High frequency trading (HFT) is taking world capital markets by storm, notably in the United States and the United Kingdom, where it accounted for about 50 percent of equities trading in 2012, and to a growing extent in other parts of Europe and in Canada. Are high frequency traders angels or devils in terms of the impact on capital markets? Critics claim the latter and charge that they put retail and institutional investors at a disadvantage. Critics also blame high frequency trading for the “flash crash” on the Dow of May 6 2010 and say it has increased the likelihood of such events happening again. A closer examination of these views is in order. In this Commentary, I first look at what HF traders do and how HFT differs from traditional market making. I then explore the empirical evidence relating to the effect of HFT on capital markets, and canvass the policy issues that HFT raises. In the final section, I list some recommendations for policymakers with respect to HFT. After surveying empirical studies of HFT, I conclude that it enhances market quality. For example, it lowers bid/ask spreads, reduces volatility, improves short-term price discovery, and creates competitive pressures that reduce broker commissions. Despite being at a pronounced speed disadvantage, retail traders have realized a net gain from the presence of HF traders in the world’s capital markets. Maintain the Order Protection Rule and Contain the Spread of Dark Pools: To prevent abusive trading practices, protect client interests, and create a level playing field among different trading venues, policymakers should defend the consolidated order book by maintaining and policing the order protection rule and minimizing the leakage of trading from the “lit” markets to “dark pools.” Do Not Interfere with Maker/Taker Pricing Models: Some observers say maker/taker pricing raises higher trading costs for retail traders, because retail trade orders are typically on the active side of the market, and associated fees are passed on to customers. However, retail traders are about as likely to be on the active as the passive side of the market. Maker/taker pricing may raise costs on the margin, but also lowers bid/ask spreads. Focus on Circuit Breakers to Prevent “Flash Crashes”: HF traders did not cause the “flash crash,” and instead supply liquidity when markets become volatile. Canadian regulators concerned with preventing similar events should focus on circuit breakers to stop market anomalies before they turn into “flash crashes.”
{"title":"High Frequency Traders: Angels or Devils?","authors":"Jeffrey G. MacIntosh","doi":"10.2139/ssrn.2340673","DOIUrl":"https://doi.org/10.2139/ssrn.2340673","url":null,"abstract":"High frequency trading (HFT) is taking world capital markets by storm, notably in the United States and the United Kingdom, where it accounted for about 50 percent of equities trading in 2012, and to a growing extent in other parts of Europe and in Canada. Are high frequency traders angels or devils in terms of the impact on capital markets? Critics claim the latter and charge that they put retail and institutional investors at a disadvantage. Critics also blame high frequency trading for the “flash crash” on the Dow of May 6 2010 and say it has increased the likelihood of such events happening again. A closer examination of these views is in order. In this Commentary, I first look at what HF traders do and how HFT differs from traditional market making. I then explore the empirical evidence relating to the effect of HFT on capital markets, and canvass the policy issues that HFT raises. In the final section, I list some recommendations for policymakers with respect to HFT. After surveying empirical studies of HFT, I conclude that it enhances market quality. For example, it lowers bid/ask spreads, reduces volatility, improves short-term price discovery, and creates competitive pressures that reduce broker commissions. Despite being at a pronounced speed disadvantage, retail traders have realized a net gain from the presence of HF traders in the world’s capital markets. Maintain the Order Protection Rule and Contain the Spread of Dark Pools: To prevent abusive trading practices, protect client interests, and create a level playing field among different trading venues, policymakers should defend the consolidated order book by maintaining and policing the order protection rule and minimizing the leakage of trading from the “lit” markets to “dark pools.” Do Not Interfere with Maker/Taker Pricing Models: Some observers say maker/taker pricing raises higher trading costs for retail traders, because retail trade orders are typically on the active side of the market, and associated fees are passed on to customers. However, retail traders are about as likely to be on the active as the passive side of the market. Maker/taker pricing may raise costs on the margin, but also lowers bid/ask spreads. Focus on Circuit Breakers to Prevent “Flash Crashes”: HF traders did not cause the “flash crash,” and instead supply liquidity when markets become volatile. Canadian regulators concerned with preventing similar events should focus on circuit breakers to stop market anomalies before they turn into “flash crashes.”","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-10-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129588915","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study analyzes a sample of initial public offerings (IPOs) to examine the sources of firm-specific risk associated with investment by venture capitalists. The results indicate that IPO backing by venture capitalists is associated with risk factors related to operating profit margins and ongoing sales generation, but not operational financing. The results also indicate that venture-backed IPOs are associated with greater reductions in firm-specific risk over the course of a year that includes the date of the IPO. In sum, the findings suggest venture capitalists are willing to accept higher levels of risk in those instances where they might have an advantage in terms of managerial skill or are able to reduce firm-specific risk subsequent to investment in order to maximize returns when they cash out. The study also makes use of proxies that are representative of the ex-ante nature of firm-specific risk at the time of a new issue.
