Modelling the implied volatility of options on long gilt futures

This paper investigates the properties of implied volatility series calculated from options on Treasury bond futures, traded on LIFFE. We demonstrate that the use of near-maturity at the money options to calculate implied volatilities causes less mis-pricing and is therefore superior to, a weighted average measure encompassing all relevant options. We demonstrate that, whilst a set of macroeconomic variables has some predictive power for implied volatilities, we are not able to earn excess returns by trading on the basis of these predictions once we allow for typical investor transactions costs.

Accounting quality, information risk and implied volatility around earnings announcements

We examine the impact of accounting quality, used as a proxy for information risk, on the behavior of equity implied volatility around quarterly earnings announcements. Using US data during 1996–2010, we observe that lower (higher) accounting quality significantly relates to higher (lower) levels of implied volatility (IV) around announcements. Worse accounting quality is further associated with a significant increase in IV before announcements, and is found to relate to a larger resolution in IV after the announcement has taken place. We interpret our findings as indicative of information risk having a significant impact on implied volatility behavior around earnings announcements.

The importance of the volatility risk premium for volatility forecasting

In this paper, we study the role of the volatility risk premium for the forecasting performance of implied volatility. We introduce a non-parametric and parsimonious approach to adjust the model-free implied volatility for the volatility risk premium and implement this methodology using more than 20 years of options and futures data on three major energy markets. Using regression models and statistical loss functions, we find compelling evidence to suggest that the risk premium adjusted implied volatility significantly outperforms other models, including its unadjusted counterpart. Our main finding holds for different choices of volatility estimators and competing time-series models, underlying the robustness of our results.

Capturing UK real estate volitility

Volatility, or the variability of the underlying asset, is one of the key fundamental components of property derivative pricing and in the application of real option models in development analysis. There has been relatively little work on volatility in real terms of its application to property derivatives and the real options analysis. Most research on volatility stems from investment performance (Nathakumaran & Newell (1995), Brown & Matysiak 2000, Booth & Matysiak 2001). Historic standard deviation is often used as a proxy for volatility and there has been a reliance on indices, which are subject to valuation smoothing effects. Transaction prices are considered to be more volatile than the traditional standard deviations of appraisal based indices. This could lead, arguably, to inefficiencies and mis-pricing, particularly if it is also accepted that changes evolve randomly over time and where future volatility and not an ex-post measure is the key (Sing 1998). If history does not repeat, or provides an unreliable measure, then estimating model based (implied) volatility is an alternative approach (Patel & Sing 2000). This paper is the first of two that employ alternative approaches to calculating and capturing volatility in UK real estate for the purposes of applying the measure to derivative pricing and real option models. It draws on a uniquely constructed IPD/Gerald Eve transactions database, containing over 21,000 properties over the period 1983-2005. In this first paper the magnitude of historic amplification associated with asset returns by sector and geographic spread is looked at. In the subsequent paper the focus will be upon model based (implied) volatility.

The option market reaction to bank loan announcements

In this study, we examine the options market reaction to bank loan announcements for the population of US firms with traded options and loan announcements during 1996-2010. We get evidence on a significant options market reaction to bank loan announcements in terms of levels and changes in short-term implied volatility and its term structure, and observe significant decreases in short-term implied volatility, and significant increases in the slope of its term structure as a result of loan announcements. Our findings appear to be more pronounced for firms with more information asymmetry, lower credit ratings and loans with longer maturities and higher spreads. Evidence is consistent with loan announcements providing reassurance for investors in the short-term, however, over longer time horizons, the increase in the TSIV slope indicates that investors become increasingly unsure over the potential risks of loan repayment or uses of the proceeds.

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.

Common black coatings - reflectance and ageing characteristics in the 0.32-14.3 mu m wavelength range

The diffuse and regular reflectances of five optically absorbing coatings frequently used in optical systems, were measured over the 0.32-14.3 mu m wavelength range, before and after exposure to heat and intense optical radiation. The measured coatings included Nextel Velvet Black, an anodised coating and NPL Super Black. The anodised coating exhibited substantial variations in its diffuse and regular reflectance values after thermal and simulated solar ageing. Solar and thermal ageing of the Nextel Velvet Black resulted in increases of its reflectance. However, thermal ageing tended to decrease the reflectance of the other paint samples examined. Thermal and solar ageing of the NPL Super Black resulted in only minor changes in its reflectance characteristics. All measurements are traceable to the UK National Standards.

