Stochastic volatility and the goodness-of-fit of the Heston model

Recently, Drǎgulescu and Yakovenko proposed an analytical formula for computing the probability density function of stock log returns, based on the Heston model, which they tested empirically. Their research design inadvertently favourably biased the fit of the data to the Heston model, thus overstating their empirical results. Furthermore, Drǎgulescu and Yakovenko did not perform any goodness-of-fit statistical tests. This study employs a research design that facilitates statistical tests of the goodness-of-fit of the Heston model to empirical returns. Robustness checks are also performed. In brief, the Heston model outperformed the Gaussian model only at high frequencies and even so does not provide a statistically acceptable fit to the data. The Gaussian model performed (marginally) better at medium and low frequencies, at which points the extra parameters of the Heston model have adverse impacts on the test statistics. © 2005 Taylor & Francis Group Ltd.

The sensitivity of US banks' stock returns to interest and exchange rate changes

Purpose – The purpose of this paper is to investigate the impact of foreign exchange and interest rate changes on US banks’ stock returns. Design/methodology/approach – The approach employs an EGARCH model to account for the ARCH effects in daily returns. Most prior studies have used standard OLS estimation methods with the result that the presence of ARCH effects would have affected estimation efficiency. For comparative purposes, the standard OLS estimation method is also used to measure sensitivity. Findings – The findings are as follows: under the conditional t-distributional assumption, the EGARCH model generated a much better fit to the data although the goodness-of-fit of the model is not entirely satisfactory; the market index return accounts for most of the variation in stock returns at both the individual bank and portfolio levels; and the degree of sensitivity of the stock returns to interest rate and FX rate changes is not very pronounced despite the use of high frequency data. Earlier results had indicated that daily data provided greater evidence of exposure sensitivity. Practical implications – Assuming that banks do not hedge perfectly, these findings have important financial implications as they suggest that the hedging policies of the banks are not reflected in their stock prices. Alternatively, it is possible that different GARCH-type models might be more appropriate when modelling high frequency returns. Originality/value – The paper contributes to existing knowledge in the area by showing that ARCH effects do impact on measures of sensitivity.

Influence of ethical beliefs, national culture and institutions on preferences for HRM in Oman

Purpose – The paper seeks to investigate the association between ethical beliefs, aspects of national culture and national institutions, and preferences for specific human resource management practices in the Sultanate of Oman. Design/methodology/approach – A total of 712 individuals working in six organisations (both private and public sectors) responded to a self-administered questionnaire in the Sultanate of Oman. To test the raised research questions of the proposed framework, the methodology of structural equation models was used. Findings – The results highlight significant differences in the belief systems on the basis of different demographic characteristics. The findings also confirm impact of ethical beliefs, and aspects of national culture and national institutions on preferences for human resource management (HRM) practices. Research limitations/implications – Although the goodness-of-fit indexes confirmed the validity of the proposed operational model, some indices were attained at rather flexible levels. Practical implications – Studies on managerial beliefs and values can offer important insights into the extent that work is viewed as an integral life activity. Such information can help differentiate among managerial styles in various cultures, and in predicting managerial behaviour such as ethical decision-making. Based on such understanding, the findings can be used to educate government officials and outside consultants interested in Oman. Originality/value – The study contributes to the accumulation of knowledge about under-researched developing countries such as Oman, as limited data are available on HRM, value orientations and ethical beliefs' issues in this region.

Population pharmacokinetics of single-dose intravenous paracetamol in children

Background To determine the pharmacokinetics (PK) of a new i.v. formulation of paracetamol (Perfalgan) in children ≤15 yr of age. Methods After obtaining written informed consent, children under 16 yr of age were recruited to this study. Blood samples were obtained at 0, 15, 30 min, 1, 2, 4, 6, and 8 h after administration of a weight-dependent dose of i.v. paracetamol. Paracetamol concentration was measured using a validated high-performance liquid chromatographic assay with ultraviolet detection method, with a lower limit of quantification (LLOQ) of 900 pg on column and an intra-day coefficient of variation of 14.3% at the LLOQ. Population PK analysis was performed by non-linear mixed-effect modelling using NONMEM. Results One hundred and fifty-nine blood samples from 33 children aged 1.8–15 yr, weight 13.7–56 kg, were analysed. Data were best described by a two-compartment model. Only body weight as a covariate significantly improved the goodness of fit of the model. The final population models for paracetamol clearance (CL), V1 (central volume of distribution), Q (inter-compartmental clearance), and V2 (peripheral volume of distribution) were: 16.51×(WT/70)0.75, 28.4×(WT/70), 11.32×(WT/70)0.75, and 13.26×(WT/70), respectively (CL, Q in litres per hour, WT in kilograms, and V1 and V2 in litres). Conclusions In children aged 1.8–15 yr, the PK parameters for i.v. paracetamol were not influenced directly by age but were by total body weight and, using allometric size scaling, significantly affected the clearances (CL, Q) and volumes of distribution (V1, V2).

