Discrete time models of the term structure of interest rates and interest rate contingent claims

In this study, discrete time one-factor models of the term structure of interest rates and their application to the pricing of interest rate contingent claims are examined theoretically and empirically. The first chapter provides a discussion of the issues involved in the pricing of interest rate contingent claims and a description of the Ho and Lee (1986), Maloney and Byrne (1989), and Black, Derman, and Toy (1990) discrete time models. In the second chapter, a general discrete time model of the term structure from which the Ho and Lee, Maloney and Byrne, and Black, Derman, and Toy models can all be obtained is presented. The general model also provides for the specification of an additional model, the ExtendedMB model. The third chapter illustrates the application of the discrete time models to the pricing of a variety of interest rate contingent claims. In the final chapter, the performance of the Ho and Lee, Black, Derman, and Toy, and ExtendedMB models in the pricing of Eurodollar futures options is investigated empirically. The results indicate that the Black, Derman, and Toy and ExtendedMB models outperform the Ho and Lee model. Little difference in the performance of the Black, Derman, and Toy and ExtendedMB models is detected. ^

Empirical study of exchange rates in Brazil, Canada and the Caribbean

This dissertation examines the monetary models of exchange rate determination for Brazil, Canada, and two countries in the Caribbean, namely, the Dominican Republic and Jamaica. With the exception of Canada, the others adopted the floating regime during the past ten years.^ The empirical validity of four seminal models in exchange rate economics were determined. Three of these models were entirely classical (Bilson and Frenkel) or Keynesian (Dornbusch) in nature. The fourth model (Real Interest Differential Model) was a mixture of the two schools of economic theory.^ There is no clear empirical evidence of the validity of the monetary models. However, the signs of the coefficients of the nominal interest differential variable were as predicted by the Keynesian hypothesis in the case of Canada and as predicted by the Chicago theorists in the remaining countries. Moreover, in case of Brazil, due to hyperinflation, the exchange rate is heavily influenced by domestic money supply.^ I also tested the purchasing power parity (PPP) for this same set of countries. For both the monetary as well as the PPP hypothesis, I tested for co-integration and applied ordinary least squares estimation procedure. The error correction model was also used for the PPP model, to determine convergence to equilibrium.^ The validity of PPP is also questionable for my set of countries. Endogeinity among the regressors as well as the lack of proper price indices are the contributing factors. More importantly, Central Bank intervention negate rapid adjustment of price and exchange rates to their equilibrium value. However, its forecasting capability for the period 1993-1994 is superior compared to the monetary models in two of the four cases.^ I conclude that in spite of the questionable validity of these models, the monetary models give better results in the case of the "smaller" economies like the Dominican Republic and Jamaica where monetary influences swamp the other determinants of exchange rate. ^

An Investigation of Narration Rates for the Reading While Listening Strategy

This study investigated the effects of Reading While Listening narration rates on elementary students' comprehension. Slow, normal and sentence interval narration rates were used. Results showed higher comprehension scores with the slow narration rate for students with low reading levels, and normal rate for high and medium level readers

Education, earnings, and rates of return: The case of Taiwan

Educational planners and economists have long recognized the importance of education as a form of productive investment in both advanced countries and developing countries. In the case of Taiwan, along with impressive economic growth, there was an even faster rate of growth of the government's investment in education. This leads some to question whether education has any role in economic development. ^ The purpose of this study is to provide a broad overview of the role of education, in terms of private rates of return to education, in Taiwan. In the process, a variety of hypotheses about human capital theory are examined and an empirical study of Taiwan's earnings functions are tested to show that education can be an important instrument to increase private rate of return, even under conditions of scarcity of natural and physical resources. Data was collected using the Manpower Survey and Manpower Utilization Survey, conducted by the government. Research questions were analyzed using descriptive statistics, frequencies, and regression analysis. ^ Results indicated that the Manpower Development Plans have been the decisive influence in allowing Taiwan to develop its human resources and achieve success in meeting the needs of Taiwan's economy. The structure of age-earnings profiles showed a strong relationship between earnings and education, and the profiles that successively shift upward are associated with higher levels of education. In the cross-sectional results of the rate of return in 1997, each additional year of schooling leads to a 6.2% increase in income. As to the private rates of return to different levels of education, the results found that the private rates of return are 2.88%, 4.85% and 10.05% for primary, secondary and higher education respectively. In an intertemporal comparison for 1980, 1985, 1990 and 1997, the results showed no significant trend except the private rates of return for primary education have been falling from 3.9% to 2.88%. ^ On the basis of this study, for individual student or family in Taiwan, there is likely to be a strong demand for education, particularly at the higher level. Therefore, a well-developed higher educational level becomes essential and the content of curriculum in higher education becomes another crucial question facing planners in Taiwan if they are going to use education as a means to foster economic development. ^

