Asset prices and the measurement of wealth and saving

The paper defines concepts of real wealth and saving which take into account the intertemporal index number problem that results from changing interest rates. Unlike conventional measures of real wealth, which are based on the market value of assets and ignore the index number problem, the new measure correctly reflects the changes in the welfare of households over time. An empirically operational approximation to the theoretical measure is provided and applied to US data. A major empirical finding is that US real financial wealth increased strongly in the 1980s, much more than is revealed by the market value of assets.

Adaptation to marginal habitats

The ability to adapt to marginal habitats, in which survival and reproduction are initially poor, plays a crucial role in the evolution of ecological niches and species ranges. Adaptation to marginal habitats may be limited by genetic, developmental, and functional constraints, but also by consequences of demographic characteristics of marginal populations. Marginal populations are often sparse, fragmented, prone to local extinctions, or are demographic sinks subject to high immigration from high-quality core habitats. This makes them demographically and genetically dependent on core habitats and prone to gene flow counteracting local selection. Theoretical and empirical research in the past decade has advanced our understanding of conditions that favor adaptation to marginal habitats despite those limitations. This review is an attempt at synthesis of those developments and of the emerging conceptual framework.

Maturation of marginal zone and follicular B cells requires B cell activating factor of the tumor necrosis factor family and is independent of B cell maturation antigen.

B cells undergo a complex series of maturation and selection steps in the bone marrow and spleen during differentiation into mature immune effector cells. The tumor necrosis factor (TNF) family member B cell activating factor of the TNF family (BAFF) (BLyS/TALL-1) plays an important role in B cell homeostasis. BAFF and its close homologue a proliferation-inducing ligand (APRIL) have both been shown to interact with at least two receptors, B cell maturation antigen (BCMA) and transmembrane activator and cyclophilin ligand interactor (TACI), however their relative contribution in transducing BAFF signals in vivo remains unclear. To functionally inactivate both BAFF and APRIL, mice transgenic for a soluble form of TACI were generated. They display a developmental block of B cell maturation in the periphery, leading to a severe depletion of marginal zone and follicular B2 B cells, but not of peritoneal B1 B cells. In contrast, mice transgenic for a soluble form of BCMA, which binds APRIL, have no detectable B cell phenotype. This demonstrates a crucial role for BAFF in B cell maturation and strongly suggests that it signals via a BCMA-independent pathway and in an APRIL-dispensable way.

Vertical Syndication-Proof Competitive Prices in Multilateral Markets

[eng] A multi-sided Böhm-Bawerk assignment game (Tejada, to appear) is a model for a multilateral market with a finite number of perfectly complementary indivisible commodities owned by different sellers, and inflexible demand and support functions. We show that for each such market game there is a unique vector of competitive prices for the commodities that is vertical syndication-proof, in the sense that, at those prices, syndication of sellers each owning a different commodity is neither beneficial nor detrimental for the buyers. Since, moreover, the benefits obtained by the agents at those prices correspond to the nucleolus of the market game, we provide a syndication-based foundation for the nucleolus as an appropriate solution concept for market games. For different solution concepts a syndicate can be disadvantageous and there is no escape to Aumman’s paradox (Aumann, 1973). We further show that vertical syndicationproofness and horizontal syndication-proofness – in which sellers of the same commodity collude – are incompatible requirements under some mild assumptions. Our results build on a self-interesting link between multi-sided Böhm-Bawerk assignment games and bankruptcy games (O’Neill, 1982). We identify a particular subset of Böhm-Bawerk assignment games and we show that it is isomorphic to the whole class of bankruptcy games. This isomorphism enables us to show the uniqueness of the vector of vertical syndication-proof prices for the whole class of Böhm-Bawerk assignment market using well-known results of bankruptcy problems.

Prices of medicines: a case-study on the impact of the rate-of-return regulation in the United Kingdom

This work carries out an empirical evaluation of the impact of the main mechanism for regulating the prices of medicines in the UK on a variety ofpharmaceutical price indices. The empirical evidence shows that the overall impact of the rate of return cap appears to have been slight or even null, and in any case that the impact would differ across therapeutic areas. These empiricalfindings suggest that the price regulation has managed to encourage UK-based firms¿ diversification in many therapeutic areas

Relaxation from a marginal state in optical bistability

Characteristic decay times for relaxation close to the marginal point of optical bistability are studied. A model-independent formula for the decay time is given which interpolates between Kramers time for activated decay and a deterministic relaxation time. This formula gives the decay time as a universal scaling function of the parameter which measures deviation from marginality. The standard deviation of the first-passage-time distribution is found to vary linearly with the decay time, close to marginality, with a slope independent of the noise intensity. Our results are substantiated by numerical simulations and their experimental relevance is pointed out.

