A simplified pricing model for volatility futures

We develop a general model to price VIX futures contracts. The model is adapted to test both the constant elasticity of variance (CEV) and the Cox–Ingersoll–Ross formulations, with and without jumps. Empirical tests on VIX futures prices provide out-of-sample estimates within 2% of the actual futures price for almost all futures maturities. We show that although jumps are present in the data, the models with jumps do not typically outperform the others; in particular, we demonstrate the important benefits of the CEV feature in pricing futures contracts. We conclude by examining errors in the model relative to the VIX characteristics

Making the least active pay: a simulation of rewards and penalties under Demand Side Participation programs

The orthodox approach for incentivising Demand Side Participation (DSP) programs is that utility losses from capital, installation and planning costs should be recovered under financial incentive mechanisms which aim to ensure that utilities have the right incentives to implement DSP activities. The recent national smart metering roll-out in the UK implies that this approach needs to be reassessed since utilities will recover the capital costs associated with DSP technology through bills. This paper introduces a reward and penalty mechanism focusing on residential users. DSP planning costs are recovered through payments from those consumers who do not react to peak signals. Those consumers who do react are rewarded by paying lower bills. Because real-time incentives to residential consumers tend to fail due to the negligible amounts associated with net gains (and losses) or individual users, in the proposed mechanism the regulator determines benchmarks which are matched against responses to signals and caps the level of rewards/penalties to avoid market distortions. The paper presents an overview of existing financial incentive mechanisms for DSP; introduces the reward/penalty mechanism aimed at fostering DSP under the hypothesis of smart metering roll-out; considers the costs faced by utilities for DSP programs; assesses linear rate effects and value changes; introduces compensatory weights for those consumers who have physical or financial impediments; and shows findings based on simulation runs on three discrete levels of elasticity.

The effect of the molecular weight on the electro-optic properties of methacrylate-based side-chain liquid crystal polymers

A series of methacrylate-based side-chain liquid crystal polymers has been prepared with a range of molecular weights. For the high molecular weight polymers a smectic phase is observed with a very narrow nematic range; however, for low molecular weight polymers only the nematic phase is observed. A marked reduction in the glass transition temperature, TSN and TNI is observed with a reduction in the molecular weight. The orientational order parameters for these polymers in the liquid crystal phase have been determined using infra-red dichroism. It is found that the higher the molecular weight of the polymer, the greater is the threshold voltage of the electro-optic response and the lower the order parameter. The increase in the threshold voltage with increasing molecular weight may be related to the intrinsic curvature elasticity and hence to the coupling between the mesogenic units and the polymer backbone.

A wide-angle X-ray study of the development of molecular orientation in crosslinked natural rubber

Molecular orientation parameters have been measured for the non-crystalline component of crosslinked natural rubber samples deformed in uniaxial tension as a function of the extension ratio and of temperature. The orientation parapeters 〈P2(cosα)〉 and 〈P4(cosα)〉 were obtained by an analysis of the anisotropy of the wide-angle X-ray scattering functions. For the measurements made at high temperatures the level of crystallinity detected was negligible and the orientation-strain behaviour could be compared directly with the predictions of molecular models of rubber elasticity. The molecular orientation behaviour with strain was found to be at variance with the estimates of the affine model particularly at low and moderate strains. Extension of the crosslinked rubber at room temperature led to strain-crystallization and measurements of both the molecular orientation of the non-crystalline chains and the degree of crystallinity during extension and relaxation enabled the role of the crystallites in the deformation process to be considered in detail. The intrinsic birefringence of the non-crystalline component was estimated, through the use of the 〈P2(cosα)〉 values obtained from X-ray scattering measurements, to be 0.20±0.02.

Food marketing technology and contingency market valuation

Marketing activities are introduced into a rational expectations model of the food marketing system. The model is used to evaluate effects of alternative marketing technologies on the distribution of the benefits of contingency markets in agriculture. Benefits depend on two parameters: the cost share of farm inputs and the elasticity of substitution between farm and nonfarm inputs in food marketing. Over a broad spectrum of technologies, consumers are likely to be the net beneficiaries and farmers the net losers from the provision of contingency markets

A multiple error-correction model of housing supply

This paper considers supply dynamics in the context of the Irish residential market. The analysis, in a multiple error-correction framework, reveals that although developers did respond to disequilibrium in supply, the rate of adjustment was relatively slow. In contrast, however, disequilibrium in demand did not impact upon supply, suggesting that inelastic supply conditions could explain the prolonged nature of the boom in the Irish market. Increased elasticity in the later stages of the boom may have been a contributory factor in the extent of the house price falls observed in recent years.

Multivalency in healable supramolecular polymers: the effect of supramolecular cross-link density on the mechanical properties and healing of noncovalent polymer networks

Polymers with the ability to heal themselves could provide access to materials with extended lifetimes in a wide range of applications such as surface coatings, automotive components and aerospace composites. Here we describe the synthesis and characterisation of two novel, stimuli-responsive, supramolecular polymer blends based on π-electron-rich pyrenyl residues and π-electron-deficient, chain-folding aromatic diimides that interact through complementary π–π stacking interactions. Different degrees of supramolecular “cross-linking” were achieved by use of divalent or trivalent poly(ethylene glycol)-based polymers featuring pyrenyl end-groups, blended with a known diimide–ether copolymer. The mechanical properties of the resulting polymer blends revealed that higher degrees of supramolecular “cross-link density” yield materials with enhanced mechanical properties, such as increased tensile modulus, modulus of toughness, elasticity and yield point. After a number of break/heal cycles, these materials were found to retain the characteristics of the pristine polymer blend, and this new approach thus offers a simple route to mechanically robust yet healable materials.

Customer retention management in the recession

The purpose of this article is to explore customer retention strategies and tactics implemented by firms in recession. Our investigations show just how big a challenge many organizations face in their ability to manage customer retention effectively. While leading organizations have embedded real-time customer life cycle management, developed accurate early warning systems, price elasticity models and ‘deal calculators’, the organizations we spoke to have only gone as far as calculating the value at risk and building simple predictive models.