Base rates of counterproductive work behaviors

This study provides a comprehensive assessment of base rates for counterproductive work behaviors (CWB) and examines their relationship with personality and demographic variables. The Randomized-Response Technique (RRT) was employed in order to reduce the effects of social desirability. Base rates were calculated for 66 behaviors for a student and nationwide sample. Results revealed 15 significant behaviors for the student sample and 7 for the nationwide sample. In addition, low neuroticism was found to relate to higher reporting of counterproductive behavior for both groups. Also, low conscientiousness was related to higher reports of CWB in the student sample. Finally, CWB was found to differ based on ethnicity for the student sample such that Caucasians reported higher rates of CWB than Hispanics.

On the fundamentals of research and development (R&D) spillovers in competitive markets

Rivals may voluntarily share Research and Development (R&D) results even in the absence of any binding agreements or collusion. In a model where rival firms engage in non-cooperative independent R&D process, we used optimization and game theory analysis to study the equilibrium strategy of the firms. Our work showed that, while minimal spillover is always equilibrium, there may be another equilibrium where firms may reciprocally choose high, sometimes perfect, spillover rates. The incentive for sharing R&D output is based on firms' expectations of learning from their rivals' R&D progress in the future. This leads to strategic complementarities between the firms' choices of spillover rates and thus policy implication follows. ^ Public research agencies can contribute more to social welfare by providing research as public goods. In a non-cooperative public-private research relationship where parallel R&D is conducted, by making its R&D results accessible, the public research agency can stimulate private spillovers, even if there exists rivalry among the private firms who can benefit from such spillovers. ^

The effects of school mobility in pre -assessment grade levels on student performance and school accountability in urban Title I schools

This study examined the effects of student mobility and educational enrollment experiences on academic achievement. The educational progress, school enrollments and transfers of inner-city elementary students were tracked over a four-year period. Student achievement was measured by criterion-referenced reading tests administered in the second semester of the third grade. It further analyzed the degree to which the switch to different basal reading textbooks interrupted the continuity of education thereby contributing to the detrimental effects of intra-district mobility. ^ Mobility histories of 2,913 third grade students were collected to evaluate the number of times each student entered or withdrew from a Miami-Dade County Public School beginning in August 2000 through March 2004, and distinguished between transfers that occurred during the academic school year and those that occurred during summer months. Data were analyzed using Pearson correlations and multiple regressions to determine if school mobility contributed to performance on the Florida Comprehensive Assessment Third Grade Reading Test (FCAT). Transferring from one school to another was found to have a significant negative impact on student test scores. Transfers within the academic school year were more detrimental than transfers that occurred during the summer months. Third grade students who transferred into schools that used the same reading textbook series were found to have significantly higher FCAT reading scores than third graders who transferred into schools that used different reading textbooks. ^ The effects of mobility rates on overall school performance were also examined. Data was collected on 124 Title I elementary schools to determine the degree to which mobility affected school accountability scores. Title I schools with high student mobility rates had significantly lower accountability scores than schools with lower student mobility rates. ^ The results of this study highlight the impact of education and housing policy and imply a need for programs and practices that promote stability in the early elementary years. ^

Evidence of the heterogeneous market hypothesis using wavelet multi -resolution analysis

