Evaluating Option Pricing Models

This study evaluates three different time units in option pricing: trading time, calendar time and continuous time using discrete approximations (CTDA). The CTDA-time model partitions the trading day into 30-minute intervals, where each interval is given a weight corresponding to the historical volatility in the respective interval. Furthermore, the non-trading volatility, both overnight and weekend volatility, is included in the first interval of the trading day in the CTDA model. The three models are tested on market prices. The results indicate that the trading-time model gives the best fit to market prices in line with the results of previous studies, but contrary to expectations under non-arbitrage option pricing. Under non-arbitrage pricing, the option premium should reflect the cost of hedging the expected volatility during the option’s remaining life. The study concludes that the historical patterns in volatility are not fully accounted for by the market, rather the market prices options closer to trading time.

The Pricing of American Put Options on Stock with Dividends

Pricing American put options on dividend-paying stocks has largely been ignored in the option pricing literature because the problem is mathematically complex and valuation usually resorts to computationally expensive and impractical pricing applications. This paper computed a simulation study, using two different approximation methods for the valuation of American put options on a stock with known discrete dividend payments. This to find out if there were pricing errors and to find out which could be the most usable method for practical users. The option pricing models used in the study was the dividend approximation by Blomeyer (1986) and the one by Barone-Adesi and Whaley (1988). The study showed that the approximation method by Blomeyer worked satisfactory for most situations, but some errors occur for longer times to the dividend payment, for smaller dividends and for in-the-money options. The approximation method by Barone-Adesi and Whaley worked well for in-the-money options and at-the-money options, but had serious pricing errors for out-of-the-money options. The conclusion of the study is that a combination of the both methods might be preferable to any single model.

Intraday and Weekend Volatility Patterns- Implications for Option Pricing

This study examines the intraday and weekend volatility on the German DAX. The intraday volatility is partitioned into smaller intervals and compared to a whole day’s volatility. The estimated intraday variance is U-shaped and the weekend variance is estimated to 19 % of a normal trading day. The patterns in the intraday and weekend volatility are used to develop an extension to the Black and Scholes formula to form a new time basis. Calendar or trading days are commonly used for measuring time in option pricing. The Continuous Time using Discrete Approximations model (CTDA) developed in this study uses a measure of time with smaller intervals, approaching continuous time. The model presented accounts for the lapse of time during trading only. Arbitrage pricing suggests that the option price equals the expected cost of hedging volatility during the option’s remaining life. In this model, time is allowed to lapse as volatility occurs on an intraday basis. The measure of time is modified in CTDA to correct for the non-constant volatility and to account for the patterns in volatility.

Pricing Index Options with Stochastic Volatility

The objective of this paper is to investigate the pricing accuracy under stochastic volatility where the volatility follows a square root process. The theoretical prices are compared with market price data (the German DAX index options market) by using two different techniques of parameter estimation, the method of moments and implicit estimation by inversion. Standard Black & Scholes pricing is used as a benchmark. The results indicate that the stochastic volatility model with parameters estimated by inversion using the available prices on the preceding day, is the most accurate pricing method of the three in this study and can be considered satisfactory. However, as the same model with parameters estimated using a rolling window (the method of moments) proved to be inferior to the benchmark, the importance of stable and correct estimation of the parameters is evident.

An efficient pricing based protocol for broadcasting in wireless ad hoc networks

In many applications of wireless ad hoc networks, wireless nodes are owned by rational and intelligent users. In this paper, we call nodes selfish if they are owned by independent users and their only objective is to maximize their individual goals. In such situations, it may not be possible to use the existing protocols for wireless ad hoc networks as these protocols assume that nodes follow the prescribed protocol without deviation. Stimulating cooperation among these nodes is an interesting and challenging problem. Providing incentives and pricing the transactions are well known approaches to stimulate cooperation. In this paper, we present a game theoretic framework for truthful broadcast protocol and strategy proof pricing mechanism called Immediate Predecessor Node Pricing Mechanism (IPNPM). The phrase strategy proof here means that truth revelation of cost is a weakly dominant-strategy (in game theoretic terms) for each node. In order to steer our mechanism-design approach towards practical implementation, we compute the payments to nodes using a distributed algorithm. We also propose a new protocol for broadcast in wireless ad hoc network with selfish nodes based on IPNPM. The features of the proposed broadcast protocol are reliability and a significantly reduced number of packet forwards compared to the number of network nodes, which in turn leads to less system-wide power consumption to broadcast a single packet. Our simulation results show the efficacy of the proposed broadcast protocol.

Synthesis and Antileukemic Activity of 1-((S)-2-Amino-4,5,6,7-tetrahydrobenzo[d]thiazol-6-yl)-3-(substituted phenyl)urea Derivatives

Heterocyclic urea derivatives play an important role as anticancer agents because of their good inhibitory activity against receptor tyrosine kinases (RTKs), raf kinases, protein tyrosine kinases (PTKs), and NADH oxidase, which play critical roles in many aspects of tumorigenesis. Benzothiazole moiety constitutes an important scaffold of drugs, possessing several pharmacological functions, mainly the anticancer activity. Based on these interesting properties of benzothiazoles and urea moiety to obtain new biologically active agents, we synthesized a series of novel 1-((S)-2-amino-4,5,6.7-tetrahydrobenzo[d]thiazol-6-yl)-3-(substituted phenyl)urea derivatives and evaluated for their efficacy as antileukemic agents against two human leukemic cell lines (K562 and Reh). These compounds showed good and moderate cytotoxic effect to cancer cell lines tested. Compounds with electron-withdrawing chloro and fluoro substituents on phenyl ring showed good activity and compounds with electron-donating methoxy group showed moderate activity. Compound with electron-withdrawing dichloro substitution on phenyl ring of aryl urea showed good activity. Further, lactate dehydrogenase (LDH) assay, flow cytometric analysis of annexin V-FITC/propidium iodide (PI) double staining and DNA fragmentation studies showed that compound with dichloro substitution on phenyl ring of aryl urea can induce apoptosis.