The anti-apoptotic factor Bcl-2 can functionally substitute for the B cell survival but not for the marginal zone B cell differentiation activity of BAFF.

The TNF family ligand B cell-activating factor (BAFF, BLyS, TALL-1) is an essential factor for B cell development. BAFF binds to three receptors, BAFF-R, transmembrane activator and CAML interactor (TACI), and B cell maturation antigen (BCMA), but only BAFF-R is required for successful survival and maturation of splenic B cells. To test whether the effect of BAFF is due to the up-regulation of anti-apoptotic factors, TACI-Ig-transgenic mice, in which BAFF function is inhibited, were crossed with transgenic mice expressing FLICE-inhibitory protein (FLIP) or Bcl-2 in the B cell compartment. FLIP expression did not rescue B cells, while enforced Bcl-2 expression restored peripheral B cells and the ability to mount T-dependent antibody responses. However, many B cells retained immaturity markers and failed to express normal amounts of CD21. Marginal zone B cells were not restored and the T-independent IgG3, but not IgM, response was impaired in the TACI-IgxBcl-2 mice. These results suggest that BAFF is required not only to inhibit apoptosis of maturating B cells, but also to promote differentiation events, in particular those leading to the generation of marginal zone B cells.

First-passage times for a marginal state driven by colored noise

The dynamical process through a marginal state (saddle point) driven by colored noise is studied. For small correlation time of the noise, the mean first-passage time and its variance are calculated using standard methods. When the correlation time of the noise is finite or large, an alternative approach, based on simple physical arguments, is proposed. It will allow us to study also the passage times of an unstable state. The theoretical predictions are tested satisfactorily by the use of computer simulations.

Scaling and data collapse for the mean exit time of asset prices

We study theoretical and empirical aspects of the mean exit time (MET) of financial time series. The theoretical modeling is done within the framework of continuous time random walk. We empirically verify that the mean exit time follows a quadratic scaling law and it has associated a prefactor which is specific to the analyzed stock. We perform a series of statistical tests to determine which kind of correlation are responsible for this specificity. The main contribution is associated with the autocorrelation property of stock returns. We introduce and solve analytically both two-state and three-state Markov chain models. The analytical results obtained with the two-state Markov chain model allows us to obtain a data collapse of the 20 measured MET profiles in a single master curve.

