Forward implied volatility expansions in LSV models

In this work we address the problem of finding formulas for efficient and reliable analytical approximation for the calculation of forward implied volatility in LSV models, a problem which is reduced to the calculation of option prices as an expansion of the price of the same financial asset in a Black-Scholes dynamic. Our approach involves an expansion of the differential operator, whose solution represents the price in local stochastic volatility dynamics. Further calculations then allow to obtain an expansion of the implied volatility without the aid of any special function or expensive from the computational point of view, in order to obtain explicit formulas fast to calculate but also as accurate as possible.

Pricing in stochastic-local volatility models with default

In recent years is becoming increasingly important to handle credit risk. Credit risk is the risk associated with the possibility of bankruptcy. More precisely, if a derivative provides for a payment at cert time T but before that time the counterparty defaults, at maturity the payment cannot be effectively performed, so the owner of the contract loses it entirely or a part of it. It means that the payoff of the derivative, and consequently its price, depends on the underlying of the basic derivative and on the risk of bankruptcy of the counterparty. To value and to hedge credit risk in a consistent way, one needs to develop a quantitative model. We have studied analytical approximation formulas and numerical methods such as Monte Carlo method in order to calculate the price of a bond. We have illustrated how to obtain fast and accurate pricing approximations by expanding the drift and diffusion as a Taylor series and we have compared the second and third order approximation of the Bond and Call price with an accurate Monte Carlo simulation. We have analysed JDCEV model with constant or stochastic interest rate. We have provided numerical examples that illustrate the effectiveness and versatility of our methods. We have used Wolfram Mathematica and Matlab.

Stochastic local volatility model for fx markets

Questa tesi verte sullo studio di un modello a volatilità stocastica e locale, utilizzato per valutare opzioni esotiche nei mercati dei cambio. La difficoltà nell'implementare un modello di tal tipo risiede nella calibrazione della leverage surface e uno degli scopi principali di questo lavoro è quello di mostrarne la procedura.

Orthogonal gamma-based expansions for volatility option prices under jump-diffusion dynamics

In my work I derive closed-form pricing formulas for volatility based options by suitably approximating the volatility process risk-neutral density function. I exploit and adapt the idea, which stands behind popular techniques already employed in the context of equity options such as Edgeworth and Gram-Charlier expansions, of approximating the underlying process as a sum of some particular polynomials weighted by a kernel, which is typically a Gaussian distribution. I propose instead a Gamma kernel to adapt the methodology to the context of volatility options. VIX vanilla options closed-form pricing formulas are derived and their accuracy is tested for the Heston model (1993) as well as for the jump-diffusion SVJJ model proposed by Duffie et al. (2000).

"Leiomyomatoid angiomatous neuroendocrine tumor" (LANT) of the pituitary reflects idiosyncratic angiogenesis in adenomas of the gonadotroph cell lineage.

Based on a single-case observation, the descriptive label "leiomyomatoid angiomatous neuroendocrine tumor" (LANT) has been tentatively applied to what was perceived as a possible novel type of dual-lineage pituitary neoplasm with biphasic architecture. We report on two additional examples of an analogous phenomenon encountered in male patients, aged 59 years (Case 1) and 91 years (Case 2). Both tumors were intra- and suprasellar masses, measuring 5.6 cm × 4.4 cm × 3.4 cm, and 2.7 cm × 2 cm × 1.7 cm, respectively. Histologically, Case 1 was an FSH-cell adenoma interwoven by vascularized connective tissue septa that tended to exhibit incremental stages of adventitial overgrowth. The epithelial component of Case 2 corresponded to an LH-cell adenoma, and lay partitioned by a maze of paucicellular to hyalinized vascular axes. Irrespective of architectural variations, perivascular spindle cells exhibited immunopositivity for vimentin, muscular actin, and smooth muscle actin. Conversely, negative results were obtained for CD34, EMA, S100 protein, GFAP, and TTF-1. Ultrastructural study failed to reveal metaplastic cell forms involving transitional features between adenohypophyseal-epithelial and mesenchymal-contractile phenotype. We propose that LANT be regarded as a peculiar reflection of maladaptive angiogenesis in some pituitary adenomas, rather than a genuine hybrid neoplasm. While no mechanistic clue is forthcoming to account for this distinctive pattern, hemodynamic strain through direct arterial - rather than portal - supply of the adenoma's capillary bed may be one such explanatory factor. The apparent predilection of the LANT pattern for macroadenomas of the gonadotroph cell lineage remains unexplained.

