Constructing good deals in discrete time arbitrage-free dynamic pricing models

Recent literature has proved that many classical pricing models (Black and Scholes, Heston, etc.) and risk measures (V aR, CV aR, etc.) may lead to “pathological meaningless situations”, since traders can build sequences of portfolios whose risk leveltends to −infinity and whose expected return tends to +infinity, i.e., (risk = −infinity, return = +infinity). Such a sequence of strategies may be called “good deal”. This paper focuses on the risk measures V aR and CV aR and analyzes this caveat in a discrete time complete pricing model. Under quite general conditions the explicit expression of a good deal is given, and its sensitivity with respect to some possible measurement errors is provided too. We point out that a critical property is the absence of short sales. In such a case we first construct a “shadow riskless asset” (SRA) without short sales and then the good deal is given by borrowing more and more money so as to invest in the SRA. It is also shown that the SRA is interested by itself, even if there are short selling restrictions.

A comparative study of alternative approaches for common factors identification

Preliminary version

Big bang bifurcations in von Bertalanffy’s dynamics with strong and weak Allee effects

The main purpose of this work was to study population dynamic discrete models in which the growth of the population is described by generalized von Bertalanffy's functions, with an adjustment or correction factor of polynomial type. The consideration of this correction factor is made with the aim to introduce the Allee effect. To the class of generalized von Bertalanffy's functions is identified and characterized subclasses of strong and weak Allee's functions and functions with no Allee effect. This classification is founded on the concepts of strong and weak Allee's effects to population growth rates associated. A complete description of the dynamic behavior is given, where we provide necessary conditions for the occurrence of unconditional and essential extinction types. The bifurcation structures of the parameter plane are analyzed regarding the evolution of the Allee limit with the aim to understand how the transition from strong Allee effect to no Allee effect, passing through the weak Allee effect, is realized. To generalized von Bertalanffy's functions with strong and weak Allee effects is identified an Allee's effect region, to which is associated the concepts of chaotic semistability curve and Allee's bifurcation point. We verified that under some sufficient conditions, generalized von Bertalanffy's functions have a particular bifurcation structure: the big bang bifurcations of the so-called box-within-a-box type. To this family of maps, the Allee bifurcation points and the big bang bifurcation points are characterized by the symmetric of Allee's limit and by a null intrinsic growth rate. The present paper is also a significant contribution in the framework of the big bang bifurcation analysis for continuous 1D maps and unveil their relationship with the explosion birth and the extinction phenomena.

Systematic and liquidity risk in sub-prime mortgage-backed assets

The mis-evaluation of risk in securitized financial products is central to understanding the global financial crisis. This paper characterizes the evolution of risk factors affecting collateralized debt obligations (CDOs) based on subprime mortgages. A key feature of subprime mortgage-backed indices is that they are distinct in their vintage of issuance. Using a latent factor framework that incorporates this vintage effect, we show the increasing importance of common factors on more senior tranches during the crisis. An innovation of the paper is that we use the unbalanced panel structure of the data to identify the vintage, credit, common and idiosyncratic effects from a state-space specification.

Persistência no desempenho dos fundos de investimento em ações

Mestrado em Contabilidade e Análise Financeira

Dynamic behaviour of soft core sandwich beam structures using kriging-based layerwise models

Sandwich structures with soft cores are widely used in applications where a high bending stiffness is required without compromising the global weight of the structure, as well as in situations where good thermal and damping properties are important parameters to observe. As equivalent single layer approaches are not the more adequate to describe realistically the kinematics and the stresses distributions as well as the dynamic behaviour of this type of sandwiches, where shear deformations and the extensibility of the core can be very significant, layerwise models may provide better solutions. Additionally and in connection with this multilayer approach, the selection of different shear deformation theories according to the nature of the material that constitutes the core and the outer skins can predict more accurately the sandwich behaviour. In the present work the authors consider the use of different shear deformation theories to formulate different layerwise models, implemented through kriging-based finite elements. The viscoelastic material behaviour, associated to the sandwich core, is modelled using the complex approach and the dynamic problem is solved in the frequency domain. The outer elastic layers considered in this work may also be made from different nanocomposites. The performance of the models developed is illustrated through a set of test cases. (C) 2015 Elsevier Ltd. All rights reserved.

The role of an illiquidity factor in the Portuguese stock market

This study examines the role of illiquidity (proxied by the proportion of zero returns) as an additional risk factor in asset pricing. We use Portuguese monthly data, covering the period between January 1988 and December 2008. We compute an illiquidity factor using the Fama and French [Fama, E. F., and K. R. French (1993), "Common risk factors in the returns on stocks and bonds", Journal of Financial Economics, Vol. 33, Nº. 1, pp. 3-56] procedure and analyze the performance of CAPM, Fama-French three-factor model and illiquidity-augmented versions of these models in explaining both the time-series and the cross-section of returns. Our results reveal that the effect of characteristic liquidity is subsumed by the models considered, but the risk of illiquidity is not priced in the Portuguese stock market.

Implications of the LHC two-photon signal for two-Higgs-doublet models

We study the implications for two-Higgs-doublet models of the recent announcement at the LHC giving a tantalizing hint for a Higgs boson of mass 125 GeV decaying into two photons. We require that the experimental result be within a factor of 2 of the theoretical standard model prediction, and analyze the type I and type II models as well as the lepton-specific and flipped models, subject to this requirement. It is assumed that there is no new physics other than two Higgs doublets. In all of the models, we display the allowed region of parameter space taking the recent LHC announcement at face value, and we analyze the W+W-, ZZ, (b) over barb, and tau(+)tau(-) expectations in these allowed regions. Throughout the entire range of parameter space allowed by the gamma gamma constraint, the numbers of events for Higgs decays into WW, ZZ, and b (b) over bar are not changed from the standard model by more than a factor of 2. In contrast, in the lepton-specific model, decays to tau(+)tau(-) are very sensitive across the entire gamma gamma-allowed region.

O conhecimento e inovação como factor de sucesso de uma organização : o caso Sport Lisboa e Benfica

Mestrado em Gestão e Empreendedorismo

Joining models with stair nesting

In the stair nested designs with u factors we have u steps and a(1), ... , a(u) "active" levels. We would have a(1) observations with different levels for the first factor each of them nesting a single level of each of the remaining factors; next a(2) observations with level a(1) + 1 for the first factor and distinct levels for the second factor each nesting a fixed level of each of the remaining factors, and so on. So the number of level combinations is Sigma(u)(i=1) a(i). In meta-analysis joint treatment of different experiments is considered. Joining the corresponding models may be useful to carry out that analysis. In this work we want joining L models with stair nesting.

Analysis of sandwich beam structures using kriging based higher order models

Functionally graded composite materials can provide continuously varying properties, which distribution can vary according to a specific location within the composite. More frequently, functionally graded materials consider a through thickness variation law, which can be more or less smoother, possessing however an important characteristic which is the continuous properties variation profiles, which eliminate the abrupt stresses discontinuities found on laminated composites. This study aims to analyze the transient dynamic behavior of sandwich structures, having a metallic core and functionally graded outer layers. To this purpose, the properties of the particulate composite metal-ceramic outer layers, are estimated using Mod-Tanaka scheme and the dynamic analyses considers first order and higher order shear deformation theories implemented though kriging finite element method. The transient dynamic response of these structures is carried out through Bossak-Newmark method. The illustrative cases presented in this work, consider the influence of the shape functions interpolation domain, the properties through-thickness distribution, the influence of considering different materials, aspect ratios and boundary conditions. (C) 2014 Elsevier Ltd. All rights reserved.