The Day of the Week Effect and Option Pricing - A Study of the German Option Market

The use of different time units in option pricing may lead to inconsistent estimates of time decay and spurious jumps in implied volatilities. Different time units in the pricing model leads to different implied volatilities although the option price itself is the same.The chosen time unit should make it necessary to adjust the volatility parameter only when there are some fundamental reasons for it and not due to wrong specifications of the model. This paper examined the effects of option pricing using different time hypotheses and empirically investigated which time frame the option markets in Germany employ over weekdays. The paper specifically tries to get a picture of how the market prices options. The results seem to verify that the German market behaves in a fashion that deviates from the most traditional time units in option pricing, calendar and trading days. The study also showed that the implied volatility of Thursdays was somewhat higher and thus differed from the pattern of other days of the week. Using a GARCH model to further investigate the effect showed that although a traditional tests, like the analysis of variance, indicated a negative return for Thursday during the same period as the implied volatilities used, this was not supported using a GARCH model.

Talousmetafysiikan kritiikkiä

Jakke Holvas: A Critique of the Metaphysics of Economy The research problem of this dissertation is the commonly held opinion according to which everything has become a question of economy in the present day. Economy legitimates and justifies. In this study, the pattern of thinking and conceptualizing in which economy figures as the ultimate reason is called the metaphysics of economy. The defining characteristic of the metaphysics of economy is its failure to recognize non-economic rules, ethics, or ways of existence. The sources included in the study cover certain classics of philosophy (Plato, Aristotle, Friedrich Nietzsche) and sociology (Karl Marx, Max Weber, Marcel Mauss), as well as the more recent French social theory (Jean Baudrillard, Michel Foucault). The research methods used are textual analysis and evaluation of concepts by means of historical comparison. The background to the study is given by the views of historians and sociologists according to whom traditional forms have ceased to exist and the market economy become established as the western system of values. The study identifies points of transition from the traditional forms to economic values. In addition, the dissertation focuses on the modern non-economic forms. The study examines the economic and ethical meanings of gift in antiquity in Homer, Plato, and Aristotle. Following Marcel Mauss, the study analyzes the forms and principles of gift exchange. The study also applies Nietzsche’s philosophy to evaluate under what conditions giving a gift becomes an act of exercising power that puts its receiver into debt. The conclusion of the study is that the classics of philosophy and sociology can rightly be interpreted in terms of the metaphysics of economy, but they also offer grounds for criticizing this metaphysics, even alternatives. One such alternative is non-economic archaic ethic. The study delineates a duality between economy and non-economy as well as creating concepts which could be used in the future to critically analyze economy from a position external to the economic system of concepts.

Onko varhaisen tuen päiväkoti mahdollinen? : Tutkimus varhaiskasvatuksen yhteisöllisestä kehittämisestä