Estramustine and its Derivatives in Potentiating Radiotherapy of Prostate Cancer

The purpose of this study was to deepen our knowledge of the combined use of estramustine and radiotherapy in the treatment of prostate cancer. Prostate cancer is a common disease, with a high variability between subjects in its malignant potential. In many cases, the disease is an incidental finding with little or no clinical significance. In other cases, however, prostate cancer may be an aggressive malignant disease, which, if the initial treatment fails, lacks an effective cure and may lead to severe symptoms, metastasis, and death despite all treatment. In many cases, the methods of treatment available at the moment provide cure or significant regression of symptoms, but often at the cost of considerable side effects. Estramustine, a cytostatic drug used for treating advanced cancer of the prostate, has been shown to inhibit prostate cancer progression and also to increase the sensitivity of cancer cells to radiotherapy. The goals of this study were, first, to find out whether it is possible to use either estramustine or an antibody against estramustine binding protein as carrier molecules for bringing therapeutic radioisotopes into prostate cancer cells, and, secondly, to gain more understanding of the mechanisms behind the known radiosensitising effect of estramustine. Estramustine and estramustine binding protein antibody were labelled with iodine-125 to study the biodistribution of these substances in mice. In the first experiment, both of the substances accumulated in the prostate, but radioiodinated estramustine also showed affinity to the liver and the lungs. Since the radiolabelled antibody was found out to accumulate more selectively to the prostate, we studied its biodistribution in nude mice with DU-145 human prostate cancer implants. In this experiment, the prostate and the tumour accumulated more radioactivity than other organs, but we concluded that the difference in the dose of radiation compared to other organs was not sufficient for the radioiodinated antibody to be advocated as a carrier molecule for treating prostate cancer. Mice with similar DU-145 prostate cancer implants were then treated with estramustine and external beam irradiation, with and without neoadjuvant estramustine treatment. The tumours responded to the treatment as expected, showing the radiation potentiating effect of estramustine. In the third experiment, this effect was found without an increase in the amount of apoptosis in the tumour cells, despite previous suggestions to the contrary. In the fourth experiment, we gave a similar treatment to the mice with DU-145 tumours. A reduction in proliferation was found in the groups treated with radiotherapy, and an increased amount of tumour hypoxia and tumour necrosis in the group treated with both neoadjuvant estramustine and radiation. This finding is contradictory to the suggestion that the radiation sensitising effect of estramustine could be attributed to its angiogenic activity.

Effect of phenoxy acids and their derivatives on lipid metabolism in groundnut (Arachis hypogaea) leaves

The effect of four phenoxy compounds [2,4-dichlorophenoxyacetic acid (2,4-D), 2,4,5-trichlorophenoxyacetic acid, 4-chlorophenoxyacetic acid 2-(dimethylamino)ethyl ester (centrophenoxine), and 4-chlorophenoxy ethyl 2-(dimethylamino) ethyl ether (neophenoxine)] on lipid metabolism in groundnut (Arachis hypogaea) leaves was investigated under nonphotosynthetic conditions. In experiments with leaf disks, the uptake of [1-14C]acetate, [32P]orthophosphate, [35S]sulfate and [methyl-14C]choline was substantially inhibited by all the phenoxy compounds except neophenoxine. When the incorporation of these precursors into lipids was measured and expressed as percentage of total uptake, there was significant inhibition of incorporation of [1-14C]acetate and [32P]orthophosphate into lipids by all the compounds except neophenoxine. The incorporation of [methyl-14C]choline was unaffected by all except centrophenoxine which showed stastically significant stimulation. [35S]Sulfate incorporation into lipids was markedly inhibited only by centrophenoxine. The fatty acid synthetase of isolated chloroplasts assayed in the absence of light was inhibited 20–50% by the phenoxy compounds at 0.5 mM concentration. This inhibition showed a dependence on time of preincubation with the herbicide suggesting an interaction with the enzyme. It was, however, reversible and excess substrate did not prevent the inhibition, suggesting that the herbicide interaction may not be at the active site. sn-Glycerol-3-phosphate acyltransferase in the chloroplast and microsomal fractions was inhibited by 2,4-D while the phosphatidic acid phosphatase was insensitive to all the phenoxy compounds. It is concluded that phenoxy compounds affect precursor uptake, their incorporation into lipids, and the chloroplast fatty acid synthetase. The free acids were the most potent compounds while the ester (centrophenoxine) was less effective and the ether (neophenoxine) was completely ineffective in their influence on lipid metabolism.

Synthesis of both enantiomers of 1-phenylethane-1,2-diol via chirality transfer from bile acid derivatives

Both enantiomers of 1-phenylethane-1,2-diol were synthesized with good to excellent enantioselectivities via selective reduction of the phenylglyoxalates derived from bile acids, followed by reductive cleavage. (C) 2000 Elsevier Science Ltd. All rights reserved.

Preparation and characterization of hydrazinium derivatives

A number of simple and complex hydrazinium derivatives have been prepared by the reaction of hydrazine hydrate with ammonium salts. The products were characterized by chemical analysis and infrared spectra.