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9â%- Technical University of Ostrava, Faculty of Economics, Department of Finance

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Financial Management of Firms and Financial Institutions

Ostrava, Czech Republic, 2017, 1st Edition

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ISBN 978-80-248-4138-0 (book of proceedings)

ISBN 978-80-248-4139-7 (CD)

ISSN 2336-162X

9â%- Technical University of Ostrava,

Czech Republic

Ĝ University of Economics Prague, Czech

Republic

doc. RNDr. Jozef Fecenko, CSc. University of Economics in Bratislava,

Slovakia

prof. Dr. Ing. Jan Frait Czech National Bank Prague,

Czech Republic

University of Economics in Bratislava,

Slovakia

University of Economics Prague,

Czech Republic

University of Economics Prague,

Czech Republic

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Bystrica, Slovakia

University of Economics in Bratislava,

Slovakia

9â%- Technical University of Ostrava,

Czech Republic

Ĝ University of Economics Prague,

Czech Republic

University of Economics Prague,

Czech Republic

. University of Economics Prague,

Czech Republic

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.RãLFH, Slovakia

9â%- Technical University of Ostrava,

Czech Republic

Tumpach, Ph.D. University of Economics in Bratislava,

Slovakia

Č 9â%- Technical University of Ostrava,

Czech Republic

doc. Ing. Miroslav , Ph.D. 9â%- Technical University of Ostrava,

Czech Republic

doc. Ing. Miroslav , Ph.D. 9â%- Technical University of Ostrava,

Czech Republic

9â%- Technical University of Ostrava,

Czech Republic

Ing. Petr , Ph.D. 9â%- Technical University of Ostrava,

Czech Republic

doc. Ing. 9â%- Technical University of Ostrava,

Czech Republic

prof. 9â%- Technical University of Ostrava,

Czech Republic

prof. Dr. Sergio Ortobelli Lozza University of Bergamo, Italy prof. Ing. M 9â%- Technical University of Ostrava,

Czech Republic

Ing. , Ph.D. 9â%- Technical University of Ostrava,

Czech Republic

doc. Ing. Martin Svoboda, Ph.D. Masaryk University in Brno,

Czech Republic

doc. Ing. , Ph.D. 9â%- Technical University of Ostrava,

Czech Republic

Ing. Ĝ, Ph.D. 9â%- Technical University of Ostrava,

Czech Republic

prof. Dr. Ing. Č 9â%- Technical University of Ostrava,

Czech Republic

Meta - Analysis of the Categorization of EU Countries in the Context of Tax Competition 14 The gray GM(1,1) model applications in time series analysis - selected issues 22 Dividends as risk subject of taxation in Slovak republic 33 Firm Investment under Financial Market Imperfections 39 CFC Rules as stated in the standards of the OECD and EU a comparative study 46 The Analysis of the Golden Rule in the Balance Sheet of Selected Business Accounting

Entities 54

Blajer-Ċ

Corporate reputation, ownership structure and market value in the banking sector in Poland 62 Materiality of Deferred Tax Reporting Case of Czech Listed Companies 70 Reporting ability of financial statements of micro and small accounting entities after amendment of Act on Accounting 79 Selection of the optimal solution of the decision-making problem 87 Analysis of the financial performance by applying multi-level decomposition method 96 Non-traditional approach using mathematical programming to a stock investment portfolio making 106 Modified KSU-STEM as an appropriate tool for making a portfolio of open unit trusts 114 International Taxation of Dividends as Regulated in Double Tax Treaties a Case of the Czech

Republic 122

Modified method of area division in fractal dimension estimation 131

Potential of blockchain technology 143

P/E, dividend yield and GDP growth in U.S.A.: The story of stock market valuation 151

Leszek Czerwonka, Jacek Jaworski

Capital Structure Determinants of Industrial Companies Listed on the Warsaw Stock

Exchange 157

Adaptive wavelet method for pricing options under the Stein-Stein stochastic volatility model 165 Valuation of the Two-Color Rainbow Real Options 173 Application and Comparison of the Methods for Influences Quantification Including Sensitivity

Analysis 185

Location Factors of Headquarters of Largest Czech Enterprises 195 the Polish case 201 On the Issue of Commercial Insurance and Commercial Insurance Market in the Slovak Republik 209

Durica Marek, Zvarikova Katarina

MDA vs. Logit bankruptcy models in the Slovak Republic 214 Evaluation of the Behavioral Differences in the FX Trading Approach with Regard to the Gender 222 Unconventional monetary policy tools in central banking globally and within the Czech

Republic 230

Nikola Milan, Marek Petr

Leverage of European Firms 237

ą-Wronka Aldona, Kozak Anna

The comparsion of various types of public-social partnerships in Poland in the light of the

empirical reasearch 246

Glova Jozef

Intangible Assets and Their Valuation Using Direct Intellectual Capital Methods: Pros and