Is the early childhood day care facility possible? The research considering communal development of the early education. In Finland mothers and fathers look after 400 000 pre-school children. Half of these attend day care facilities, in which 50 000 staff are employed. The aim of this research is to develop co-operation practices within the day care centre. This research refines and expands my own interest in and knowledge of day care management and content development. The basis of the research draws upon ethnographic material covering the period 1999–2005. The day care centre chosen as a central informant was the first suburban centre founded in 1963, and it provided a rich local and welfare state research perspective. It became clear that the day care facility’s co-operation practices formed the basis of bringing up children and at the same time produced a new multi-operational and multi-layered community for child participation. Adult day care centre workers bringing up the children as a professional work and solutions defining the conditions for the work are expressed in a child’s upbringing. This obviously has an impact in where as the development of communities. From the human and community scientific point of view, the group of youngest children will take up a future position as key players in communities as essential actors and reformers. The research was carried out as multiphase and multiscientific practical research and iterative data formation. The results verified that the co-operation between parents and day care staff produces important benefits for all the stakeholders. However, the day care staff has difficulties in implementing the benefits. During the research process, it became clear that conceptually day care staff saw the practices as ”very important, but not easily realised in practice”. As a result this demanded further research to address this issue and to extend this to the carefacility’s co-operation practises and their communal and social conditions. The research looks at the carefacility’s co-operation with key stakeholders. At the same time it undertakes an analytical and historical examination of carefacilitys’s with an experimental focus as two day care centres chosen as experimental objects. The results of the research showed that the benefits gained by children were determined by the day care centre’s socio-political structure and the parent’s resources. The research framework categorised early childhood education as generational and gender based structures. As part of the research, the strains endemic to these formations have been examined. The system for bringing up children was created as part of a so called welfare state project by implemented by the Day Care Act in year 1973. The law secured the subjective right for every pre-school child to have access to day care facilities. The law also introduced a labour and sosiopolitical phase and the refinement of the day care facility’s education-care concept. The latest phase that started during the early 1990´s was called the market-based social services strategy. As a result of this phase, state support was limited and the screening function of the law was relaxed. This new strategy resulted in a divisive and bureaucratic social welfare system, that individualised and segregated children and their parents, leaving some families outside the communal and welfare state benefit net. The modern day care centre is a hybrid of different aims. Children spend longer and more irregular time in day care. The families are multicultural and that requires more training for the staff. The work in day care has been enhanced, for example he level of education for the staff has been lowered and productivity has been improved. However, administrative work and different kinds of support and net work functions together with the continuous change have taken over from the work done face to face with children. Staff experiences more pressure as the management and the work load has increased. Consequently the long-term planning and daily implementation of the nuclear task of the day care facility is difficult to control. This will have an effect on both motivation and manageability of the work. Overall quality of the early childhood upbringing has been weakened. The possibilities for the near future were tested in the two day care centres chosen as an experi-ment objects. The analysis of these experiments showed that generative interaction work will benefit everyone: children, parents and employees. The main results of the research are new concepts of an early support day care centre, which can be empirically and theoretically possi-ble for development the near future. Key words: Day care facility’s co-operation practises, early childhood education as generational structure, child’s multi-operational and multi-layered community, multi-subjective operator, generative interaction work, communal composition.

Intergenerational Transfer of Sabbath Observance : How is Religious Tradition Transferred to Children among Finnish Seventh-day Adventists?

This study examined religious home education in educational, psychological, and sociological context. Growing up within a religious denomination is a process of learning the rules, norms, opinions, and attitudes, which serve to make the individual an active member of the group. It is a process of transferring the cultural inheritance between generations. Sabbathkeeping can be regarded as a strong indicator of the Seventh-day Adventist value system, which is also why I have concentrated on this specific issue in my study. The purpose of the study was to find out, how the Sabbath is transferred from parents to children among Finnish Adventists. It was also examined how parents could make the day of rest positively exceptional for children, and how the parental authoritativeness affects the process of transference. According to Bull & Lockhart s (1989) theory, the amount of Adventist generations in family history influences the transfer of religious tradition. This study aimed to find out whether or not this theory would apply to the present-day Finland. The nature of religious development among Adventist young people was also one of the interests of the research. The methods used in the study were in-depth interviews (n = 10) and a survey (n = 106). The majority of the interviewees was young adults (age 15-30) grown up in Adventist families. The interviews were taped and transcribed for the study, and survey answers were analysed with SPSS-data analysis program. The amount of survey questionnaires evaluated was 106, whole population of 15-30 year-old Finnish Adventists being about one thousand. Democratic relationship between parents and children, parents' example, encouragement to own thinking, and positive experiences of Sabbath and the whole religion, including the social dimension of the Adventism, seem to be some of the most significant factors in transference of religious tradition. Both too severe and too permissive education were considered to lead to similar results: unsuccessful transfer of values, or even rebellion and adopting a totally opposite way of life than that of the parents. In this study the amount of Adventist generations in family history does not correlate significantly with the end results of value transference. Keywords: Sabbath, intergenerational, value transference, religious home education Avainsanat: sapatti, arvojen siirtyminen vanhemmilta lapsille, uskonnollinen kotikasvatus

