Testing option pricing with the Edgeworth expansion

There is a well-developed framework, the Black-Scholes theory, for the pricing of contracts based on the future prices of certain assets, called options. This theory assumes that the probability distribution of the returns of the underlying asset is a Gaussian distribution. However, it is observed in the market that this hypothesis is flawed, leading to the introduction of a fudge factor, the so-called volatility smile. Therefore, it would be interesting to explore extensions of the Black-Scholes theory to non-Gaussian distributions. In this paper, we provide an explicit formula for the price of an option when the distributions of the returns of the underlying asset is parametrized by an Edgeworth expansion, which allows for the introduction of higher independent moments of the probability distribution, namely skewness and kurtosis. We test our formula with options in the Brazilian and American markets, showing that the volatility smile can be reduced. We also check whether our approach leads to more efficient hedging strategies of these instruments. (C) 2004 Elsevier B.V. All rights reserved.

Distinção entre areias eolicas e praiais pele analise discriminante

Beach deposits occur in high energy environments with continual sorting by swash and backswash. The fines are removed by the backswash, which is not competent to remove the coarser material. Hence negative asymmetry (skewness) results. The wind transports only the finer fraction to the dunes, resulting in a tendency towards a positively skewed distribution. In the case studied the aeolian sand has a mean asymmetry of 0.13, the beach sand -0.11. Equivalent values for mean grain size and standard deviation are 2.51 and 0.24 (aeolian) and 2.41 and 0.37 (beach). Beach sands are therefore coarser and less well sorted than aeolian sands. -V.Gardiner

Using tree population size structures to assess the impacts of cattle grazing and eucalypts plantations in subtropical South America

To evaluate the effects of distinct management of the matrix in which forest fragments are found upon plant populations thriving in forest remnants in south Brazil, we assessed the conservation status of populations of four woody species (Campomanesia rhombea, Diospyros incontans, Myrciaria cuspidata and Sebastiania commersoniana) through analyses of size structure. Analyzes were carried out at two scales. At a local scale, we consider populations in fragments surrounded by pastures or eucalypts forest plantations, and at a regional scale we also consider larger forest tracts taken as reference areas (Rio Grande do Sul Forest Inventory databank). Population size structures were summarized using the symmetry of height distributions. Small individual size classes prevailed at the local scale in fragments surrounded by eucalypts plantations, whereas in areas exposed to cattle ranching, populations of the same species consistently lack small individuals. At the regional scale, populations in fragments surrounded by pastures presented greater skewness (prevalence of small plants) than populations in reference areas, while populations surrounded by eucalypts plantations presented intermediate skewness. These results reinforce the notion that plantations have a higher conservation value for forest ecosystems than other commercial land uses, like cattle ranching. © 2010 Springer Science+Business Media B.V.

Avaliação do tratamento ortodôntico precoce da classe II, 1ª divisão, subdivisão

Coordenação de Aperfeiçoamento de Pessoal de Nível Superior (CAPES)

Validação das escalas de preocupação com o peso corporal e de estresse percebido

Fundação de Amparo à Pesquisa do Estado de São Paulo (FAPESP)

Aquisição fonológica de fricativas por crianças com transtorno fonológico: uma investigação acústica

Pós-graduação em Estudos Linguísticos - IBILCE

Usinabilidade e integridade superficial de implantes dentários

Pós-graduação em Engenharia Mecânica - FEIS