Density forecasts of crude-oil prices using option-implied and ARCH-type models

The predictive accuracy of competing crude-oil price forecast densities is investigated for the 1994–2006 period. Moving beyond standard ARCH type models that rely exclusively on past returns, we examine the benefits of utilizing the forward-looking information that is embedded in the prices of derivative contracts. Risk-neutral densities, obtained from panels of crude-oil option prices, are adjusted to reflect real-world risks using either a parametric or a non-parametric calibration approach. The relative performance of the models is evaluated for the entire support of the density, as well as for regions and intervals that are of special interest for the economic agent. We find that non-parametric adjustments of risk-neutral density forecasts perform significantly better than their parametric counterparts. Goodness-of-fit tests and out-of-sample likelihood comparisons favor forecast densities obtained by option prices and non-parametric calibration methods over those constructed using historical returns and simulated ARCH processes. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark 31:727–754, 2011

Collocation, interpretation and explanation:the case of just any

This article discusses the question of compositionality by examining whether the indiscriminacy reading of the collocation of just with any can be shown to be a consequence of the schematic meaning-potential of each of these two items. A comparison of justwith other restrictive focus particles allows its schematic meaning to be defined as that of goodness of fit. Any is defined as representing an indefinite member of a set as extractable from the set in exactly the same way as each of the other members thereof. The collocation just any often gives rise to a scalar reading oriented towards the lowest value on the scale due to the fact that focus on the unconstrained extractability of a random indefinite item brings into consideration even marginal cases and the latter tend to be interpreted as situated on the lower end of the scale. The attention to low-end values also explains why just any is regularly found with the adjective old, the prepositional phrase at all and various devaluating expressions. It is concluded that the meanings of the component parts of this collocation do indeed account for the meaning of the whole, and that an appropriate methodology allows identification of linguistic meanings and their interrelations. © 2011 Elsevier B.V.

The enantioselective population pharmacokinetics of intravenous ketorolac in children using a stereoselective assay suitable for microanalysis

Objective: To describe the effect of age and body size on enantiomer selective pharmacokinetic (PK) of intravenous ketorolac in children using a microanalytical assay. Methods: Blood samples were obtained at 0, 15 and 30 min and at 1, 2, 4, 6, 8 and 12 h after a weight-dependent dose of ketorolac. Enantiomer concentration was measured using a liquid chromatography tandem mass spectrometry method. Non-linear mixed-effect modelling was used to assess PK parameters. Key findings: Data from 11 children (1.7–15.6 years, weight 10.7–67.4 kg) were best described by a two-compartment model for R(+), S(−) and racemic ketorolac. Only weight (WT) significantly improved the goodness of fit. The final population models were CL = 1.5 × (WT/46)0.75, V1 = 8.2 × (WT/46), Q = 3.4 × (WT/46)0.75, V2 = 7.9 × (WT/46), CL = 2.98 × (WT/46), V1 = 13.2 × (WT/46), Q = 2.8 × (WT/46)0.75, V2 = 51.5 × (WT/46), and CL = 1.1 × (WT/46)0.75, V1 = 4.9 × (WT/46), Q = 1.7 × (WT/46)0.75 and V2 = 6.3 × (WT/46)for R(+), S(−) and racemic ketorolac. Conclusions: Only body weight influenced the PK parameters for R(+) and S(−) ketorolac. Using allometric size scaling significantly affected the clearances (CL, Q) and volumes of distribution (V1, V2).

A question of fit:cultural and individual differences in interpersonal justice perceptions

This study examined the link between employees’ adult attachment orientations and perceptions of line managers’ interpersonal justice behaviors, and the moderating effect of national culture (collectivism). Participants from countries categorized as low collectivistic (N = 205) and high collectivistic (N = 136) completed an online survey. Attachment anxiety and avoidance were negatively related to interpersonal justice perceptions. Cultural differences did not moderate the effects of avoidance. However, the relationship between attachment anxiety and interpersonal justice was non-significant in the Southern Asia (more collectivistic) cultural cluster. Our findings indicate the importance of ‘fit’ between cultural relational values and individual attachment orientations in shaping interpersonal justice perceptions, and highlight the need for more non-western organizational justice research.

Statnote 16: fitting a regression line to data

Fitting a linear regression to data provides much more information about the relationship between two variables than a simple correlation test. A goodness of fit test of the line should always be carried out. Hence, ‘r squared’ estimates the strength of the relationship between Y and X, ANOVA whether a statistically significant line is present, and the ‘t’ test whether the slope of the line is significantly different from zero. In addition, it is important to check whether the data fit the assumptions for regression analysis and, if not, whether a transformation of the Y and/or X variables is necessary.