Rural Income Generation and Diversification : A Case Study in Eastern Zambia

Rural income diversification has been found to be rather the norm than the exception in developing countries. Smallholder households tend to diversify their income sources because of the need to manage risks, secure a smooth flow of income, allocate surplus labour, respond to various kinds of market failures, and apply coping strategies. The Agricultural Household Model provides a theoretical rationale for income diversification in that rural households aim at maximising their utility. There are several elements involved, such as agricultural production for their own consumption and markets, leisure activities and income from non-farm sources. The aim of the present study is to enhance understanding of the processes of rural income generation and diversification in eastern Zambia. Specifically, it explores the relationship between household characteristics, asset endowments and income-generation patterns. According to the sustainable- rural-livelihoods framework, the assets a household possesses shape its capacity to seize new economic opportunities. The study is based on two surveys conducted among rural smallholder households in four districts of Eastern Province in Zambia in 1985/86 and 2003. Sixty-seven of the interviewed households were present in both surveys and this panel allows comparison between the two points of time. The initial descriptive analysis is complemented with an econometric analysis of the relationships between household assets and income sources. The results show that, on average, 30 per cent of the households income originated from sources outside their own agriculture. There was a slight increase in the proportion of non-farm income from 1985/86 to 2003, but total income clearly declined mainly on account of diminishing crop income. The land area the household was able to cultivate, which is often dependent on the available labour, was the most significant factor affecting both the household-income level and the diversification patterns. Diversification was, in most cases, a coping strategy rather than a voluntary choice. Measured as income/capita/day, all households were below the poverty line in 2003. The agricultural reforms in Zambia, combined with other trends such as changes in rainfall pattern, the worsening livestock situation and the incidence of human disease, had a negative impact on agricultural productivity and income between 1985/86 and 2003. Sources of non-farm income were closely linked to agriculture either upstream or downstream and the income they generated was not enough to compensate for the decline of agricultural income. Household assets and characteristics had a smaller impact on diversification patterns than expected, which could reflect the lack of opportunities in the remote rural environment.

The Impact of Emissions Trading on the Price of Electricity in Nord Pool : Market Power and Price Determination in the Nordic Electricity Market

The objective of this thesis is to find out how dominant firms in a liberalised electricity market will react when they face an increase in the level of costs due to emissions trading, and how this will effect the price of electricity. The Nordic electricity market is chosen as the setting in which to examine the question, since recent studies on the subject suggest that interaction between electricity markets and emissions trading is very much dependent on conditions specific to each market area. There is reason to believe that imperfect competition prevails in the Nordic market, thus the issue is approached through the theory of oligopolistic competition. The generation capacity available at the market, marginal cost of electricity production and seasonal levels of demand form the data based on which the dominant firms are modelled using the Cournot model of competition. The calculations are made for two levels of demand, high and low, and with several values of demand elasticity. The producers are first modelled under no carbon costs and then by adding the cost of carbon dioxide at 20€/t to those technologies subject to carbon regulation. In all cases the situation under perfect competition is determined as a comparison point for the results of the Cournot game. The results imply that the potential for market power does exist on the Nordic market, but the possibility for exercising market power depends on the demand level. In season of high demand the dominant firms may raise the price significantly above competitive levels, and the situation is aggravated when the cost of carbon dioixide is accounted for. Under low demand leves there is no difference between perfect and imperfect competition. The results are highly dependent on the price elasticity of demand.

Informational efficiency of the European Union emission allowance market

This thesis studies the informational efficiency of the European Union emission allowance (EUA) market. In an efficient market, the market price is unpredictable and profits above average are impossible in the long run. The main research problem is does the EUA price follow a random walk. The method is an econometric analysis of the price series, which includes an autocorrelation coefficient test and a variance ratio test. The results reveal that the price series is autocorrelated and therefore a nonrandom walk. In order to find out the extent of predictability, the price series is modelled with an autoregressive model. The conclusion is that the EUA price is autocorrelated only to a small degree and that the predictability cannot be used to make extra profits. The EUA market is therefore considered informationally efficient, although the price series does not fulfill the requirements of a random walk. A market review supports the conclusion, but it is clear that the maturing of the market is still in process.

