A nonlinear threshold model for the dependence of extremes of stationary sequences

One of the main implications of the efficient market hypothesis (EMH) is that expected future returns on financial assets are not predictable if investors are risk neutral. In this paper we argue that financial time series offer more information than that this hypothesis seems to supply. In particular we postulate that runs of very large returns can be predictable for small time periods. In order to prove this we propose a TAR(3,1)-GARCH(1,1) model that is able to describe two different types of extreme events: a first type generated by large uncertainty regimes where runs of extremes are not predictable and a second type where extremes come from isolated dread/joy events. This model is new in the literature in nonlinear processes. Its novelty resides on two features of the model that make it different from previous TAR methodologies. The regimes are motivated by the occurrence of extreme values and the threshold variable is defined by the shock affecting the process in the preceding period. In this way this model is able to uncover dependence and clustering of extremes in high as well as in low volatility periods. This model is tested with data from General Motors stocks prices corresponding to two crises that had a substantial impact in financial markets worldwide; the Black Monday of October 1987 and September 11th, 2001. By analyzing the periods around these crises we find evidence of statistical significance of our model and thereby of predictability of extremes for September 11th but not for Black Monday. These findings support the hypotheses of a big negative event producing runs of negative returns in the first case, and of the burst of a worldwide stock market bubble in the second example. JEL classification: C12; C15; C22; C51 Keywords and Phrases: asymmetries, crises, extreme values, hypothesis testing, leverage effect, nonlinearities, threshold models

New delay-dependent stability criteria for uncertain neutral systems with mixed time-varying delays and nonlinear perturbations

The problem of stability analysis for a class of neutral systems with mixed time-varying neutral, discrete and distributed delays and nonlinear parameter perturbations is addressed. By introducing a novel Lyapunov-Krasovskii functional and combining the descriptor model transformation, the Leibniz-Newton formula, some free-weighting matrices, and a suitable change of variables, new sufficient conditions are established for the stability of the considered system, which are neutral-delay-dependent, discrete-delay-range dependent, and distributeddelay-dependent. The conditions are presented in terms of linear matrix inequalities (LMIs) and can be efficiently solved using convex programming techniques. Two numerical examples are given to illustrate the efficiency of the proposed method

Social preferences: Some simple tests and a new model

Departures from pure self interest in economic experiments have recently inspired models of "social preferences". We conduct experiments on simple two-person and three-person games with binary choices that test these theories more directly than the array of games conventionally considered. Our experiments show strong support for the prevalence of "quasi-maximin" preferences: People sacrifice to increase the payoffs for all recipients, but especially for the lowest-payoff recipients. People are also motivated by reciprocity: While people are reluctant to sacrifice to reciprocate good or bad behavior beyond what they would sacrifice for neutral parties, they withdraw willingness to sacrifice to achieve a fair outcome when others are themselves unwilling to sacrifice. Some participants are averse to getting different payoffs than others, but based on our experiments and reinterpretation of previous experiments we argue that behavior that has been presented as "difference aversion" in recent papers is actually a combination of reciprocal and quasi-maximin motivations. We formulate a model in which each player is willing to sacrifice to allocate the quasi-maximin allocation only to those players also believed to be pursuing the quasi-maximin allocation, and may sacrifice to punish unfair players.

Ignorance promotes competition: An auction model with endogenous private valuations

We study a situation in which an auctioneer wishes to sell an object toone of N risk-neutral bidders with heterogeneous preferences. Theauctioneer does not know bidders preferences but has private informationabout the characteristics of the ob ject, and must decide how muchinformation to reveal prior to the auction. We show that the auctioneerhas incentives to release less information than would be efficient andthat the amount of information released increases with the level ofcompetition (as measured by the number of bidders). Furthermore, in aperfectly competitive market the auctioneer would provide the efficientlevel of information.

Leptonic secondary emission in a hadronic microquasar model

Context.It has been proposed that the origin of the very high-energy photons emitted from high-mass X-ray binaries with jet-like features, so-called microquasars (MQs), is related to hadronic interactions between relativistic protons in the jet and cold protons of the stellar wind. Leptonic secondary emission should be calculated in a complete hadronic model that includes the effects of pairs from charged pion decays inside the jets and the emission from pairs generated by gamma-ray absorption in the photosphere of the system. Aims.We aim at predicting the broadband spectrum from a general hadronic microquasar model, taking into account the emission from secondaries created by charged pion decay inside the jet. Methods.The particle energy distribution for secondary leptons injected along the jets is consistently derived taking the energy losses into account. The spectral energy distribution resulting from these leptons is calculated after assuming different values of the magnetic field inside the jets. We also compute the spectrum of the gamma-rays produced by neutral pion-decay and processed by electromagnetic cascades under the stellar photon field. Results.We show that the secondary emission can dominate the spectral energy distribution at low energies (~1 MeV). At high energies, the production spectrum can be significantly distorted by the effect of electromagnetic cascades. These effects are phase-dependent, and some variability modulated by the orbital period is predicted.

