This study examines whether fund companies pursue a strategy of actively enhancing the performance of current well-performing funds and young funds at the expense of poorly performing funds and old funds. The observation results reveal that potential conflicts of interest between fund management companies and investors are not prevalent. Particularly, fundcompanies do not boost the performance of either young funds or prior-well performing funds at the cost of either old funds or prior-bad performing funds, respectively. The key reasons for this finding are the insignificant convex flow-performance relationship and the insignificant spillover effect in the Taiwan mutual fund market. Key words: Flow-performance relationship, spillover effect, cross-fund subsidization.

This paper develops a model with uncertain network size and it extends the traditional real option theory to take not only the decisions of firms but also the decisions of consumers into consideration. There are three main contributions in this dynamic equilibrium model: (1).In general, the stronger the network externality is, the more possible a negative relationship between volatility and the trigger number of consumers exists; (2). With uncertainty of the network size of the product, the policy of lump sum subsidy to consumers is definitely better than the policy of lump sum subsidy to a firm; and (3).This paper offers a dynamic model of a volatile network size so that in the future many interesting issues related to network externality can be analyzed by real option approach under an equilibrium model Key words:Uncertain Network Size, Real Option, Investment, Network Externality.

In this paper we empirically analyze the demand for hedging instruments in Taiwan. The results indicate that firm size is the most important factor, larger firms are more likely to use hedging tools. Generally speaking, firms which have larger size, lower board of directors ownership, shorter history, lower risk, and higher percent of foreign exchange profit/loss to EBIT, are more likely to engage in risk hedging. Our result is consistent with the hedging economy of scale hypothesis as well as the signalling hypothesis. In addition, we also examine whether the sensitivity of firm value to exchange rate differs between hedge firms and non-hedge firms, the result suggests that hedging does not matter.

Conventionally financial variables such as stock prices, foreign exchange rates, and interest rates are assumed to follow a diffusion process with continuous time paths when pricing financial assets. While more and more empirical evidence show that pure diffusion models are not appropriate for these financial variables. In this study, we investigate an jump-diffusion process, which is a mixture of an O-U process with mean-reverting characteristics and a compound Poisson jump process, for the term structure of interest rates. We develop a methodology and complete an empirical study for Taiwan money market interest rates. The result shows that, for daily data the jump-diffusion model is significant. While the jump-diffusion model is not supported for monthly data, due to the fact that less frequently observed data is not appropriate for detecting the jump component in the interest rate process. Since the assumption of an appropriate stochastic process for the interest rate and the estimation of its associated parameters, are of critical importance when pricing and hedging with term structure of interest rates and interest rate derivatives, the result and the methodology for estimating parameters in the jump-diffusion process have important implications for the area of financial engineering Key words: Diffusion Process, Jump-Diffusion Process, Mean-Reversion, Term Structure of Interest Rates, Financial Engineering

This paper uses the actual traded NT/$ exchange rate and volume of Taipei Foreign Exchange Brokrage Inc. in Taipei foreign exchange market to study the price-volume patterns of daily open, close, and before and after lunch break. The time profiles of intradaily NT/$ exchange rate change and volume from Monday through Friday exhibit L shape, but Saturday's time profiles are of the U shape which likes other financial markets. The mean, variance, and range of intraday 15 minutes exchange rate changes become the largest at open 9:00-9:15 is The intradaily 15 minutes exchange rate changes are leptokurtic and kurtosic. The variance of 15 minutes exchange rate change at Saturday open 9:00-9: 15 is significantly larger than all other time intervals. The open price-volume patterns of Taipei foreign exchange market can be explained by information theory, but not the close patterns.