Cons 255

Guo Haochen

Hedging portfolio risk management with VaR 264

Estimation and analysis of value multipliers within processing industry in Czech Republic 270 Application of Sensitivity Analysis within Determination of Chosen Partial Effects on Company's

Value 277

Business Strategy Management: The Importance of Employees During Implementation of

Strategic Changes 284

The use of Big Data in terms of overhead costs 294 The nature and importance of dislosing information about interests in any subsidiaries, joint ventures and associates according to IFRSs 301

Hospodka Jan,

Indicating Insolvency in Firms 312

DG method for the Hull-White option pricing model 320 Managing foreign exchange exposures in the context of ending the currency commitment of the

CNB 328

Is the Financial Literacy Level of Finance and Law Students the Same? 336 Efficiency of financial institutions in the Visegrad Group according to Data Envelopment Analysis with dual-role variable 342

Ilavska Iveta, Durica Marek

Delta and Gamma for Gap Options 350

Development and application of the Industry 4.0 principles in the selected firms and areas in the

Czech Republic 357

Impact of Banking Union on the Banking industry in Slovak Republic 364 Inflation forecasting in company financial management (use and reliability) 372 Employees' Performance Management by Using MCDM Methods 383 Back-test of efficiency by combining technical indicators on the EUR/JPY 391 SD portfolio enhancement with and without short sales 400 Bayesian Estimation of Probability of Incidences of the Most Serious Oncological Diseases in the

Czech Republic 407

Kostalova Jana

Use of Financial Instruments in the Czech Republic within the European Structural and Investment Funds in the Programming Period 2014-2020 415

Kouaissah Noureddine, Ortobelli Lozza Sergio

Multivariate Dominance among financial sectors 423

Banking sector 432

Break-even analysis under normally distributed input variables 440 A corporation structure draft for the selected Slovak companies 446 Application the Binomial Distribution, Hypergeometric Distribution and Poisson Probability

Distribution in Accounting 455

459

Kuna-Marszalek Anetta, Marszalek Jakub

Greening the Green - Environmental and Financial Aspects of the American Green Bond Market

Development 468

Performance management of business entities in light of comprehensive income concept 476

Lando Tommaso, Bertoli-Barsotti Lucio

Income inequality and intersecting Lorenz curves: an empirical study 484 Comparison of valuation approaches of finished goods and work in progress 491 Assessment of Impact of Items Reducing Tax Base and Tax on Total Amount of Corporate Income

Tax in the Czech Republic in Selected Sectors 498

Malavasi Matteo, Ortobelli Sergio

Semiparametric Tests for Behavioral Finance Efficiency 507 Investigating the Distributional Properties of Highly Volatile Bitcoin Exchange Rate 514 Optimal Strategy for Homeowners about Mortgages in Eurozone in 2017 522

Optimization and Testing of RSI 530

The impact of macroeconomic indicators on sovereign rating 538

Mastalerz-Kodzis Adrianna

Multidimensional phenomena analysis with the use 543 The Quantification of Effectiveness as Precondition for Facility Management 552 Benefits and risks of using outsourcing of economic activities 560 The relationship between profitability and efficiency 568

Michalkova Lucia, Kliestik Tomas

Determinants of value of tax shield in the Slovak Republic 574 Analysis of Blue-Collars and White-Collars Approach to Company's Attendance 583

Ğ-Nawrocka Monika, Zeug-ĩ

The evaluation of the effectiveness of a long-term stocks investment strategy based on the largest

Lyapunov exponent 590

Impact of changes in accounting regulation on sanctions for its violation in selected countries 599

Moravcikova Dominika, Kliestikova Jana

Brand valuation and recognition of Sedita with using a licence analogue method and the possibility of its use in creating the value of the enterprise 609 Comparative analysis of traditional and alternative financing of SMEs in Slovakia 617

Investment Bubbles 625

The possibility of identification of high-risk suppliers from financial statements 636 The Use and Comparison of Survival Models for Corporate Bankruptcies 644 Determination of Credit Risk for Debt Assets Portfolio between 2016 and 2017 653

Company in crisis 661

The Impact of Digitalization and Connectivity on Automotive OEM: Sustainability

Dashboard 668

Comparison of the tax and contribution burden on the entrepreneur in Slovak legislation 678 Possibilities of Financial Statements Presentation for Micro Accounting Entities in the Slovak

Republic 687

Podhorska Ivana, Misankova Maria

study in Slovakia 692 Multi-criteria fuzzy modelling in the issue of portfolio selection 700 708
Tax Implications of Non-monetary Capital Contributions in Corporations 716

Reuse Svend, Svoboda Martin

Czech PX-TR Derivation of Historical Data for the Performance Index and Analysis of two