Neutral atoms in ionic lattices: Excited states of KCl:Ag(0)

The optical-absorption spectrum of a cationic Ag0 atom in a KCl crystal has been studied theoretically by means of a series of cluster models of increasing size. Excitation energies have been determined by means of a multiconfigurational self-consistent field procedure followed by a second-order perturbation correlation treatment. Moreover results obtained within the density-functional framework are also reported. The calculations confirm the assignment of bands I and IV to transitions of the Ag-5s electron into delocalized states with mainly K-4s,4p character. Bands II and III have been assigned to internal transitions on the Ag atom, which correspond to the atomic Ag-4d to Ag-5s transition. We also determine the lowest charge transfer (CT) excitation energy and confirm the assignment of band VI to such a transition. The study of the variation of the CT excitation energy with the Ag-Cl distance R gives additional support to a large displacement of the Cl ions due to the presence of the Ag0 impurity. Moreover, from the present results, it is predicted that on passing to NaCl:Ag0 the CT onset would be out of the optical range while the 5s-5p transition would undergo a redshift of 0.3 eV. These conclusions, which underline the different character of involved orbitals, are consistent with experimental findings. The existence of a CT transition in the optical range for an atom inside an ionic host is explained by a simple model, which also accounts for the differences with the more common 3d systems. The present study sheds also some light on the R dependence of the s2-sp transitions due to s2 ions like Tl+.

A semi-grand canonical Monte Carlo simulation model for ion binding to ionizable surfaces: proton binding of carboxylated latex particles as a case study

In this paper, we present a computer simulation study of the ion binding process at an ionizable surface using a semi-grand canonical Monte Carlo method that models the surface as a discrete distribution of charged and neutral functional groups in equilibrium with explicit ions modelled in the context of the primitive model. The parameters of the simulation model were tuned and checked by comparison with experimental titrations of carboxylated latex particles in the presence of different ionic strengths of monovalent ions. The titration of these particles was analysed by calculating the degree of dissociation of the latex functional groups vs. pH curves at different background salt concentrations. As the charge of the titrated surface changes during the simulation, a procedure to keep the electroneutrality of the system is required. Here, two approaches are used with the choice depending on the ion selected to maintain electroneutrality: counterion or coion procedures. We compare and discuss the difference between the procedures. The simulations also provided a microscopic description of the electrostatic double layer (EDL) structure as a function of p H and ionic strength. The results allow us to quantify the effect of the size of the background salt ions and of the surface functional groups on the degree of dissociation. The non-homogeneous structure of the EDL was revealed by plotting the counterion density profiles around charged and neutral surface functional groups.

A semi-grand canonical Monte Carlo simulation model for ion binding to ionizable surfaces: Proton binding of carboxylated latex particles as a case study

In this paper, we present a computer simulation study of the ion binding process at an ionizable surface using a semi-grand canonical Monte Carlo method that models the surface as a discrete distribution of charged and neutral functional groups in equilibrium with explicit ions modelled in the context of the primitive model. The parameters of the simulation model were tuned and checked by comparison with experimental titrations of carboxylated latex particles in the presence of different ionic strengths of monovalent ions. The titration of these particles was analysed by calculating the degree of dissociation of the latex functional groups vs. pH curves at different background salt concentrations. As the charge of the titrated surface changes during the simulation, a procedure to keep the electroneutrality of the system is required. Here, two approaches are used with the choice depending on the ion selected to maintain electroneutrality: counterion or coion procedures. We compare and discuss the difference between the procedures. The simulations also provided a microscopic description of the electrostatic double layer (EDL) structure as a function of pH and ionic strength. The results allow us to quantify the effect of the size of the background salt ions and of the surface functional groups on the degree of dissociation. The non-homogeneous structure of the EDL was revealed by plotting the counterion density profiles around charged and neutral surface functional groups. © 2011 American Institute of Physics.