Three essays on asset pricing

In this dissertation, I investigate three related topics on asset pricing: the consumption-based asset pricing under long-run risks and fat tails, the pricing of VIX (CBOE Volatility Index) options and the market price of risk embedded in stock returns and stock options. These three topics are fully explored in Chapter II through IV. Chapter V summarizes the main conclusions. In Chapter II, I explore the effects of fat tails on the equilibrium implications of the long run risks model of asset pricing by introducing innovations with dampened power law to consumption and dividends growth processes. I estimate the structural parameters of the proposed model by maximum likelihood. I find that the stochastic volatility model with fat tails can, without resorting to high risk aversion, generate implied risk premium, expected risk free rate and their volatilities comparable to the magnitudes observed in data. In Chapter III, I examine the pricing performance of VIX option models. The contention that simpler-is-better is supported by the empirical evidence using actual VIX option market data. I find that no model has small pricing errors over the entire range of strike prices and times to expiration. In general, Whaley’s Black-like option model produces the best overall results, supporting the simpler-is-better contention. However, the Whaley model does under/overprice out-of-the-money call/put VIX options, which is contrary to the behavior of stock index option pricing models. In Chapter IV, I explore risk pricing through a model of time-changed Lvy processes based on the joint evidence from individual stock options and underlying stocks. I specify a pricing kernel that prices idiosyncratic and systematic risks. This approach to examining risk premia on stocks deviates from existing studies. The empirical results show that the market pays positive premia for idiosyncratic and market jump-diffusion risk, and idiosyncratic volatility risk. However, there is no consensus on the premium for market volatility risk. It can be positive or negative. The positive premium on idiosyncratic risk runs contrary to the implications of traditional capital asset pricing theory.

Three Essays on Asset Pricing

In this dissertation, I investigate three related topics on asset pricing: the consumption-based asset pricing under long-run risks and fat tails, the pricing of VIX (CBOE Volatility Index) options and the market price of risk embedded in stock returns and stock options. These three topics are fully explored in Chapter II through IV. Chapter V summarizes the main conclusions. In Chapter II, I explore the effects of fat tails on the equilibrium implications of the long run risks model of asset pricing by introducing innovations with dampened power law to consumption and dividends growth processes. I estimate the structural parameters of the proposed model by maximum likelihood. I find that the stochastic volatility model with fat tails can, without resorting to high risk aversion, generate implied risk premium, expected risk free rate and their volatilities comparable to the magnitudes observed in data. In Chapter III, I examine the pricing performance of VIX option models. The contention that simpler-is-better is supported by the empirical evidence using actual VIX option market data. I find that no model has small pricing errors over the entire range of strike prices and times to expiration. In general, Whaley’s Black-like option model produces the best overall results, supporting the simpler-is-better contention. However, the Whaley model does under/overprice out-of-the-money call/put VIX options, which is contrary to the behavior of stock index option pricing models. In Chapter IV, I explore risk pricing through a model of time-changed Lévy processes based on the joint evidence from individual stock options and underlying stocks. I specify a pricing kernel that prices idiosyncratic and systematic risks. This approach to examining risk premia on stocks deviates from existing studies. The empirical results show that the market pays positive premia for idiosyncratic and market jump-diffusion risk, and idiosyncratic volatility risk. However, there is no consensus on the premium for market volatility risk. It can be positive or negative. The positive premium on idiosyncratic risk runs contrary to the implications of traditional capital asset pricing theory.

Fat Absorption in Commercial French Fries Depending on Oil Type and Coating

This study examines the effect of edible coatings, type of oil used, and cooking method on the fat content of commercially available French fries. In contrast to earlier studies that examined laboratory prepared French fries, this study assesses commercially available French fries and cooking oils. This study also measured the fat content in oven baked French fries, comparing the two cooking methods in addition to the comparisons of different coatings’ oil uptake. The findings of this study were that the type of oil used did have a significant impact on the final oil content of the uncoated and seasoned fries. The fries coated in modified food starch and fried in peanut and soy oils had what appeared to be significantly higher oil content than those fried in corn oil or baked, but the difference was not statistically significant. Additionally, fat content in French fries with hydrocollidial coatings that were prepared in corn oil were not significantly different than French fries with the same coating that were baked.

Deployment of a Hybrid Multicast Switch in Energy-Aware Data Center Network: A Case of Fat-Tree Topology

Recently, energy efficiency or green IT has become a hot issue for many IT infrastructures as they attempt to utilize energy-efficient strategies in their enterprise IT systems in order to minimize operational costs. Networking devices are shared resources connecting important IT infrastructures, especially in a data center network they are always operated 24/7 which consume a huge amount of energy, and it has been obviously shown that this energy consumption is largely independent of the traffic through the devices. As a result, power consumption in networking devices is becoming more and more a critical problem, which is of interest for both research community and general public. Multicast benefits group communications in saving link bandwidth and improving application throughput, both of which are important for green data center. In this paper, we study the deployment strategy of multicast switches in hybrid mode in energy-aware data center network: a case of famous fat-tree topology. The objective is to find the best location to deploy multicast switch not only to achieve optimal bandwidth utilization but also to minimize power consumption. We show that it is possible to easily achieve nearly 50% of energy consumption after applying our proposed algorithm.