{"title":"Venture Capital and Risk Management: Evidence from Initial Public Offerings","authors":"C. Bamford, Edward B. Douthett","doi":"10.22495/RGCV2I1ART4","DOIUrl":"https://doi.org/10.22495/RGCV2I1ART4","url":null,"abstract":"This study analyzes a sample of initial public offerings (IPOs) to examine the sources of firm-specific risk associated with investment by venture capitalists. The results indicate that IPO backing by venture capitalists is associated with risk factors related to operating profit margins and ongoing sales generation, but not operational financing. The results also indicate that venture-backed IPOs are associated with greater reductions in firm-specific risk over the course of a year that includes the date of the IPO. In sum, the findings suggest venture capitalists are willing to accept higher levels of risk in those instances where they might have an advantage in terms of managerial skill or are able to reduce firm-specific risk subsequent to investment in order to maximize returns when they cash out. The study also makes use of proxies that are representative of the ex-ante nature of firm-specific risk at the time of a new issue.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"43 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-09-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128161788","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The likelihood of success of grantmaking on large scale projects depends in general on pieces of information widely dispersed and privately held by recipients, public agencies, nongovernmental organizations and other interested parties. In this paper we discuss how philanthropists could eA‚¬A‚¨A¢E†AiAƒÂ¼ectively make use of suitably designed information markets to help them gathering dispersed knowledge and beliefs on the potential for social impact of innovative projects on the one hand, and in supporting the deliberation process regarding the allocation of grants on the other one.
{"title":"Using Information Markets in Grantmaking: An Assessment of the Issues Involved and an Application to Italian Banking Foundations","authors":"E. Gaffeo","doi":"10.2139/ssrn.2327459","DOIUrl":"https://doi.org/10.2139/ssrn.2327459","url":null,"abstract":"The likelihood of success of grantmaking on large scale projects depends in general on pieces of information widely dispersed and privately held by recipients, public agencies, nongovernmental organizations and other interested parties. In this paper we discuss how philanthropists could eA‚¬A‚¨A¢E†AiAƒÂ¼ectively make use of suitably designed information markets to help them gathering dispersed knowledge and beliefs on the potential for social impact of innovative projects on the one hand, and in supporting the deliberation process regarding the allocation of grants on the other one.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"374 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-09-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116324989","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Mobile financial services — often called mobile money — are a high priority for many mobile operators, financial institutions, technology firms and governments. In regions where financial inclusion is limited, such as sub- Saharan Africa (SSA), mobile money promises a lower-cost, more scalable alternative to traditional banking. Yet, despite high interest levels in SSA markets, there have been few success stories to date. This is partly due to uncertainty about whether Kenya — where M-Pesa has become one of the few mobile money success stories — is unique, or whether the potential for mobile payments in other markets is similarly robust. To cast some light on the opportunity, this article attempts to quantify some of the many highpotential payments flows in this rapidly evolving region, and to estimate the associated revenue pools.
{"title":"Sub-Saharan Africa: A Major Potential Revenue Opportunity for Digital Payments","authors":"J. Kendall, R. Schiff, E. Smadja","doi":"10.2139/ssrn.2298244","DOIUrl":"https://doi.org/10.2139/ssrn.2298244","url":null,"abstract":"Mobile financial services — often called mobile money — are a high priority for many mobile operators, financial institutions, technology firms and governments. In regions where financial inclusion is limited, such as sub- Saharan Africa (SSA), mobile money promises a lower-cost, more scalable alternative to traditional banking. Yet, despite high interest levels in SSA markets, there have been few success stories to date. This is partly due to uncertainty about whether Kenya — where M-Pesa has become one of the few mobile money success stories — is unique, or whether the potential for mobile payments in other markets is similarly robust. To cast some light on the opportunity, this article attempts to quantify some of the many highpotential payments flows in this rapidly evolving region, and to estimate the associated revenue pools.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"83 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129495804","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
At the State Science & Technology Institute's September conference in Portland, Thomas Vass, of the Private Capital Market, Inc., is going to address the conference on how the new Regulation D 506(c) rules can promote regional economic growth. His presentation is titled “How Economic Developers Can Fill The Crowdfunding Capital Market Gaps In Regional Innovation Ecosystems: Economic Developers Can Manage The Regional Deal Flow Pipeline.” The third part of his presentation presents a mental map for economic developers on where to look for crowdfunding investment opportunities in their home communities.
