Testing option pricing with the Edgeworth expansion

There is a well-developed framework, the Black-Scholes theory, for the pricing of contracts based on the future prices of certain assets, called options. This theory assumes that the probability distribution of the returns of the underlying asset is a Gaussian distribution. However, it is observed in the market that this hypothesis is flawed, leading to the introduction of a fudge factor, the so-called volatility smile. Therefore, it would be interesting to explore extensions of the Black-Scholes theory to non-Gaussian distributions. In this paper, we provide an explicit formula for the price of an option when the distributions of the returns of the underlying asset is parametrized by an Edgeworth expansion, which allows for the introduction of higher independent moments of the probability distribution, namely skewness and kurtosis. We test our formula with options in the Brazilian and American markets, showing that the volatility smile can be reduced. We also check whether our approach leads to more efficient hedging strategies of these instruments. (C) 2004 Elsevier B.V. All rights reserved.

Evaluation Method for Strategic Investments

Real Options Analysis (ROA) has become a complimentary tool for engineering economics. It has become popular due to the limitations of conventional engineering valuation methods; specifically, the assumptions of uncertainty. Industry is seeking to quantify the value of engineering investments with uncertainty. One problem with conventional tools are that they may assume that cash flows are certain, therefore minimizing the possibility of the uncertainty of future values. Real options analysis provides a solution to this problem, but has been used sparingly by practitioners. This paper seeks to provide a new model, referred to as the Beta Distribution Real Options Pricing Model (BDROP), which addresses these limitations and can be easily used by practitioners. The positive attributes of this new model include unconstrained market assumptions, robust representation of the underlying asset‟s uncertainty, and an uncomplicated methodology. This research demonstrates the use of the model to evaluate the use of automation for inventory control.

Cardiovascular response to beta-adrenergic blockade or activation in 23 inbred mouse strains

We report the characterisation of 27 cardiovascular-related traits in 23 inbred mouse strains. Mice were phenotyped either in response to chronic administration of a single dose of the beta-adrenergic receptor blocker atenolol or under a low and a high dose of the beta-agonist isoproterenol and compared to baseline condition. The robustness of our data is supported by high trait heritabilities (typically H(2)>0.7) and significant correlations of trait values measured in baseline condition with independent multistrain datasets of the Mouse Phenome Database. We then focused on the drug-, dose-, and strain-specific responses to beta-stimulation and beta-blockade of a selection of traits including heart rate, systolic blood pressure, cardiac weight indices, ECG parameters and body weight. Because of the wealth of data accumulated, we applied integrative analyses such as comprehensive bi-clustering to investigate the structure of the response across the different phenotypes, strains and experimental conditions. Information extracted from these analyses is discussed in terms of novelty and biological implications. For example, we observe that traits related to ventricular weight in most strains respond only to the high dose of isoproterenol, while heart rate and atrial weight are already affected by the low dose. Finally, we observe little concordance between strain similarity based on the phenotypes and genotypic relatedness computed from genomic SNP profiles. This indicates that cardiovascular phenotypes are unlikely to segregate according to global phylogeny, but rather be governed by smaller, local differences in the genetic architecture of the various strains.

BETASCAN: probable beta-amyloids identified by pairwise probabilistic analysis

Amyloids and prion proteins are clinically and biologically important beta-structures, whose supersecondary structures are difficult to determine by standard experimental or computational means. In addition, significant conformational heterogeneity is known or suspected to exist in many amyloid fibrils. Recent work has indicated the utility of pairwise probabilistic statistics in beta-structure prediction. We develop here a new strategy for beta-structure prediction, emphasizing the determination of beta-strands and pairs of beta-strands as fundamental units of beta-structure. Our program, BETASCAN, calculates likelihood scores for potential beta-strands and strand-pairs based on correlations observed in parallel beta-sheets. The program then determines the strands and pairs with the greatest local likelihood for all of the sequence's potential beta-structures. BETASCAN suggests multiple alternate folding patterns and assigns relative a priori probabilities based solely on amino acid sequence, probability tables, and pre-chosen parameters. The algorithm compares favorably with the results of previous algorithms (BETAPRO, PASTA, SALSA, TANGO, and Zyggregator) in beta-structure prediction and amyloid propensity prediction. Accurate prediction is demonstrated for experimentally determined amyloid beta-structures, for a set of known beta-aggregates, and for the parallel beta-strands of beta-helices, amyloid-like globular proteins. BETASCAN is able both to detect beta-strands with higher sensitivity and to detect the edges of beta-strands in a richly beta-like sequence. For two proteins (Abeta and Het-s), there exist multiple sets of experimental data implying contradictory structures; BETASCAN is able to detect each competing structure as a potential structure variant. The ability to correlate multiple alternate beta-structures to experiment opens the possibility of computational investigation of prion strains and structural heterogeneity of amyloid. BETASCAN is publicly accessible on the Web at http://betascan.csail.mit.edu.

