American option valuation: implied calibration of GARCH pricing models

This study analyzes the issue of American option valuation when the underlying exhibits a GARCH-type volatility process. We propose the usage of Rubinstein's Edgeworth binomial tree (EBT) in contrast to simulation-based methods being considered in previous studies. The EBT-based valuation approach makes an implied calibration of the pricing model feasible. By empirically analyzing the pricing performance of American index and equity options, we illustrate the superiority of the proposed approach.

N-nitroso compound exposure-associated transcriptomic profiles are indicative of an increased risk for colorectal cancer

Endogenous formation of N-nitroso compounds (NOCs), which are known animal carcinogens, could contribute to human carcinogenesis but definitive evidence is still lacking. To investigate the relevance of NOCs in human colorectal cancer (CRC) development, we analyzed whole genome gene expression modifications in human colon biopsies in relation to fecal NOC exposure. We had a particular interest in patients suffering from intestinal inflammation as this may stimulate endogenous NOC formation, and consequently predispose to CRC risk. Inflammatory bowel disease (IBD) patients diagnosed with ulcerative colitis and irritable bowel syndrome patients without inflammation, serving as controls, were therefore recruited. Fecal NOC were demonstrated in the majority of subjects. By associating gene expression levels of all subjects to fecal NOC levels, we identified a NOC exposure-associated transcriptomic response that suggests that physiological NOC concentrations may potentially induce genotoxic responses and chromatin modifications in human colon tissue, both of which are linked to carcinogenicity. In a network analysis, chromatin modifications were linked to 11 significantly modulated histone genes, pointing towards a possible epigenetic mechanism that may be relevant in comprehending NOC-induced carcinogenesis. In addition, pro-inflammatory transcriptomic modifications were identified in visually non-inflamed regions of the IBD colon. However, fecal NOC levels were slightly but not significantly increased in IBD patients, suggesting that inflammation did not strongly stimulate NOC formation. We conclude that NOC exposure is associated with gene expression modifications in the human colon that may suggest a potential role of these compounds in CRC development.

The case of negative day-ahead electricity prices

In recent years, Germany has significantly increased its share of electricity produced from renewable sources, which is mainly due to the Renewable Energy Act (EEG). The EEG substantially impacts the dynamics of intra-day electricity prices by increasing the likelihood of negative prices. In this paper, we present a non-Gaussian process to model German intra-day electricity prices and propose an estimation procedure for this model. Most importantly, our model is able to generate extreme positive and negative spikes. A simulation study demonstrates the ability of our model to capture the characteristics of the data.

Red meat intake-induced increases in fecal water genotoxicity correlate with pro-carcinogenic gene expression changes in the human colon

Red meat consumption is associated with an increased colorectal cancer (CRC) risk, which may be due to an increased endogenous formation of genotoxic N-nitroso compounds (NOCs). To assess the impact of red meat consumption on potential risk factors of CRC, we investigated the effect of a 7-day dietary red meat intervention in human subjects on endogenous NOC formation and fecal water genotoxicity in relation to genome-wide transcriptomic changes induced in colonic tissue. The intervention showed no effect on fecal NOC excretion but fecal water genotoxicity significantly increased in response to red meat intake. Colonic inflammation caused by inflammatory bowel disease, which has been suggested to stimulate endogenous nitrosation, did not influence fecal NOC excretion or fecal water genotoxicity. Transcriptomic analyses revealed that genes significantly correlating with the increase in fecal water genotoxicity were involved in biological pathways indicative of genotoxic effects, including modifications in DNA damage repair, cell cycle, and apoptosis pathways. Moreover, WNT signaling and nucleosome remodeling pathways were modulated which are implicated in human CRC development. We conclude that the gene expression changes identified in this study corroborate the genotoxic potential of diets high in red meat and point towards a potentially increased CRC risk in humans.

Coppicing shifts CO2 stimulation of poplar productivity to above-ground pools: a synthesis of leaf to stand level results from the POP/EUROFACE experiment

A poplar short rotation coppice (SRC) grown for the production of bioenergy can combine carbon (C) storage with fossil fuel substitution. Here, we summarize the responses of a poplar (Populus) plantation to 6 yr of free air CO2 enrichment (POP/EUROFACE consisting of two rotation cycles). We show that a poplar plantation growing in nonlimiting light, nutrient and water conditions will significantly increase its productivity in elevated CO2 concentrations ([CO2]). Increased biomass yield resulted from an early growth enhancement and photosynthesis did not acclimate to elevated [CO2]. Sufficient nutrient availability, increased nitrogen use efficiency (NUE) and the large sink capacity of poplars contributed to the sustained increase in C uptake over 6 yr. Additional C taken up in high [CO2] was mainly invested into woody biomass pools. Coppicing increased yield by 66% and partly shifted the extra C uptake in elevated [CO2] to above-ground pools, as fine root biomass declined and its [CO2] stimulation disappeared. Mineral soil C increased equally in ambient and elevated [CO2] during the 6 yr experiment. However, elevated [CO2] increased the stabilization of C in the mineral soil. Increased productivity of a poplar SRC in elevated [CO2] may allow shorter rotation cycles, enhancing the viability of SRC for biofuel production.