Trading Strategies 723

Analysis of Variance of Economic Value Added to Chosen Industry in the Czech Republic 732

Siekelova Anna, Svabova Lucia

Decision to provide trade credit based on selected models of financial health prediction in the chosen sector 740 Strategies of Portfolio Insurance at Extremal Risks 747

Ĕ-Baron Anna

The efficiency of online auction market in Poland for chosen category of items 755

Framework for Valuation of CAT Bonds 763

Impact Analysis of the European Structural Funds on Efficiency of Employment Issues in Euro

Area 773

The significance of cross-currency basis in corporate finance 781

Steinerowska-Streb Izabella

The impact of capital shortages on the financial investment sources of family firms 790 EBIT Construction and Its Impact on ROA: Does it Affect Corporate Rating? 798 Acquisition of the company: plan for the first 100 days 805

Quality of the reporting under IFRS 8 of issuers of the quoted securities in the Czech

Republic 814

Estimation of Claim Frequency by Generalized Linear Models 821

Human Capital Accounting 831

843

MĜ A

Comparison of several alternatives to numerical pricing of options 851 Torri Gabriele, Giacometti Rosella, Rachev Svetlozar Option Pricing in Non-Gaussian Ornstein-Uhlenbeck Markets 857

Tworek Piotr

Methods of Risk Identification in Management of Public Sector Organizations 866 Spatial Structure of Headquarters of Largest Enterprises in the Czech Republic 874 The Importance of Brand Portfolio Optimization 883

Valaskova Katarina

Slovak Prediction Models in Economic Practice 891

Setting optimal limit of cover by stochastic optimisation 901 Concordance Rate between Time Series of Exchange Rates, Statistical and

Probabilistic view 907

Vitali Sebastiano, Moriggia Vittorio

Pension fund ALM models with stochastic dominance 915

Vokoun Marek

Impact of Innovation Outsourcing on the Financial Situation of Companies in the Czech Republic 923 931
Determination of Risk Measure by Assuming Laplace Distribution 937

Zeug-ĩĞ-Nawrocka Monika

Risk Analysis of Fundamental Portfolio of Investment 944 Bond valuation under risk, flexibility and interaction on a game theory basis 951 11 International Scientic Conference Financial Management and Financial Institutions V©B-TU of Ostrava, Faculty of Economics, Department of FinanceOstrava 6 { 7September 2017DG method for the Hull-White option pricing model

Jiøí Hozman

1, Tomá¹ Tichý2

Abstract

The main disadvantage of the Black-Scholes framework is that this approach can capture neither real nor risk-neutral market behaviour. Therefore many various extensions, such as incorporating of stochastic volatility into Black-Scholes model or replacing diusion processes by pure jump or jump-diusion processes, have been suggested. Among them, the Hull-White model used to be quite popular due to its ability to extend the Black- Scholes framework easily by letting the volatility itself be modeleled as a lognormal process as opposed to its constant value. A common mathematical approach to this model leads to the pricing equation represented by a degenerate parabolic partial dierential equation of two spatial and one temporal variables accompanied by the system of boundary and initial conditions. The presented numerical valuation process is based on the utilization of the discontinuous Galerkin method for space discretization and the Crank-Nicolson scheme in the time coordinate. Finally, reference numerical experiments on real market data illustrate comprehensive empirical ndings on options with stochastic volatility.

Keywords

Option pricing, stochastic volatility, Hull-White model, discontinuous Galerkin method,

Crank-Nicolson scheme.

JEL Classication: G22

1. Introduction

1 RNDr. Jiøí Hozman, Ph.D., Department of Mathematics and Didactics of Mathematics, Faculty of

Science, Humanities and Education, Technical University of Liberec, Studentská 2, 461 17 Liberec, Czech

Republic, e-mail: jiri.hozman@tul.cz.

2doc. Ing. Tomá¹ Tichý, Ph.D., Department of Finance, Faculty of Economics, V©B-TU Ostrava, Sokolská

33, 701 21 Ostrava, Czech Republic. e-mail: tomas.tichy@vsb.cz.

Both authors were supported through the Czech Science Foundation (GACR) under project 16-09541S. Fur-

thermore, the second author also acknowledges support provided within SP2017/32, an SGS research project

of VSB-TU Ostrava. The support is greatly acknowledged. 320
11 International Scientic Conference Financial Management and Financial Institutions V©B-TU of Ostrava, Faculty of Economics, Department of FinanceOstrava 6 { 7September 2017

2. Generalizations of the Black-Scholes model

321
11 International Scientic Conference Financial Management and Financial Institutions V©B-TU of Ostrava, Faculty of Economics, Department of FinanceOstrava 6 { 7September 20172.1 Hull-White stochastic volatility model

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