A QUT study of blockchain hesitancy in accounting found participants agreed on its efficiency and transparency but were deterred by blockchain’s complexity and cost of integration into existing accounting systems.

The study looks at the organizational-level adoption of blockchain accounting and empirically identifies factors affecting the uptake of blockchain technology for recording transactions. The article, “Looking beyond the hype: The challenges of blockchain adoption in accounting,” was published in the International Journal of Accounting Information Systems.

Ph.D. researcher Mohsina Akter, Associate Professor Tyge Kummer and Dr. Ogan Yigitbasioglu, from QUT’s School of Accountancy interviewed 19 participants, including experts from three Big Four accounting firms, IT professionals, blockchain experts, senior managers and CEOs.

Akter said blockchain had been hyped as a game-changer for accounting transactions as it enabled triple-entry accounting and real-time reporting.

“Blockchain enables distributed, immutable ledgers that record and verify transactions as they occur and distribute the same copy of the ledger to participating ‘nodes’ in the network,” Akter said.

“This creates a chain of accounting records instead of retaining separate records and increases the transparency of information for everyone involved.

“Blockchain holds promises for improving the accounting and auditing processes. However, application of the technology at the organizational level remains limited.

“Our study provides insights on the limited uptake of blockchain accounting in organizations.”

Participants cited these blockchain benefits:

• Blockchain brings efficiency in the recording process by reducing the reconciliation needed across ledgers, reducing errors and fraud, and enabling instantaneous verification of transactions.
• Blockchain provides the same copy of the ledger across the network, bringing increased transparency and reliability of information and trust in the network.
• Traceability and immutability of records make it difficult to manipulate information and facilitate fraud detection.
• Enhances reputation as an innovative and high-tech firm.

However, Akter said the participants raised concerns about the integration and interfacing of blockchain with existing accounting systems, involving comprehensive knowledge of the technology and coordination with many diverse parties.

Other barriers to adoption are:

• The high initial investment of education, infrastructure and integration costs and the large computing resources needed for blockchain deployments.
• A lack of understanding of blockchain, the problems it could solve, and the value it could bring to the accounting domain.
• The lack of proven use cases in the accounting domain and limited availability of blockchain-led accounting solutions.
• Concerns over privacy and data security in sharing information on blockchain networks.

“Our findings show that an organization’s intention to adopt blockchain in accounting is multifaceted. It not only depends on the technology itself but also on factors such as organizational readiness, top management support, and external pressures, all of which play a role in driving the adoption decision,” Akter said.

The Asia-Pacific region is the largest consumer of personal luxury goods in the world. Asian consumers shop at home and overseas in cities like New York, Milan and Paris, contributing to the luxury industry’s remarkable growth.

However, many Asian countries are deeply shaped by traditional values and religions, such as Confucianism and Buddhism, both of which advocate modest and even frugal living.

This paradox intrigued Rajeev Batra, professor of marketing at the University of Michigan’s Ross School of Business. Batra and colleagues investigated how these seemingly conflicting phenomena coexist. Their research revealed that collectivism in these Asian markets actually enhances luxury consumption.

The research examined seven less-studied Asian markets including Hong Kong, South Korea, Japan, Singapore, Indonesia, Malaysia and Thailand. Using data from more than 3,000 consumers aged 18-64, the study explored how collectivism, religion-tradition, thriftiness and status/materialist consumption values jointly shape consumption preferences in these markets.

The findings, published in the Journal of International Business Studies, indicate that collectivism plays a key role among the four values. Collectivistic societies, such as those in the seven Asian markets, often place greater importance on religious-traditional values, the researchers say. An increase in religious-traditional values leads to a rise in thriftiness, which subsequently decreases status consumption or luxury consumption.

However, collectivism directly boosts status consumption, and this positive effect is so strong that it overrides all countervailing negative effects. As a result, Asian consumers exhibit a passion for luxury consumption while simultaneously endorsing the moral virtues of thriftiness, Batra and colleagues say.