Noncommutativity and Some of Its Present-Day Developments

This masters thesis explores some of the most recent developments in noncommutative quantum field theory. This old theme, first suggested by Heisenberg in the late 1940s, has had a renaissance during the last decade due to the firmly held belief that space-time becomes noncommutative at small distances and also due to the discovery that string theory in a background field gives rise to noncommutative field theory as an effective low energy limit. This has led to interesting attempts to create a noncommutative standard model, a noncommutative minimal supersymmetric standard model, noncommutative gravity theories etc. This thesis reviews themes and problems like those of UV/IR mixing, charge quantization, how to deal with the non-commutative symmetries, how to solve the Seiberg-Witten map, its connection to fluid mechanics and the problem of constructing general coordinate transformations to obtain a theory of noncommutative gravity. An emphasis has been put on presenting both the group theoretical results and the string theoretical ones, so that a comparison of the two can be made.

Monopolising Names? : The Protection of Geographical Indications in the European Community

Marketing of goods under geographical names has always been common. Aims to prevent abuse have given rise to separate forms of legal protection for geographical indications (GIs) both nationally and internationally. The European Community (EC) has also gradually enacted its own legal regime to protect geographical indications. The legal protection of GIs has traditionally been based on the idea that geographical origin endows a product exclusive qualities and characteristics. In today s world we are able to replicate almost any prod-uct anywhere, including its qualities and characteristics. One would think that this would preclude protec-tion from most geographical names, yet the number of geographical indications seems to be rising. GIs are no longer what they used to be. In the EC it is no longer required that a product is endowed exclusive characteristics by its geographical origin as long as consumers associate the product with a certain geo-graphical origin. This departure from the traditional protection of GIs is based on the premise that a geographical name extends beyond and exists apart from the product and therefore deserves protection itself. The thesis tries to clearly articulate the underlying reasons, justifications, principles and policies behind the protection of GIs in the EC and then scrutinise the scope and shape of the GI system in the light of its own justifications. The essential questions it attempts to aswer are (1) What is the basis and criteria for granting GI rights? (2) What is the scope of protection afforded to GIs? and (3) Are these both justified in the light of the functions and policies underlying granting and protecting of GIs? Despite the differences, the actual functions of GIs are in many ways identical to those of trade marks. Geographical indications have a limited role as source and quality indicators in allowing consumers to make informed and efficient choices in the market place. In the EC this role is undermined by allowing able room and discretion for uses that are arbitrary. Nevertheless, generic GIs are unable to play this role. The traditional basis for justifying legal protection seems implausible in most case. Qualities and charac-teristics are more likely to be related to transportable skill and manufacturing methods than the actual geographical location of production. Geographical indications are also incapable of protecting culture from market-induced changes. Protection against genericness, against any misuse, imitation and evocation as well as against exploiting the reputation of a GI seem to be there to protect the GI itself. Expanding or strengthening the already existing GI protection or using it to protect generic GIs cannot be justified with arguments on terroir or culture. The conclusion of the writer is that GIs themselves merit protection only in extremely rare cases and usually only the source and origin function of GIs should be protected. The approach should not be any different from one taken in trade mark law. GI protection should not be used as a means to mo-nopolise names. At the end of the day, the scope of GI protection is nevertheless a policy issue.

Foreign Capital and Finland : Central government's first period of reliance on international financial markets, 1862-1938