Data methods in optometry. Part 6: fitting a regression line to data

1. Fitting a linear regression to data provides much more information about the relationship between two variables than a simple correlation test. A goodness of fit test of the line should always be carried out. Hence, r squared estimates the strength of the relationship between Y and X, ANOVA whether a statistically significant line is present, and the ‘t’ test whether the slope of the line is significantly different from zero. 2. Always check whether the data collected fit the assumptions for regression analysis and, if not, whether a transformation of the Y and/or X variables is necessary. 3. If the regression line is to be used for prediction, it is important to determine whether the prediction involves an individual y value or a mean. Care should be taken if predictions are made close to the extremities of the data and are subject to considerable error if x falls beyond the range of the data. Multiple predictions require correction of the P values. 3. If several individual regression lines have been calculated from a number of similar sets of data, consider whether they should be combined to form a single regression line. 4. If the data exhibit a degree of curvature, then fitting a higher-order polynomial curve may provide a better fit than a straight line. In this case, a test of whether the data depart significantly from a linear regression should be carried out.

Statnote 34 : the Kolmogorov-Smirnov (KS) test

The Kolmogorov-Smirnov (KS) test is a non-parametric test which can be used in two different circumstances. First, it can be used as an alternative to chi-square (?2) as a ‘goodness-of-fit’ test to compare whether a given ‘observed’ sample of observations conforms to an ‘expected’ distribution of results (KS, one-sample test). An example of the use of the one-sample test to determine whether a sample of observations was normally distributed was described previously. Second, it can be used as an alternative to the Mann-Whitney test to compare two independent samples of observations (KS, two-sample test). Hence, this statnote describes the use of the KS test with reference to two scenarios: (1) to compare the observed frequency (Fo) of soil samples containing cysts of the protozoan Naegleria collected each month for a year with an expected equal frequency (Fe) across months (one-sample test), and (2) to compare the abundance of bacteria on cloths and sponges sampled in a domestic kitchen environment (two-sample test).

Peptide binding to the HLA-DRB1 supertype:a proteochemometrics analysis

A proteochemometrics approach was applied to a set of 2666 peptides binding to 12 HLA-DRB1 proteins. Sequences of both peptide and protein were described using three z-descriptors. Cross terms accounting for adjacent positions and for every second position in the peptides were included in the models, as well as cross terms for peptide/protein interactions. Models were derived based on combinations of different blocks of variables. These models had moderate goodness of fit, as expressed by r2, which ranged from 0.685 to 0.732; and good cross-validated predictive ability, as expressed by q2, which varied from 0.678 to 0.719. The external predictive ability was tested using a set of 356 HLA-DRB1 binders, which showed an r2(pred) in the range 0.364-0.530. Peptide and protein positions involved in the interactions were analyzed in terms of hydrophobicity, steric bulk and polarity.

Multi-model fitting based on minimum spanning tree

This paper presents a novel approach to the computation of primitive geometrical structures, where no prior knowledge about the visual scene is available and a high level of noise is expected. We based our work on the grouping principles of proximity and similarity, of points and preliminary models. The former was realized using Minimum Spanning Trees (MST), on which we apply a stable alignment and goodness of fit criteria. As for the latter, we used spectral clustering of preliminary models. The algorithm can be generalized to various model fitting settings, without tuning of run parameters. Experiments demonstrate the significant improvement in the localization accuracy of models in plane, homography and motion segmentation examples. The efficiency of the algorithm is not dependent on fine tuning of run parameters like most others in the field.

A corpus of 714 full-color images of depth-rotated objects

A set of full-color images of objects is described for use in experiments investigating the effects of in-depth rotation on the identification of three-dimensional objects. The corpus contains up to 11 perspective views of 70 nameable objects. We also provide ratings of the "goodness" of each view, based on Thurstonian scaling of subjects' preferences in a paired-comparison experiment. An exploratory cluster analysis on the scaling solutions indicates that the amount of information available in a given view generally is the major determinant of the goodness of the view. For instance, objects with an elongated front-back axis tend to cluster together, and the front and back views of these objects, which do not reveal the object's major surfaces and features, are evaluated as the worst views.

Recognition times of different views of 56 depth-rotated objects: a note concerning Verfaillie and Boutsen (1995)

The present study examines the effect of the goodness of view on the minimal exposure time required to recognize depth-rotated objects. In a previous study, Verfaillie and Boutsen (1995) derived scales of goodness of view, using a new corpus of images of depth-rotated objects. In the present experiment, a subset of this corpus (five views of 56 objects) is used to determine the recognition exposure time for each view, by increasing exposure time across successive presentations until the object is recognized. The results indicate that, for two thirds of the objects, good views are recognized more frequently and have lower recognition exposure times than bad views.