An extreme case of plant-insect co-diversification: figs and fig-pollinating wasps

It is thought that speciation in phytophagous insects is often due to colonization of novel host plants, because radiations of plant and insect lineages are typically asynchronous. Recent phylogenetic comparisons have supported this model of diversification for both insect herbivores and specialized pollinators. An exceptional case where contemporaneous plant insect diversification might be expected is the obligate mutualism between fig trees (Ficus species, Moraceae) and their pollinating wasps (Agaonidae, Hymenoptera). The ubiquity and ecological significance of this mutualism in tropical and subtropical ecosystems has long intrigued biologists, but the systematic challenge posed by >750 interacting species pairs has hindered progress toward understanding its evolutionary history. In particular, taxon sampling and analytical tools have been insufficient for large-scale co-phylogenetic analyses. Here, we sampled nearly 200 interacting pairs of fig and wasp species from across the globe. Two supermatrices were assembled: on average, wasps had sequences from 77% of six genes (5.6kb), figs had sequences from 60% of five genes (5.5 kb), and overall 850 new DNA sequences were generated for this study. We also developed a new analytical tool, Jane 2, for event-based phylogenetic reconciliation analysis of very large data sets. Separate Bayesian phylogenetic analyses for figs and fig wasps under relaxed molecular clock assumptions indicate Cretaceous diversification of crown groups and contemporaneous divergence for nearly half of all fig and pollinator lineages. Event-based co-phylogenetic analyses further support the co-diversification hypothesis. Biogeographic analyses indicate that the presentday distribution of fig and pollinator lineages is consistent with an Eurasian origin and subsequent dispersal, rather than with Gondwanan vicariance. Overall, our findings indicate that the fig-pollinator mutualism represents an extreme case among plant-insect interactions of coordinated dispersal and long-term co-diversification.

Pathogenic LRRK2 mutations do not alter gene expression in cell model systems or human brain tissue

Point mutations in LRRK2 cause autosomal dominant Parkinson's disease. Despite extensive efforts to determine the mechanism of cell death in patients with LRRK2 mutations, the aetiology of LRRK2 PD is not well understood. To examine possible alterations in gene expression linked to the presence of LRRK2 mutations, we carried out a case versus control analysis of global gene expression in three systems: fibroblasts isolated from LRRK2 mutation carriers and healthy, non-mutation carrying controls; brain tissue from G2019S mutation carriers and controls; and HEK293 inducible LRRK2 wild type and mutant cell lines. No significant alteration in gene expression was found in these systems following correction for multiple testing. These data suggest that any alterations in basal gene expression in fibroblasts or cell lines containing mutations in LRRK2 are likely to be quantitatively small. This work suggests that LRRK2 is unlikely to play a direct role in modulation of gene expression, although it remains possible that this protein can influence mRNA expression under pathogenic cicumstances.

Futures basis, inventory and commodity price volatility: an empirical analysis

We employ a large dataset of physical inventory data on 21 different commodities for the period 1993–2011 to empirically analyze the behavior of commodity prices and their volatility as predicted by the theory of storage. We examine two main issues. First, we analyze the relationship between inventory and the shape of the forward curve. Low (high) inventory is associated with forward curves in backwardation (contango), as the theory of storage predicts. Second, we show that price volatility is a decreasing function of inventory for the majority of commodities in our sample. This effect is more pronounced in backwardated markets. Our findings are robust with respect to alternative inventory measures and over the recent commodity price boom.

Risk premia in covered bond markets

The authors empirically explore risk premia in mortgage covered bond markets. Using a large panel dataset of covered bond asset swap spreads, they study the impact of different legal and economic environments. Conducting an in-depth analysis of this market, the authors find significant but small differences between countries during normal market periods. However, these differences are much stronger during times of economic crisis. Moreover, they find that developments in the real estate market are of relatively little importance during stable market periods. During economic distress, however, they are of high importance for explaining risk premia in covered bond markets

The (de)merits of minimum-variance hedging: application to the crack spread

We study the empirical performance of the classical minimum-variance hedging strategy, comparing several econometric models for estimating hedge ratios of crude oil, gasoline and heating oil crack spreads. Given the great variability and large jumps in both spot and futures prices, considerable care is required when processing the relevant data and accounting for the costs of maintaining and re-balancing the hedge position. We find that the variance reduction produced by all models is statistically and economically indistinguishable from the one-for-one “naïve” hedge. However, minimum-variance hedging models, especially those based on GARCH, generate much greater margin and transaction costs than the naïve hedge. Therefore we encourage hedgers to use a naïve hedging strategy on the crack spread bundles now offered by the exchange; this strategy is the cheapest and easiest to implement. Our conclusion contradicts the majority of the existing literature, which favours the implementation of GARCH-based hedging strategies.