In collectivist societies, people often care deeply about the opinions of their social groups. Because of this, they might purchase expensive or high-status items to impress their peers and fit in with their group. Additionally, unlike in Western individualist cultures, where status consumption can be viewed negatively as showing off or materialistic, in collectivist cultures, luxury consumption is likely to be supported as it brings honor to valued in-groups.

“The fact that luxury consumption is high and increasing in Asia may not be because Asians are becoming more Western and individualistic, but because collectivists have their own reasons for valuing status consumption and are now more able to indulge in it,” Batra said.

Batra says that it is premature to conclude that only younger, more globally connected consumers are the ones to target with status-oriented appeals. Older, more religious-traditional consumers, tightly connected to their social in-groups, might also be receptive to status-oriented appeals, contrary to common marketing wisdom.

The research also shows that the values consumers hold can influence how they prioritize different features when choosing products. For instance, consumers who place high importance on status consumption values often want their consumption choices to be noticed by others. They prioritize product attributes that are more publicly visible, such as style, brand reputation and origin, and are less price sensitive.

In contrast, thrifty consumers place greater weight on perceived durability and value for money.

“This will help marketers to prioritize which product attributes to emphasize,” Batra said.

Statistics Canada recently released a detailed report estimating which professions are likely to be affected by artificial intelligence in the next few years.

It concludes with an optimistic message for education and health-care professionals, suggesting that not only are they expected to retain their jobs, but their productivity will be enhanced by AI advancements. However, the outlook is grimmer for those in finance, insurance, information and cultural industries, who are predicted to see their careers derailed by AI.

Should doctors and teachers now breathe easy, while accountants and writers panic? Maybe, but not because of the data in this report.

What Statistics Canada offers here is a relatively meaningless exercise. It assumes that it is the technology itself and how well it complements human efforts, not the business models designed to undermine our shared humanity, that is the key determinant. By making this mistake, the report is yet another casualty of buying into corporate-driven optimism at the expense of uglier business realities.

High exposure to AI hype

Corporations pushing new innovations or products that play on our greatest hopes and fears is nothing new. The only thing that may be novel is the sheer scale of Big Tech’s hopes for AI impact, which seem to reach every industry.

It’s no surprise, then, that there is widespread fear about what industries and sectors will be replaced by AI. Nor is it surprising that Statistics Canada would seek to allay some of those fears.

The study groups jobs into three categories:

• those with high AI exposure and low complementarity, meaning humans may be competing directly with machines for these roles;
• those with high AI exposure and high complementarity, where automation could enhance the productivity of the workers who remain essential to the job;
• and those with low AI exposure, where replacement doesn’t seem to be a threat yet.

The report’s authors claim their approach—examining the relationship between exposure and complementarity—is superior to older methods that looked at manual versus cognitive or repetitive versus non-repetitive tasks when analyzing the impact of automation on workplaces.

However, by focusing on these categories, the study still buys into corporate hype. These categories of analysis were developed in 2021. Over the past few years, new windows have opened up, allowing us a clearer view of the ways Big Tech is rushing to deploy AI. The newly revealed unethical tactics render the predictive categories of exposure and complementarity fairly meaningless.

AI is often driven by people

Recent developments have shown that even jobs with high AI exposure and low AI complementarity are still relying on humans behind the scenes to do essential work. Take Cruise, the self-driving car company bought by General Motors in 2016 for more than $1 billion. Cab driving is a job with high AI exposure and low AI complementarity—we assume a cab is either being controlled by a human driver or, if it’s driverless, by AI.

As it turns out, Cruise’s “autonomous” cabs in California were not, in fact, driverless. There was remote human intervention every few miles.

If we were to accurately analyze this job, there are three categories to consider. The first is for in-car human drivers, the second is remote human drivers and the third is autonomous AI-driven vehicles. The second category makes complementarity fairly high here. But the fact that Cruise, and likely other tech companies, tried to keep this under wraps raises a whole new world of questions.

A similar situation emerged at Presto Automation, a company specializing in AI-powered drive-thru ordering for chains like Checkers and Del Taco. The company described itself as one of the biggest “labor automation technology providers” in the industry, but it was revealed that much of its “automation” is driven by human labor based in the Philippines.