Estimation of jump-diffusion processes via empirical characteristic functions

Preface The starting point for this work and eventually the subject of the whole thesis was the question: how to estimate parameters of the affine stochastic volatility jump-diffusion models. These models are very important for contingent claim pricing. Their major advantage, availability T of analytical solutions for characteristic functions, made them the models of choice for many theoretical constructions and practical applications. At the same time, estimation of parameters of stochastic volatility jump-diffusion models is not a straightforward task. The problem is coming from the variance process, which is non-observable. There are several estimation methodologies that deal with estimation problems of latent variables. One appeared to be particularly interesting. It proposes the estimator that in contrast to the other methods requires neither discretization nor simulation of the process: the Continuous Empirical Characteristic function estimator (EGF) based on the unconditional characteristic function. However, the procedure was derived only for the stochastic volatility models without jumps. Thus, it has become the subject of my research. This thesis consists of three parts. Each one is written as independent and self contained article. At the same time, questions that are answered by the second and third parts of this Work arise naturally from the issues investigated and results obtained in the first one. The first chapter is the theoretical foundation of the thesis. It proposes an estimation procedure for the stochastic volatility models with jumps both in the asset price and variance processes. The estimation procedure is based on the joint unconditional characteristic function for the stochastic process. The major analytical result of this part as well as of the whole thesis is the closed form expression for the joint unconditional characteristic function for the stochastic volatility jump-diffusion models. The empirical part of the chapter suggests that besides a stochastic volatility, jumps both in the mean and the volatility equation are relevant for modelling returns of the S&P500 index, which has been chosen as a general representative of the stock asset class. Hence, the next question is: what jump process to use to model returns of the S&P500. The decision about the jump process in the framework of the affine jump- diffusion models boils down to defining the intensity of the compound Poisson process, a constant or some function of state variables, and to choosing the distribution of the jump size. While the jump in the variance process is usually assumed to be exponential, there are at least three distributions of the jump size which are currently used for the asset log-prices: normal, exponential and double exponential. The second part of this thesis shows that normal jumps in the asset log-returns should be used if we are to model S&P500 index by a stochastic volatility jump-diffusion model. This is a surprising result. Exponential distribution has fatter tails and for this reason either exponential or double exponential jump size was expected to provide the best it of the stochastic volatility jump-diffusion models to the data. The idea of testing the efficiency of the Continuous ECF estimator on the simulated data has already appeared when the first estimation results of the first chapter were obtained. In the absence of a benchmark or any ground for comparison it is unreasonable to be sure that our parameter estimates and the true parameters of the models coincide. The conclusion of the second chapter provides one more reason to do that kind of test. Thus, the third part of this thesis concentrates on the estimation of parameters of stochastic volatility jump- diffusion models on the basis of the asset price time-series simulated from various "true" parameter sets. The goal is to show that the Continuous ECF estimator based on the joint unconditional characteristic function is capable of finding the true parameters. And, the third chapter proves that our estimator indeed has the ability to do so. Once it is clear that the Continuous ECF estimator based on the unconditional characteristic function is working, the next question does not wait to appear. The question is whether the computation effort can be reduced without affecting the efficiency of the estimator, or whether the efficiency of the estimator can be improved without dramatically increasing the computational burden. The efficiency of the Continuous ECF estimator depends on the number of dimensions of the joint unconditional characteristic function which is used for its construction. Theoretically, the more dimensions there are, the more efficient is the estimation procedure. In practice, however, this relationship is not so straightforward due to the increasing computational difficulties. The second chapter, for example, in addition to the choice of the jump process, discusses the possibility of using the marginal, i.e. one-dimensional, unconditional characteristic function in the estimation instead of the joint, bi-dimensional, unconditional characteristic function. As result, the preference for one or the other depends on the model to be estimated. Thus, the computational effort can be reduced in some cases without affecting the efficiency of the estimator. The improvement of the estimator s efficiency by increasing its dimensionality faces more difficulties. The third chapter of this thesis, in addition to what was discussed above, compares the performance of the estimators with bi- and three-dimensional unconditional characteristic functions on the simulated data. It shows that the theoretical efficiency of the Continuous ECF estimator based on the three-dimensional unconditional characteristic function is not attainable in practice, at least for the moment, due to the limitations on the computer power and optimization toolboxes available to the general public. Thus, the Continuous ECF estimator based on the joint, bi-dimensional, unconditional characteristic function has all the reasons to exist and to be used for the estimation of parameters of the stochastic volatility jump-diffusion models.

Vertical Syndication-Proof Competitive Prices in Multilateral Markets

[eng] A multi-sided Böhm-Bawerk assignment game (Tejada, to appear) is a model for a multilateral market with a finite number of perfectly complementary indivisible commodities owned by different sellers, and inflexible demand and support functions. We show that for each such market game there is a unique vector of competitive prices for the commodities that is vertical syndication-proof, in the sense that, at those prices, syndication of sellers each owning a different commodity is neither beneficial nor detrimental for the buyers. Since, moreover, the benefits obtained by the agents at those prices correspond to the nucleolus of the market game, we provide a syndication-based foundation for the nucleolus as an appropriate solution concept for market games. For different solution concepts a syndicate can be disadvantageous and there is no escape to Aumman’s paradox (Aumann, 1973). We further show that vertical syndicationproofness and horizontal syndication-proofness – in which sellers of the same commodity collude – are incompatible requirements under some mild assumptions. Our results build on a self-interesting link between multi-sided Böhm-Bawerk assignment games and bankruptcy games (O’Neill, 1982). We identify a particular subset of Böhm-Bawerk assignment games and we show that it is isomorphic to the whole class of bankruptcy games. This isomorphism enables us to show the uniqueness of the vector of vertical syndication-proof prices for the whole class of Böhm-Bawerk assignment market using well-known results of bankruptcy problems.

Prices of medicines: a case-study on the impact of the rate-of-return regulation in the United Kingdom

This work carries out an empirical evaluation of the impact of the main mechanism for regulating the prices of medicines in the UK on a variety ofpharmaceutical price indices. The empirical evidence shows that the overall impact of the rate of return cap appears to have been slight or even null, and in any case that the impact would differ across therapeutic areas. These empiricalfindings suggest that the price regulation has managed to encourage UK-based firms¿ diversification in many therapeutic areas