'Black skins-white masks': Postcolonial reflections on 'race', gender and second generation return migration to the Caribbean

This paper illustrates the opportunities afforded by the adoption of postcolonial discourse in development geography, drawing specifically on issues of transnationalism, hybridity and inbetweeness. The utility of such notions and associated approaches is illustrated by the authors' current research on the migration of young, second generation and foreign-born 'Bajan-Brits' to the small Caribbean island nation of Barbados, the homeland of their parents. Focussing on issues of 'race' and gender, the paper examines the experiences of return migration among this cohort from an interpretative perspective framed within postcolonial discourse. It argues that notwithstanding the considerable sociocultural problems of adjustment encountered, these Bajan-Brit 'returnees' may be seen as occupying positions of relative economic privilege. Theirs is a liminal space derived by virtue of having been born and/or raised in the UK and being of the black 'race'. Accordingly, they are demonstrated to be both advantaged and disadvantaged; both transnational and national; and black but, in some senses, symbolically white.

Both black and symbolically white: The 'Bajan-Brit' return migrant as post-colonial hybrid

The research presented in this article centres on an under-researched demographic group of young return migrants, namely, second-generation Barbadians, or 'Bajan-Brits', who have decided to 'return' to the birthplace of their parents. Based on 51 in-depth interviews, the essay examines the experiences of second-generation return migrants from an interpretative perspective framed within post-colonial discourse. The article first considers the Bajan-Brits and issues of race in the UK before their decision to migrate. It is then demonstrated that on 'return', in certain respects, these young, black English migrants occupy a liminal position of cultural, racial and economic privilege, based on their 'symbolic' or 'token' whiteness within the post-colonial context of Barbados. But this very hybridity and inbetweeness means that they also face difficulties and associated feelings of social alienation and discrimination. The ambivalent status of this transnational group of migrants serves to challenge traditional notions of Barbadian racial identity.

When smoke gets in our eyes: The multiple impacts of atmospheric black carbon on climate, air quality and health

With both climate change and air quality on political and social agendas from local to global scale, the links between these hitherto separate fields are becoming more apparent. Black carbon, largely from combustion processes, scatters and absorbs incoming solar radiation, contributes to poor air quality and induces respiratory and cardiovascular problems. Uncertainties in the amount, location, size and shape of atmospheric black carbon cause large uncertainty in both climate change estimates and toxicology studies alike. Increased research has led to new effects and areas of uncertainty being uncovered. Here we draw together recent results and explore the increasing opportunities for synergistic research that will lead to improved confidence in the impact of black carbon on climate change, air quality and human health. Topics of mutual interest include better information on spatial distribution, size, mixing state and measuring and monitoring. (c) 2006 Elsevier Ltd. All rights reserved.

The meteorology of the Western Indian Ocean, and the influence of the east African highlands

This paper reviews the meteorology of the Western Indian Ocean and uses a state–of–the–art atmospheric general circulation model to investigate the influence of the East African Highlands on the climate of the Indian Ocean and its surrounding regions. The new 44–year re–analysis produced by the European Centre for Medium range Weather Forecasts (ECMWF) has been used to construct a new climatology of the Western Indian Ocean. A brief overview of the seasonal cycle of the Western Indian Ocean is presented which emphasizes the importance of the geography of the Indian Ocean basin for controlling the meteorology of the Western Indian Ocean. The principal modes of inter–annual variability are described, associated with El Niño and the Indian Ocean Dipole or Zonal Mode, and the basic characteristics of the subseasonal weather over the Western Indian Ocean are presented, including new statistics on cyclone tracks derived from the ECMWF re–analyses. Sensitivity experiments, in which the orographic effects of East Africa are removed, have shown that the East African Highlands, although not very high, play a significant role in the climate of Africa, India and Southeast Asia, and in the heat, salinity and momentum forcing of the Western Indian Ocean. The hydrological cycle over Africa is systematically enhanced in all seasons by the presence of the East African Highlands, and during the Asian summer monsoon there is a major redistribution of the rainfall across India and Southeast Asia. The implied impact of the East African Highlands on the ocean is substantial. The East African Highlands systematically freshen the tropical Indian Ocean, and act to focus the monsoon winds along the coast, leading to greater upwelling and cooler sea–surface temperatures.