{"title":"Increasing the Number of Crowdfunding Technological Investment Opportunities in Your Local Small Business Economy","authors":"Laurie Thomas Vass","doi":"10.2139/ssrn.2308932","DOIUrl":"https://doi.org/10.2139/ssrn.2308932","url":null,"abstract":"At the State Science & Technology Institute's September conference in Portland, Thomas Vass, of the Private Capital Market, Inc., is going to address the conference on how the new Regulation D 506(c) rules can promote regional economic growth. His presentation is titled “How Economic Developers Can Fill The Crowdfunding Capital Market Gaps In Regional Innovation Ecosystems: Economic Developers Can Manage The Regional Deal Flow Pipeline.” The third part of his presentation presents a mental map for economic developers on where to look for crowdfunding investment opportunities in their home communities.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"111 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-08-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129743881","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study attempts to discover and analyze the predictive power of stock messages, posting on financial message boards, on future stock price directional movements. We construct a set of robust models based on sentiment analysis and data mining algorithms. Our dataset consist of 447,393 messages, on the 30 Dow Jones Index (DJIA) stocks, posted on the Yahoo! Finance message board in the period August 2012 to May 2013, of which 55,217 with sentiment tag and 5,967 distinct authors. We propose a novel way to generate sentiment based on author’s credibility, calculated on accuracy of his past messages. Our results provide empirical evidence that, using our method (3 and 5 scale index models), there is strong and useful information on financial message boards pertinent to stock market movements. In addition, we demonstrate that we can use this information in order to make accurate predictions about the return on investment and to implement good trading strategies based on sentiment analysis, doing, on average, much better than traditional investment strategies like Buy and Hold or Moving Averages (5-20 periods). Our results appear to be statistically and economically significant. Theory that suggests a link between small investor behavior and stock market performance is now supported by our work.
{"title":"Web Sentiment Analysis for Revealing Public Opinions, Trends and Making Good Financial Decisions","authors":"Cristian Bissattini, K. Christodoulou","doi":"10.2139/ssrn.2309375","DOIUrl":"https://doi.org/10.2139/ssrn.2309375","url":null,"abstract":"This study attempts to discover and analyze the predictive power of stock messages, posting on financial message boards, on future stock price directional movements. We construct a set of robust models based on sentiment analysis and data mining algorithms. Our dataset consist of 447,393 messages, on the 30 Dow Jones Index (DJIA) stocks, posted on the Yahoo! Finance message board in the period August 2012 to May 2013, of which 55,217 with sentiment tag and 5,967 distinct authors. We propose a novel way to generate sentiment based on author’s credibility, calculated on accuracy of his past messages. Our results provide empirical evidence that, using our method (3 and 5 scale index models), there is strong and useful information on financial message boards pertinent to stock market movements. In addition, we demonstrate that we can use this information in order to make accurate predictions about the return on investment and to implement good trading strategies based on sentiment analysis, doing, on average, much better than traditional investment strategies like Buy and Hold or Moving Averages (5-20 periods). Our results appear to be statistically and economically significant. Theory that suggests a link between small investor behavior and stock market performance is now supported by our work.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-07-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117119912","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Rising global competition, increasing deregulation, introduction of innovative products and delivery channels have pushed risk management to the forefront of today’s banking. Ability to predict risks and take appropriate position is the key to success. It can be said that risk takers will survive, effective risk managers will prosper and risk averse are likely to perish. In the regulated banking environment, banks had to primarily deal with credit or default risk. As the economy move into a perfect market economy, it has to deal with a whole range of market related risks like exchange risks, interest rate risk, etc. Operational risk, which had always existed in the system, would become more pronounced in the coming days as we have technology as a new factor in today’s banking. Traditional risk management techniques become obsolete with the growth of derivatives and off-balance sheet operations, coupled with diversification. The expansion in E-banking will lead to continuous vigilance and revisions of regulations.