In finance literature many economic theories and models have been proposed to explain and estimate the relationship between risk and return. Assuming risk averseness and rational behavior on part of the investor, the models are developed which are supposed to help in forming efficient portfolios that either maximize (minimize) the expected rate of return (risk) for a given level of risk (rates of return). One of the most used models to form these efficient portfolios is the Sharpe's Capital Asset Pricing Model (CAPM). In the development of this model it is assumed that the investors have homogeneous expectations about the future probability distribution of the rates of return. That is, every investor assumes the same values of the parameters of the probability distribution. Likewise financial volatility homogeneity is commonly assumed, where volatility is taken as investment risk which is usually measured by the variance of the rates of return. Typically the square root of the variance is used to define financial volatility, furthermore it is also often assumed that the data generating process is made of independent and identically distributed random variables. This again implies that financial volatility is measured from homogeneous time series with stationary parameters. In this dissertation, we investigate the assumptions of homogeneity of market agents and provide evidence for the case of heterogeneity in market participants' information, objectives, and expectations about the parameters of the probability distribution of prices as given by the differences in the empirical distributions corresponding to different time scales, which in this study are associated with different classes of investors, as well as demonstrate that statistical properties of the underlying data generating processes including the volatility in the rates of return are quite heterogeneous. In other words, we provide empirical evidence against the traditional views about homogeneity using non-parametric wavelet analysis on trading data, The results show heterogeneity of financial volatility at different time scales, and time-scale is one of the most important aspects in which trading behavior differs. In fact we conclude that heterogeneity as posited by the Heterogeneous Markets Hypothesis is the norm and not the exception.

Functional near infrared spectroscopy study of language, joint attention and motor skills

Near infrared spectroscopy (NIRS) is an emerging non-invasive optical neuro imaging technique that monitors the hemodynamic response to brain activation with ms-scale temporal resolution and sub-cm spatial resolution. The overall goal of my dissertation was to develop and apply NIRS towards investigation of neurological response to language, joint attention and planning and execution of motor skills in healthy adults. Language studies were performed to investigate the hemodynamic response, synchrony and dominance feature of the frontal and fronto-temporal cortex of healthy adults in response to language reception and expression. The mathematical model developed based on granger causality explicated the directional flow of information during the processing of language stimuli by the fronto-temporal cortex. Joint attention and planning/ execution of motor skill studies were performed to investigate the hemodynamic response, synchrony and dominance feature of the frontal cortex of healthy adults and in children (5-8 years old) with autism (for joint attention studies) and individuals with cerebral palsy (for planning/execution of motor skills studies). The joint attention studies on healthy adults showed differences in activation as well as intensity and phase dependent connectivity in the frontal cortex during joint attention in comparison to rest. The joint attention studies on typically developing children showed differences in frontal cortical activation in comparison to that in children with autism. The planning and execution of motor skills studies on healthy adults and individuals with cerebral palsy (CP) showed difference in the frontal cortical dominance, that is, bilateral and ipsilateral dominance, respectively. The planning and execution of motor skills studies also demonstrated the plastic and learning behavior of brain wherein correlation was found between the relative change in total hemoglobin in the frontal cortex and the kinematics of the activity performed by the participants. Thus, during my dissertation the NIRS neuroimaging technique was successfully implemented to investigate the neurological response of language, joint attention and planning and execution of motor skills in healthy adults as well as preliminarily on children with autism and individuals with cerebral palsy. These NIRS studies have long-term potential for the design of early stage interventions in children with autism and customized rehabilitation in individuals with cerebral palsy.

