Asian J. of Management Science and Applications (4 papers in press)
Information Embedded in Options Open Interest and their Utility in Directional Trading
by Avinash ., T. Mallikarjunappa
Abstract: This paper investigates whether information embedded in open interest is informative in directional trading using daily data on Nifty50 options and 10 popular company stock options listed at NSE for the financial year between 2011 and 2016. We then predicted stock price at the options expiration based on OI distribution. We assume option market is informationally efficient based on empirical evidence and then compare the performance of three directional trading strategies with its non-directional variant. The results show that the OI based active strategies perform better than passive strategies and hence, they can be used to predict the direction of price movement and to strategise direction based trading using stock and options.
Keywords: Active Strategy; Directional Trading; Non-price; Open Interest; Options; Passive Strategy; Prediction; Price Movement.
IDENTIFYING THE KEY INDICATORS OF FINANCIAL STABILITY AND FINANCIAL DEVELOPMENT: A REVIEW OF FINANCIAL SERVICE SECTOR
by Rahul Dhiman
The present study makes an attempt to study the major indicators used in the previous studies for examining the financial development and financial stability in order to select the market. This study is conducted as a systematic review based on an assessment of papers on international published in academic journals between 1991 and 2015. The findings of the study reveal that there is the existence of mixed proxies/indicators of financial development and financial stability in the literature of financial services sector. The variable that has received much attention in the empirical literature on financial development is a private credit to GDP ratio. Similarly, foreign currency loans as a percentage of total loans and loan to deposit ratio are indicators to examine financial stability. The common methodological trends found in the literature are Granger causality tests and disclose the existence of unidirectional, bidirectional or no causality. In order to examine the long-run relationship, Johansen co-integration tests are used in the literature. The study recommends that in the countries where the financial system is weak, and where immediate, full-fledged financial sector liberalisation is not advisable, can open up certain types of financial services trade, and hence may not finalise that nation as a select market.
Keywords: Strategic framework; Financial Services; Financial development; financial stability.
A Near-Optimal Policy and its Comparison with Base stock and Kanban policies in a Two-Stage Production and Inventory System with Advance Demand Information
by Koichi Nakade, Shizuru Tsuchiya
Abstract: Base stock and (Extended) Kanban policies have been analyzed as basic and simple production and inventory policies. On the other hand, advance demand information (ADI) is useful for controlling production and inventory systems, and the production control with ADI has been discussed in a decade. In addition, if the order and production are made corresponding to the state of the system, more profits are expected to be achieved. To derive a state-dependent dynamic policy, an approach of Markov decision processes can be used. Deriving an optimal policy is difficult for the large-size problem, however, because of the curse of dimensionality. In this paper, Two-Phase Time Aggregation Algorithm (Arruda and Fragoso (2015), TA-algorithm) is applied to a two-stage production and inventory system with advance demand information. From observation in numerical examples for the small dimension problem, modification of TA algorithm leads to convergence to better near-optimal policies. Numerical results show effectiveness of the modification, and the derived near-optimal policies are compared with base stock and extended Kanban policies.
Keywords: Markov decision process; advance demand information; algorithm; kanban; base stock; policy iteration; time aggregation.
A Study of Total Optimization Model for Supply Balance in Electric Power Market Network
by Jing Sun, Yuna Mori, Koichi Nakade
Abstract: This paper aims to derive optimal combination of electric powers for supply balance of electric power market network. As traditional combination of electric powers, hydro, fuel and nuclear power are developed in order to provide electricity for modern living in a stable manner at the lowest prices. Recently, due to the problems of CO2 emissions, fuel price increase and safety measures of nuclear power plants, the increase of renewable energy in Energy Mix became an important issue of electric power industry. In this paper, first, an electric supply model for calculating the optimal Energy Mix considered with safety, economy and environment is proposed, then, a total optimization stochastic model for supply balance considered electric power supply capacity and reliability is developed, finally, a case study of Japan power market is conducted. The results of numeric experiment show that the proposed models are useful for setting of the optimal Energy Mix.
Keywords: Stochastic programming; Renewable energy; Power market network.