{"title":"Risk Management in Banking Industry","authors":"S. Dhar","doi":"10.2139/SSRN.2280369","DOIUrl":"https://doi.org/10.2139/SSRN.2280369","url":null,"abstract":"Rising global competition, increasing deregulation, introduction of innovative products and delivery channels have pushed risk management to the forefront of today’s banking. Ability to predict risks and take appropriate position is the key to success. It can be said that risk takers will survive, effective risk managers will prosper and risk averse are likely to perish. In the regulated banking environment, banks had to primarily deal with credit or default risk. As the economy move into a perfect market economy, it has to deal with a whole range of market related risks like exchange risks, interest rate risk, etc. Operational risk, which had always existed in the system, would become more pronounced in the coming days as we have technology as a new factor in today’s banking. Traditional risk management techniques become obsolete with the growth of derivatives and off-balance sheet operations, coupled with diversification. The expansion in E-banking will lead to continuous vigilance and revisions of regulations.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"319 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-06-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133914184","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Convergence of financial theory and practice heralded by the seminal and fundamental economic research by Arrow and Debreu in the early 1950’s has led in the hands of financial engineers to an extraordinary financial innovation in the 70’s and ever since. The theoretical ability to price future assets has led to an explosive growth of financial trading, liquidity and to the growth of finance and its citadels. Options and credit derivative markets, securitization of non or partially liquid assets have provided extraordinary opportunities to “unearth” frozen assets for trade and profit. The 2007-2009 financial crisis has evoked a greater awareness that traditional financial dogma is based on assumptions that have become increasingly difficult to justify. Globalization, the growth of "Too Big To Fail" (TBTF) firms, insiders trading, information and power asymmetries and the growth of regulation have, among other factors, conspired to render the assumption of complete markets to be unsustainable. Deviant behaviors in financial markets, non-transparency of transactions, complexity and dependence on a global scale have created a fragile and contagious global economy, where systemic risks are no longer an exception but a permanent threat. By the same token, the explosive growth of information and data fueled by the internet and social media as well as an IT has created far greater dependence of financial systems and institutions on Information Technology (IT) emphasizing information as assets they seek to use for both financial management and competitive advantage. Technology, engineering and financial trends and developments have combined to yield an extraordinary growth of complexity, regulation and globalization, providing new opportunities and risks and undermine the traditional model based approaches to finance.The purposes of this paper are to outline a number of factors, economic or otherwise that undermine the finance’s fundamental theories, their practice, regulation and their implications to the future of finance. In particular, we emphasize a strategic and multi-polar finance, beset by complexity, chaos and countervailing forces leading a multi-agent finance, computational and financial data-analytics driven rather than simple risk models of uncertainty.A number of pricing models based on a strategic finance and a micro-matching of economic and financial states are also summarized and their practical implications drawn. In addition, topics such as Big Data finance and multi-agent financial modeling are outlined to provide elements for future theoretical and practical developments. This paper is a work in progress and therefore its intent is to attract greater attention to some elements (however selective and partial) that would contribute to potential transformations of a financial engineering future.