Inadequacy of Micronutrients, Fat, and Fiber Consumption in the Diets of Haitian-, African- and Cuban-Americans with and without Type 2 Diabetes

Micronutrient insufficiency, low dietary fiber, and high saturated fat intake have been associated with chronic diseases. Micronutrient insufficiencies may exacerbate poor health outcomes for persons with type 2 diabetes and minority status. We examined dietary intakes using the Recommended Dietary Allowances (RDAs) of micronutrients, and Adequate Intakes (AIs) of fiber, and Dietary Guidelines for Americans (DGA) for saturated fat in Haitian-, African-, and Cuban- Americans (n = 868), approximately half of each group with type 2 diabetes. Insufficient intakes of vitamins D and E and calcium were found in over 40 % of the participants. Over 50 % of African- and Cuban- Americans consumed over 10 % of calories from saturated fat. Haitian-Americans were more likely to have insufficiencies in iron, B-vitamins, and vitamins D and E, and less likely to have inadequate intake of saturated fat as compared to Cuban-Americans. Vitamin D insufficiency was more likely for Haitian-Americans as compared to African- Americans. Diabetes status alone did not predict micronutrient insufficiencies; however, Haitian-Americans with no diabetes were more likely to be insufficient in calcium. Adjusting for age, gender, energy, smoking, physical activity, access to health care, and education negated the majority of micronutrient insufficiency differences by ethnicity. These findings suggest that policies are needed to ensure that low-cost, quality produce can be accessed regardless of neighborhood and socioeconomic status.

Low-fat food consumption by people with diabetes decreases fat saturated fat, and cholesterol intake

This study investigated the effect of providing free-access to several fat-modified foods on dietary energy and fat intake in free-living individuals with and without diabetes mellitus. Five low/no-fat products or their regular-fat versions were provided to volunteers to take home and use for 3 days. Energy and nutrient intakes of all foods consumed were determined through a weighed food diary and by weighing the food provided before and after consumption. Fifteen individuals with diabetes and 15 case-matched controls without diabetes participated in the study. Individuals with diabetes and controls responded similarly to the fat-modified foods. In both groups there was a significant reduction in the percent of kcals and grams of fat consumed during the low-fat condition compared to the regular-fat condition (p

Attitudes and behaviors of pre-adolescents with diabetes toward fat -modified foods

Fat modified foods are widely available and have the potential to help individuals with diabetes, including children, achieve a lower total fat and saturated fat intake. Sixty-three pre-adolescents (10-13 years) with insulin-dependent diabetes mellitus (IDDM or Type I), and 60 without diabetes (boys, n=54; girls, n=69) were tested to determine their beliefs and attitudes towards high-fat and reduced-fat foods. In addition, both children and parents were asked about the child's use of low fat foods i.e., how often the parent bought or encouraged their child to eat reduced-fat food; how strongly the doctor or dietitian promoted the use of reduced-fat foods, and the child's concern about dietary fat. In this study, preadolescents with diabetes were not more likely than those without diabetes to use fat-modified foods. Parental and health care practitioner encouragement is associated with greater use of these products by children.

Hiearchies of Eating Disorders: Fat-Phobia and Internalized Beauty Ideals in Online Communities

Research and discourse on Eating Disorders (ED) have a tendency to perpetuate certain stereotypes regarding women of color, however unintentional or innocuous it may appear. The research conducted, does show that the prominent ED within communities of minorities or of lower social status is Binge Eating Disorder (BED). A Foucauldian discourse analysis of online forums by young women with ED, such as myproana.com, would be the primary method of documenting how these women form a hierarchy of the community's ED, and analyze if it correlates with the social status primarily associated with the Eating Disorder. Within these forums, and ED based communities, a clear hierarchy is formed, with Anorexia Nervosa at the top and BED at the bottom. From the minimal research available on women of color and ED, it is clear that, for Black women at least, BED is the most common—and thus it is my goal to explore any possible correlation if applicable. Because so little exists that focuses on EDs in women of color, this analysis may help to promote more research in race and class dynamics of Eating Disorders, as well on how those factors affect how women view their own bodies.

Does the Pareto Distribution of Hurricane Damage Inherit its Fat Tail from a Zipf Distribution of Assets at Hazard?

Tropical Cyclones are a continuing threat to life and property. Willoughby (2012) found that a Pareto (power-law) cumulative distribution fitted to the most damaging 10% of US hurricane seasons fit their impacts well. Here, we find that damage follows a Pareto distribution because the assets at hazard follow a Zipf distribution, which can be thought of as a Pareto distribution with exponent 1. The Z-CAT model is an idealized hurricane catastrophe model that represents a coastline where populated places with Zipf- distributed assets are randomly scattered and damaged by virtual hurricanes with sizes and intensities generated through a Monte-Carlo process. Results produce realistic Pareto exponents. The ability of the Z-CAT model to simulate different climate scenarios allowed testing of sensitivities to Maximum Potential Intensity, landfall rates and building structure vulnerability. The Z-CAT model results demonstrate that a statistical significant difference in damage is found when only changes in the parameters create a doubling of damage.