The Importance of Dissimilatory Nitrate Reduction to Ammonium (DNRA) in the Nitrogen Cycle of Coastal Ecosystems

Until recently, it was believed that biological assimilation and gaseous nitrogen (N) loss through denitrification were the two major fates of nitrate entering or produced within most coastal ecosystems. Denitrification is often viewed as an important ecosystem service that removes reactive N from the ecosystem. However, there is a competing nitrate reduction process, dissimilatory nitrate reduction to ammonium (DNRA), that conserves N within the ecosystem. The recent application of nitrogen stable isotopes as tracers has generated growing evidence that DNRA is a major nitrogen pathway that cannot be ignored. Measurements comparing the importance of denitrification vs. DNRA in 55 coastal sites found that DNRA accounted for more than 30% of the nitrate reduction at 26 sites. DNRA was the dominant pathway at more than one-third of the sites. Understanding what controls the relative importance of denitrification and DNRA, and how the balance changes with increased nitrogen loading, is of critical importance for predicting eutrophication trajectories. Recent improvements in methods for assessing rates of DNRA have helped refine our understanding of the rates and controls of this process, but accurate measurements in vegetated sediment still remain a challenge.

The Role of Agriculture and Food Consumption in Tropical Conservation

A growing human population, shifting human dietary habits, and climate change are negatively affecting global ecosystems on a massive scale. Expanding agricultural areas to feed a growing population drives extensive habitat loss, and climate change compounds stresses on both food security and ecosystems. Understanding the negative effects of human diet and climate change on agricultural and natural ecosystems provides a context within which potential technological and behavioral solutions can be proposed to help maximize conservation. The purpose of this research was to (1) examine the potential effects of climate change on the suitability of areas for commercial banana plantations in Latin America in the 2050s and how shifts in growing areas could affect protected areas; (2) test the ability of small unmanned aerial vehicles (UAVs) to map productivity of banana plantations as a potential tool for increasing yields and decreasing future plantation expansions; (3) project the effects on biodiversity of increasing rates of animal product consumption in developing megadiverse countries; and (4) estimate the capacity of global pasture biomass production and Fischer-Tropsch hydrocarbon synthesis (IGCC-FT) processing to meet electricity, gasoline and diesel needs. The results indicate that (1) the overall extent of areas suitable for conventional banana cultivation is predicted to decrease by 19% by 2050 because of a hotter and drier climate, but all current banana exporting countries are predicted to maintain some suitable areas with no effects on protected areas; (2) Spatial patterns of NDVI and ENDVI were significantly positively correlated with several metrics of fruit yield and quality, indicating that UAV systems can be used in banana plantations to map spatial patterns of fruit yield; (3) Livestock production is the single largest driver of habitat loss, and both livestock and feedstock production are increasing in developing biodiverse tropical countries. Reducing global animal product consumption should therefore be at the forefront of strategies aimed at reducing biodiversity loss; (4) Removing livestock from global pasture lands and instead utilizing the biomass production could produce enough energy to meet 100% of the electricity, gasoline, and diesel needs of over 40 countries with extensive grassland ecosystems, primarily in tropical developing countries.

Investigation of spatial patterns of ground-water exchange with lakes, using a three-dimensional numerical model

Hydrogeologic variables controlling groundwater exchange with inflow and flow-through lakes were simulated using a three-dimensional numerical model (MODFLOW) to investigate and quantify spatial patterns of lake bed seepage and hydraulic head distributions in the porous medium surrounding the lakes. Also, the total annual inflow and outflow were calculated as a percentage of lake volume for flow-through lake simulations. The general exponential decline of seepage rates with distance offshore was best demonstrated at lower anisotropy ratio (i.e., Kh/Kv = 1, 10), with increasing deviation from the exponential pattern as anisotropy was increased to 100 and 1000. 2-D vertical section models constructed for comparison with 3-D models showed that groundwater heads and seepages were higher in 3-D simulations. Addition of low conductivity lake sediments decreased seepage rates nearshore and increased seepage rates offshore in inflow lakes, and increased the area of groundwater inseepage on the beds of flow-through lakes. Introduction of heterogeneity into the medium decreased the water table and seepage ratesnearshore, and increased seepage rates offshore in inflow lakes. A laterally restricted aquifer located at the downgradient side of the flow-through lake increased the area of outseepage. Recharge rate, lake depth and lake bed slope had relatively little effect on the spatial patterns of seepage rates and groundwater exchange with lakes.