The main objective of the study is to evaluate the Finnish central government s foreign borrowing between the years 1862 and 1938. Most of this period was characterised by deep capital market integration that bears resemblance to the liberal world financial order at the turn of the millennium. The main aim is to analyse the credit risk associated with the state and its determination by evaluating the world financial market centres perception of Finland. By doing this, the study is also expected to provide an additional dimension to Finland s political and economic history by incorporating into the research the assessments of international capital markets regarding Finland during a period that witnessed profound political and economic changes in Finnish society. The evaluation of the credit risk mainly relies on exchange-rate risk free time series of the state s foreign bonds. They have been collected from quotations in the stock exchanges in Helsinki, Hamburg, Paris and London. In addition, it investigates Finland s exposure to short-term debt and Moody s credit ratings assigned to Finland. The study emphasises the importance of the political risk. It suggests that the hey-day of the state s reliance on foreign capital markets took place during last few decades of the 19th century when Finland enjoyed a wide autonomy in the Russian Empire and prudently managed its economy, highlighted in Finland s adherence to the international gold standard. Political confrontations in Finland and, in particular, in Russia and the turbulence of the world financial system prevented the return of this beneficial position again. Through its issuance of foreign bonds the state was able to import substantial amounts of foreign capital, which was sorely needed to foster economic development in Finland. Moreover, the study argues that the state s presence in the western capital markets not only had economic benefits, but it also increased the international awareness of Finland s distinct and separate status in the Russian Empire and later underlined its position as an independent republic.

Studies on Wage Differentials and Labour Market Transitions

This thesis consists of four studies. The first study examines wage differentials between women and men in the Finnish manufacturing sector. A matched employer-employee data set is used to decompose the overall gender wage gap into the contributions of sex differences in human capital, labour market segregation, and residual within-job wage differentials. The topic of the second study is the relationship between the extended unemployment benefits and labour market transitions of older workers. The analysis exploits a quasi-experimental setting caused by a change in the law that raised the eligibility age of workers benefiting from extended benefits. Roughly half of the unemployed workers with extended benefits are estimated to be effectively withdrawn from labour market search. The risk of unemployment declined and the re-employment probability increased among the age groups directly affected by the reform. The third study provides an empirical analysis of a structural equilibrium search model. Estimation results from various model specifications are compared and discussed. The last study is a methodological study where the difficulties of interpreting the results of competing risks hazard models are discussed and a solution for a particular class of models is proposed. It is argued that a common practice of reporting the results of qualitative response models in terms of marginal effects is also useful in the context of competing risks duration models.

Essays on Labor Market Frictions, Technological Change and Macroeconomic Fluctuations

The dissertation consists of an introductory chapter and three essays that apply search-matching theory to study the interaction of labor market frictions, technological change and macroeconomic fluctuations. The first essay studies the impact of capital-embodied growth on equilibrium unemployment by extending a vintage capital/search model to incorporate vintage human capital. In addition to the capital obsolescence (or creative destruction) effect that tends to raise unemployment, vintage human capital introduces a skill obsolescence effect of faster growth that has the opposite sign. Faster skill obsolescence reduces the value of unemployment, hence wages and leads to more job creation and less job destruction, unambiguously reducing unemployment. The second essay studies the effect of skill biased technological change on skill mismatch and the allocation of workers and firms in the labor market. By allowing workers to invest in education, we extend a matching model with two-sided heterogeneity to incorporate an endogenous distribution of high and low skill workers. We consider various possibilities for the cost of acquiring skills and show that while unemployment increases in most scenarios, the effect on the distribution of vacancy and worker types varies according to the structure of skill costs. When the model is extended to incorporate endogenous labor market participation, we show that the unemployment rate becomes less informative of the state of the labor market as the participation margin absorbs employment effects. The third essay studies the effects of labor taxes on equilibrium labor market outcomes and macroeconomic dynamics in a New Keynesian model with matching frictions. Three policy instruments are considered: a marginal tax and a tax subsidy to produce tax progression schemes, and a replacement ratio to account for variability in outside options. In equilibrium, the marginal tax rate and replacement ratio dampen economic activity whereas tax subsidies boost the economy. The marginal tax rate and replacement ratio amplify shock responses whereas employment subsidies weaken them. The tax instruments affect the degree to which the wage absorbs shocks. We show that increasing tax progression when taxation is initially progressive is harmful for steady state employment and output, and amplifies the sensitivity of macroeconomic variables to shocks. When taxation is initially proportional, increasing progression is beneficial for output and employment and dampens shock responses.