Contributions published at Quantitative Finance (Marc Chesney)

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This paper introduces an analytically tractable method for the pricing of European and American Parisian options in a flexible jump-diffusion model. Our contribution is threefold. First, using a double Laplace-Carson transform with respect to the option maturity and the Parisian (excursion) time, we obtain closed-form solutions for different types of Parisian contracts. Our approach allows us also to analytically disentangle contributions of the jump and diffusion components for Parisian options in the excursion region. Second, we provide numerical examples and quantify the impact of jumps on the option price and the greeks. Finally, we study the non-monotonic effects of volatility and jump intensity close to the excursion barrier, which are important for shareholders’ investment policy decisions in a levered firm.

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The goal of this article is to assess the optimal choices of a smallholder quinoa farmer in the Puno region of Peru, in terms of his decision if and when to undertake certain investments that are expected to increase quinoa yield and crop resistance to harsh weather conditions, such as frost. We focus on two irreversible options, namely quinoa variety management andWaruWaru. The former alternative considers the option of the farmer to switch from his business-as-usual quinoa variety to one that has different yield and frost resistance characteristics. The latter alternative refers to the implementation of an ancestral cultivation practice that is estimated to offer benefits in terms of yield increase and resistance to harsh climate conditions. We rely on Real Options Analysis to assess the two types of investment opportunities for the farmer. This approach allows us to determine not only whether the investments should be undertaken or not, but also the optimal timing to do so. We find that one quinoa variety (Kancolla) offers the highest benefits to the farmer and switching to this option should be immediate if investment costs are low; however, as costs increase, the decision to switch quinoa variety is optimally postponed until quinoa price uncertainty is reduced. We find that the Waru Waru option is not worth undertaking unless further evidence related to the increase in the productivity of quinoa is developed. However, at increases in productivity above 20%, the Waru Waru option becomes highly attractive. The article also discusses how quinoa price dynamics, yield sensitivity to frost, and governmental support impact decisions of the smallholder farmer.

Consumer financial health has become a prominent topic in developed economy contexts, but its relevancy and microdeterminants in emerging markets are not yet well understood. This paper operationalizes newly formulated conceptual frameworks of global consumer financial health and financial capability using nationally-representative and comparable survey data from three developed and five emerging economies. It applies regression analyses to these data to test whether a joint interaction effect exists between individuals' levels of financial literacy and financial inclusion on their financial health, and how this effect differs across contextual settings. The paper's main findings confirm a multiplicative interaction effect, but demonstrate that this joint relationship is primarily observed in lower-income populations, whether across or within countries, whereas higher-income populations exhibit positive but largely independent relationships between increased financial inclusion, financial literacy, and financial health. The key implication is that, of all populations, the financial health of marginalized populations is most affected by increased integration into formal financial systems, but that the direction of this relationship is also most dependent on their personal levels of financial literacy. As a practical application, the paper focuses on the sample's self-employed and employed lower-income respondents and estimates both their respective optimal minimum financial literacy thresholds, and the subpopulations at risk of negative outcomes.

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This short book describes the role big banks played in the financial crisis of 2008 while denouncing the financial oligarchy’s seizing of power and the dangers it represents for democracy today. There have been many books since the financial crisis that have considered historical events leading up to the crisis but few that consider a solution. Ten years after the great financial crash, this book synthesises the historical developments and introduces a proposal aimed at rebalancing the economy and society at large. The author presents a novel solution that would change current tax systems in the developed world, in their entirety.