of establishing a firm institutional footing for civilian supremacy. South Korea's political leaders have not crafted durable regulations and institutions that will sustain civilian control over the military.
More than six decades, Korea is still divided. The most highly militarized zone in the world lies along the demilitarized zone. How to draw the line prudently between seeking national security and promoting democracy shall be the most delicate task facing all the civilian regimes to come in South Korea. That mission will remain challenging not only for civilian politicians but also for military leaders.
Clara Lee Brown, Natalia Ward and Benjamin H. Nam
While conceived to examine key factors affecting post-retirement career advancement of retired elite athletes in South Korea, the purpose of this paper is to report how English…
Abstract
Purpose
While conceived to examine key factors affecting post-retirement career advancement of retired elite athletes in South Korea, the purpose of this paper is to report how English, as a de facto global lingua franca, functions as a powerful gatekeeper in the sports administration field.
Design/methodology/approach
Interpreted through the lens of Bourdieu’s linguistic capital and Gramsci’s hegemony of language, the present study draws on content analysis of semi-structured individual interviews, as well as focus group interviews, conducted with thirty former South Korean elite athletes.
Findings
Based on the data analysis, systematic bias toward athletes was uncovered, privileging English as the single determining factor for employment. Furthermore, the educational implications for adult learners of English as a Foreign or English an Additional Language reveal unrealistic expectations of top–down language policies.
Originality/value
Perspectives of athlete participants, an underrepresented group in educational research, within the South Korean globalization context shed critical light on the pervasive aspects of English hegemony and its unexamined dimensions.