{"title":"The Future of Financial Engineering","authors":"C. Tapiero","doi":"10.2139/ssrn.2259232","DOIUrl":"https://doi.org/10.2139/ssrn.2259232","url":null,"abstract":"Convergence of financial theory and practice heralded by the seminal and fundamental economic research by Arrow and Debreu in the early 1950’s has led in the hands of financial engineers to an extraordinary financial innovation in the 70’s and ever since. The theoretical ability to price future assets has led to an explosive growth of financial trading, liquidity and to the growth of finance and its citadels. Options and credit derivative markets, securitization of non or partially liquid assets have provided extraordinary opportunities to “unearth” frozen assets for trade and profit. The 2007-2009 financial crisis has evoked a greater awareness that traditional financial dogma is based on assumptions that have become increasingly difficult to justify. Globalization, the growth of \"Too Big To Fail\" (TBTF) firms, insiders trading, information and power asymmetries and the growth of regulation have, among other factors, conspired to render the assumption of complete markets to be unsustainable. Deviant behaviors in financial markets, non-transparency of transactions, complexity and dependence on a global scale have created a fragile and contagious global economy, where systemic risks are no longer an exception but a permanent threat. By the same token, the explosive growth of information and data fueled by the internet and social media as well as an IT has created far greater dependence of financial systems and institutions on Information Technology (IT) emphasizing information as assets they seek to use for both financial management and competitive advantage. Technology, engineering and financial trends and developments have combined to yield an extraordinary growth of complexity, regulation and globalization, providing new opportunities and risks and undermine the traditional model based approaches to finance.The purposes of this paper are to outline a number of factors, economic or otherwise that undermine the finance’s fundamental theories, their practice, regulation and their implications to the future of finance. In particular, we emphasize a strategic and multi-polar finance, beset by complexity, chaos and countervailing forces leading a multi-agent finance, computational and financial data-analytics driven rather than simple risk models of uncertainty.A number of pricing models based on a strategic finance and a micro-matching of economic and financial states are also summarized and their practical implications drawn. In addition, topics such as Big Data finance and multi-agent financial modeling are outlined to provide elements for future theoretical and practical developments. This paper is a work in progress and therefore its intent is to attract greater attention to some elements (however selective and partial) that would contribute to potential transformations of a financial engineering future.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132407918","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
More (rather than fewer) material resources are thought to be the key driver in innovation project performance. Recent empirical evidence, however, suggests that the influence of material resource availability on innovation projects is not as simple and straightforwardly positive as it may seem. We build on the concept of an innovation project team's resource elasticity to disentangle the material resource–innovation output conundrum. This concept is analogous to the marketing concept of price elasticity and points to four types of innovation project teams based on their resource elasticity: In resource‐elastic teams, the relationship between material resources and innovation outcomes is positive (hence, they are ‘resource driven’ when able to dispose of adequate material resources or ‘resource victims’ when lacking these material resources). In contrast, and as a significant departure from previous work, resource‐inelastic teams show no or even a negative relationship between material resource adequacy and team performance (thus, the teams are ‘resourceful’ if they can perform with limited material resources or ‘resource burners’ if they show low success with adequate material resources). Because neither adequate nor inadequate material resources seem to be a reliable predictor of success, we synthesize empirical research efforts that point to each team type's key characteristics to derive novel implications for managing innovation projects.
{"title":"The Influence of Material Resources on Innovation Projects: The Role of Resource Elasticity","authors":"M. Weiss, M. Hoegl, M. Gibbert","doi":"10.1111/radm.12007","DOIUrl":"https://doi.org/10.1111/radm.12007","url":null,"abstract":"More (rather than fewer) material resources are thought to be the key driver in innovation project performance. Recent empirical evidence, however, suggests that the influence of material resource availability on innovation projects is not as simple and straightforwardly positive as it may seem. We build on the concept of an innovation project team's resource elasticity to disentangle the material resource–innovation output conundrum. This concept is analogous to the marketing concept of price elasticity and points to four types of innovation project teams based on their resource elasticity: In resource‐elastic teams, the relationship between material resources and innovation outcomes is positive (hence, they are ‘resource driven’ when able to dispose of adequate material resources or ‘resource victims’ when lacking these material resources). In contrast, and as a significant departure from previous work, resource‐inelastic teams show no or even a negative relationship between material resource adequacy and team performance (thus, the teams are ‘resourceful’ if they can perform with limited material resources or ‘resource burners’ if they show low success with adequate material resources). Because neither adequate nor inadequate material resources seem to be a reliable predictor of success, we synthesize empirical research efforts that point to each team type's key characteristics to derive novel implications for managing innovation projects.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115909979","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In the age of automation, trading and market making is about estimating the fair price of automated trading system research and development projects. This requires a new methodology to arrive at such a fair price. A real options framework is a natural choice. In this paper we review a methodology for automated trading system R&D and present a practical real option model for valuing such projects so as to enable rapid strategy cycling.
{"title":"A Practical Real Options Approach to Valuing High Frequency Trading System R&D Projects","authors":"A. Kumiega, Ben Van Vliet","doi":"10.2139/ssrn.2327201","DOIUrl":"https://doi.org/10.2139/ssrn.2327201","url":null,"abstract":"In the age of automation, trading and market making is about estimating the fair price of automated trading system research and development projects. This requires a new methodology to arrive at such a fair price. A real options framework is a natural choice. In this paper we review a methodology for automated trading system R&D and present a practical real option model for valuing such projects so as to enable rapid strategy cycling.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"54 4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-02-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125928951","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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