The Great Moderation and the Relationship between Output Growth and Its Volatility

This study examines the effect of the Great Moderation on the relationship between U.S. output growth and its volatility over the period 1947 to 2006. First, we consider the possible effects of structural change in the volatility process. In so doing, we employ GARCH-M and ARCH-M specifications of the process describing output growth rate and its volatility with and without a one-time structural break in volatility. Second, our data analyses and empirical results suggest no significant relationship between the output growth rate and its volatility, favoring the traditional wisdom of dichotomy in macroeconomics. Moreover, the evidence shows that the time-varying variance falls sharply or even disappears once we incorporate a one-time structural break in the unconditional variance of output starting 1982 or 1984. That is, the integrated GARCH effect proves spurious. Finally, a joint test of a trend change and a one-time shift in the volatility process finds that the one-time shift dominates.

The effect of alcohol consumption on mortality among idiosyncratic drug induced liver injury (IDILI) patients

Severe liver injury (SLI) due to drugs is a frequent cause of catastrophic illness and hospitalization. Due to significant morbidity, mortality, and excess medical care costs, this poses a challenge as a public health problem. The role of associated risk factors like alcohol consumption in contributing to the high mortality remains to be studied. This study was conducted to assess the impact of alcohol use on mortality in IDILI patients, while adjusting for age, gender, race/ethnicity, and education level. The data from this study indicate only a small excess risk of death among IDILI patients using alcohol, but the difference was not statistically significant. The major contribution of this study to the field of public health is that it excludes a large hazard of alcohol consumption on the mortality among idiosyncratic drug induced liver injury (IDILI) patients. ^

Modeling the Volatility of Real GDP Growth: The Case of Japan Revisited

Previous studies (e.g., Hamori, 2000; Ho and Tsui, 2003; Fountas et al., 2004) find high volatility persistence of economic growth rates using generalized autoregressive conditional heteroskedasticity (GARCH) specifications. This paper reexamines the Japanese case, using the same approach and showing that this finding of high volatility persistence reflects the Great Moderation, which features a sharp decline in the variance as well as two falls in the mean of the growth rates identified by Bai and Perronâs (1998, 2003) multiple structural change test. Our empirical results provide new evidence. First, excess kurtosis drops substantially or disappears in the GARCH or exponential GARCH model that corrects for an additive outlier. Second, using the outlier-corrected data, the integrated GARCH effect or high volatility persistence remains in the specification once we introduce intercept-shift dummies into the mean equation. Third, the time-varying variance falls sharply, only when we incorporate the break in the variance equation. Fourth, the ARCH in mean model finds no effects of our more correct measure of output volatility on output growth or of output growth on its volatility.

Total Factor Productivity and Monetary Policy: Evidence from Conditional Volatility

This paper empirically assesses whether monetary policy affects real economic activity through its affect on the aggregate supply side of the macroeconomy. Analysts typically argue that monetary policy either does not affect the real economy, the classical dichotomy, or only affects the real economy in the short run through aggregate demand new Keynesian or new classical theories. Real business cycle theorists try to explain the business cycle with supply-side productivity shocks. We provide some preliminary evidence about how monetary policy affects the aggregate supply side of the macroeconomy through its affect on total factor productivity, an important measure of supply-side performance. The results show that monetary policy exerts a positive and statistically significant effect on the supply-side of the macroeconomy. Moreover, the findings buttress the importance of countercyclical monetary policy as well as support the adoption of an optimal money supply rule. Our results also prove consistent with the effective role of monetary policy in the Great Moderation as well as the more recent rise in productivity growth.