Software company Zendesk presents another example. It once charged customers based on how often the software was used to try to resolve customer problems. Now, Zendesk only charges when its proprietary AI completes a task without humans stepping in.

Technically, this scenario could be described as high exposure and high complementarity. But do we want to support a business model where the customer’s first point of contact is likely to be frustrating and unhelpful? Especially knowing businesses will roll the dice on this model because they won’t be charged for those unhelpful interactions?

Scrutinizing business models

As it stands, AI presents more of a business challenge than a technological one. Government institutions like Statistics Canada need to be careful not to amplify the hype surrounding it. Policy decisions need to be based on a critical analysis of how businesses actually use AI, rather than by inflated predictions and corporate agendas.

To create effective policies, it’s crucial that decision-makers focus on how AI is truly being integrated into businesses, rather than getting caught up in speculative forecasts that may never fully materialize.

The role of technology should be to support human welfare, not simply reduce labor costs for businesses. Historically, every wave of technological innovation has brought about concerns about job displacement. The fact that future innovations may replace human labor is not new or to be feared; instead, it should prompt us to think critically about how it’s being used, and who stands to benefit.

Policy decisions, therefore, should be rooted in accurate, transparent data. Statistics Canada, as a key data provider, has an essential role to play here. It needs to offer a clear, unbiased view of the situation, ensuring policymakers have the right information to make informed decisions.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Perpetual American strangle options (PASOs) offer investors a method for minimizing risk during highly volatile market scenarios by allowing them to buy or sell options at any date without an expiration date. In a new study, researchers investigated the pricing of PASOs under a stochastic volatility model with fast mean reversion which better captures real markets compared to traditional models.

Options are a financial instrument that gives the holder the right to buy and sell an underlying asset, at a predetermined price, on or before a specified date. For example, European-style options allow the buyer to exercise this right at its maturity date, while American-style options can be exercised at any time up to and including the expiration date. These are generally traded in public financial markets, such as stock exchanges.

With the increasing complexity of markets, a wide range of products have emerged, including strangle options. A strangle option is an investment strategy that combines call and put options, both with the same expiration date but different strike prices. This strategy is typically used by investors who anticipate a large fluctuation in the market in either direction, as it helps minimize potential losses.

PASOs take this further by allowing the holder to exercise the options at any time, without an expiration date, providing considerable benefits. Consequently, PASOs have been the focus of considerable research. However, despite such studies, the pricing of PASOs and their early exercise boundaries have not yet been studied using a stochastic volatility (SV) model, which more accurately captures real market behavior compared to the Black-Scholes model.

Addressing this gap, a team of researchers led by Associate Professor Ji-Hun Yoon from Pusan National University, Korea developed a pricing formula for PASOs under an SV model with fast mean reversion. Their findings were made available online on July 27, 2024 in Mathematics and Computers in Simulation.

“In recent years, financial markets have experienced considerable fluctuations during global financial crisis, such as the US subprime mortgage crisis in 2007 and 2008, the Eurozone crisis in 2010, the COVID-19 pandemic, and the Russia-Ukraine conflict. American strangle options can help investors minimize risk during such crises,” says Dr. Yoon.

In this study, researchers first established a partial differential equation (PDE) for the value of PASOs under an SV model (PASOSV). A PDE is a mathematical equation that helps to model how one variable changes with respect to another.

In this case, the value of the PASOSV relative to the underlying asset’s price. However, due to the complexity of SV, an exact solution was not possible. Instead, the researchers applied an asymptotic analysis approach, incorporating a special term representing the fast reversion rate of highly volatile markets.

To validate their formula, they used the Monte-Carlo simulation method, which predicts potential future values of assets through thousands of simulated scenarios. They also conducted numerical simulations to analyze how SV impacts the option price and the free boundary values using various parameters. The findings revealed that SV significantly influences option prices and exercise boundary values when volatility is low, indicating that while high volatility can give higher returns, low volatility can increase risk from investing in PASOs.

“Our study lays the foundation for development of more resilient products by financial institutions, thereby providing investors with better tools and strategies to manage risk and maximize returns, especially in low volatility environments,” concludes Dr. Yoon.