Canonical valuation of options in the presence of stochastic volatility

Proposed by M. Stutzer (1996), canonical valuation is a new method for valuing derivative securities under the risk-neutral framework. It is non-parametric, simple to apply, and, unlike many alternative approaches, does not require any option data. Although canonical valuation has great potential, its applicability in realistic scenarios has not yet been widely tested. This article documents the ability of canonical valuation to price derivatives in a number of settings. In a constant-volatility world, canonical estimates of option prices struggle to match a Black-Scholes estimate based on historical volatility. However, in a more realistic stochastic-volatility setting, canonical valuation outperforms the Black-Scholes model. As the volatility generating process becomes further removed from the constant-volatility world, the relative performance edge of canonical valuation is more evident. In general, the results are encouraging that canonical valuation is a useful technique for valuing derivatives. (C) 2005 Wiley Periodicals, Inc.

Power generation investment opportunities evaluation: A comparison between net present value and real options approach

To evaluate an investment project in the competitive electricity market, there are several key factors that affects the project's value: the present value that the project could bring to investor, the possible future course of actions that investor has and the project's management flexibility. The traditional net present value (NPV) criteria has the ability to capture the present value of the project's future cash flow, but it fails to assess the value brought by market uncertainty and management flexibility. By contrast with NPV, the real options approach (ROA) method has the advantage to combining the uncertainty and flexibility in evaluation process. In this paper, a framework for using ROA to evaluate the generation investment opportunity has been proposed. By given a detailed case study, the proposed framework is compared with NPV and showing a different results

Stereotypic explanatory bias: Implicit stereotyping as a predictor of discrimination

Two experiments examined whether a measure of implicit stereotyping based on the tendency to explain Black stereotype-incongruent events more often than Black stereotype-congruent events (Stereotypic Explanatory Bias or SEB) is predictive of behavior toward a partner in an interracial interaction. In Experiment I SEB predicted White males' choice to ask stereotypic questions of a Black female (but not a White male or White female) in an interview. In Experiment 2 the type of explanation (internal or external attribution) made for stereotype-inconsistency was examined. Results showed that White participants who made internal attributions for Black stereotype-incongruent behavior were rated more positively and those who made external attributions were rated more negatively by a Black male confederate. These results point to the potential of implicit stereotyping as an important predictor of behavior in an interracial interaction. (C) 2002 Elsevier Science (USA). All rights reserved.

Blood pressure and heart rate during tonic immobility in the black tipped reef shark, Carcharhinus melanoptera

Tonic immobility was induced in black tipped reef sharks (Carcharhinus melanoptera) and heart rate and ventral aortic blood pressure recorded. Without branchial irrigation, tonic immobility was correlated with a significant depression in blood pressure and heart rate irrespective of the sharks being in air or in water. Tonic immobility with branchial irrigation resulted in a significant increase in blood pressure in sharks in air, but not in water. Heart rate was unchanged when the gills were irrigated. Intra-arterial injections of atropine abolished the bradycardia and blood pressure rise associated with tonic immobility. We conclude that, during tonic immobility, sharks are able to receive afferent information from the ventilatory system and make appropriate responses via the vagus nerve.

The cost of life expectancy and the implicit social valuation of life

A new method of estimating the economic value of life is proposed. Using cross-country data, an equation is estimated to explain life expectancy as a function of real consumption of goods and services. The associated cost function for life expectancy in terms of the prices of specific goods and services is used to estimate the cost of a reduction in age-specific mortality rates sufficient to save the life of one person. The cost of saving a life in OECD countries is as much as 1000 times that in the poorest countries. Ethical implications are discussed.

Optics of the developing fish eye: comparisons of Matthiessen's ratio and the focal length of the lens in the black bream Acanthopagrus butcheri (Sparidae, Teleostei)

Matthiessen's ratio (distance from centre of lens to retina: lens radius) was measured in developing black bream, Acanthopagrus butcheri (Sparidae, Teleostei). The value decreased over the first 10 days post-hatch from 3.6 to 2.3 along the nasal and from four to 2.6 along temporal axis. Coincidentally, there was a decrease in the focal ratio of the lens (focal length:lens radius). Morphologically, the accommodatory retractor lentis muscle appeared to become functional between 10-12 days post-hatch. The results suggest that a higher focal ratio compensates for the relatively high Matthiessen's ratio brought about by constraints of small eye size during early development. Combined with differences in axial length, this provides a means for larval fish to focus images from different distances prior to the ability to accommodate. (C) 1999 Elsevier Science Ltd. All rights reserved.

Ontogenetic changes in the retinal photoreceptor mosaic in a fish, the black bream, Acanthopagrus butcheri

The morphological development of the photoreceptor mosaic was followed by light and electron microscopy in a specific region of dorsal retina of the black bream, Acanthopagrus butcheri (Sparidae, Teleostei), from hatching to eight weeks of age. The retina was differentiated when the larvae reached a total length of 3 mm (3-5 days posthatch). Single cones, arranged in tightly packed rows, were the only morphologically distinct type of photoreceptor present until the larvae were 6 mm (day 15) in standard length (SL). At this time, the rad nuclei had become differentiated and the ellipsoids of selected cones began to form subsurface cisternae along neighbouring cone membranes. In this way, double, triple, quadruple, and occasionally photoreceptor chains of up to 10 cones were formed. At 8 mm SL, there was little apparent order in the photoreceptor mosaic. However, concomitant with subsequent growth, quadruple and other multiple cone receptors disappeared, with the exception of the triple cones, which gradually reduced in both number and retinal coverage to be restricted to central retina by 15 mm SL (days 40-55). Following this stage, the arrangement of double and single cones peripheral to the region of triple cones in dorsal retina was transformed into the adult pattern of a regular mosaic of four double cones surrounding a single cone. These results demonstrate that an established photoreceptor mosaic of rows of single cones can be reorganised to form a regular square mosaic composed of single and double cones. J. Comp. Neural. 412:203-217, 1999. (C) 1999 Wiley-Liss, Inc.

Germination of the seeds of Castanospermum australe (black bean) as studied by the high-field NMR microimaging

The germination of the seeds from the Chesnut tree (Castanospermum australe) has been investigated by the NMR Microimaging at 190 MHz. Conventional H-1 spin-echo and T-1 images reveals some details of black bean seeds vascular structure: a system of small spherical holes and curvelinear pathways.