Falling short of expectations? Stress-testing the European banking system. CEPS Policy Brief No. 315, 15 January 2014

Before the ECB takes over responsibility for overseeing Europe’s largest banks, as foreseen in the establishment of a eurozone banking union, it plans to conduct an Asset Quality Review (AQR) throughout the coming year, which will identify the capital shortfalls of these banks. This study finds that a comprehensive and decisive AQR will most likely reveal a substantial lack of capital in many peripheral and core European banks. The authors provide estimates of the capital shortfalls of banks that will be stress-tested under the AQR using publicly available data and a series of shortfall measures. Their analysis identifies which banks will most likely need capital, where a public back stop is likely to be needed and, since many countries are already highly leveraged, where an EU-wide backstop might be necessary.

A vállalatok árképzési gyakorlata a versenyképesség szolgálatában (The pricing practice of corporates and the competitiveness)

A marketing-szakirodalom szerint az ár az egyik legfontosabb marketingeszköz, és a vállalati versenyképesség értelmezésében is meghatározó szerepe van. A megfelelő árképzés kialakítása ugyanakkor összetett folyamat, amely önmagában is külön képességnek tekinthető, és kell befektetést igényel. A szerző az elemzés során így arra volt kíváncsi, hogy a vezető, azaz a versenyképes vállalatok árazási gyakorlata mutat-e eltéréseket, és, ha igen, melyek azok a területek, amelyek leginkább összefüggnek az eredményességükkel. A háromszáz hazai vállalatra kiterjedő kutatás során azt találta, hogy a vezető vállalatok valamelyest másképp tekintenek az ár szerepére és szignifikánsan magasabb árszínvonalon értékesítenek. Ez nagyobb mozgásteret enged számukra, a versenytársak árkihívásaira így könnyebben tudnak árakciókkal válaszolni. Árképzési céljaikban azonban kevésbé mutatkoznak különbségek, mert számukra is kihívást jelent a válság, és nekik is több szempontnak kell egyszerre megfelelniük. Az árak meghatározásánál azonban több tényezőt vesznek figyelembe és jobban támaszkodnak a vevőkről szerzett információkra. ______________ According to the marketing literature the price is one of the most important marketing tools and it plays a dominant role in the interpretation of corporate competitiveness, as well. The appropriate pricing, however, a complex process that can be regarded as a distinct capability and it requires sufficient investment itself. In this analysis the author enquired if the pricing practice of the leading, that is, the most competitive companies has a different profile, and if yes, which areas are associated with the success of them. Based on the survey of 300 domestic organisations he found that the leading companies consider the role of price in a slightly different way and they price their products or services significantly higherthan the others. This let them some space to manoeuvre and they can react with price promotions when the competitors challenge them with price activities. Regarding the pricing objectives the author couldn’t identify differences. The leading companies are also affected by the economic crisis and they have to match many expectations at the same time but they take more factors into consideration when they set their prices and more likely use customer information.

The market value implications of pension asset allocation

Pension funds have been part of the private sector since the 1850's. Defined Benefit pension plans [DB], where a company promises to make regular contributions to investment accounts held for participating employees in order to pay a promised lifelong annuity, are significant capital markets participants, amounting to 2.3 trillion dollars in 2010 (Federal Reserve Board, 2013). In 2006, Statement of Financial Accounting Standards No.158 (SFAS 158), Employers' Accounting for Defined Benefit Pension and Other Postemployment Plans, shifted information concerning funding status and pension asset/liability composition from disclosure in the footnotes to recognition in the financial statements. I add to the literature by being the first to examine the effect of recent pension reform during the financial crisis of 2008-09. This dissertation is comprised of three related essays. In my first essay, I investigate whether investors assign different pricing multiples to the various classes of pension assets when valuing firms. The pricing multiples on all classes of assets are significantly different from each other, but only investments in bonds and equities were value-relevant during the recent financial crisis. Consistent with investors viewing pension liabilities as liabilities of the firm, the pricing multiples on pension liabilities are significantly larger than those on non-pension liabilities. The only pension costs significantly associated with firm value are actual rate of return and interest expense. In my second essay, I investigate the role of accruals in predicting future cash flows, extending the Barth et al. (2001a) model of the accrual process. Using market value of equity as a proxy for cash flows, the results of this study suggest that aggregate accounting amounts mask how the components of earnings affect investors' ability to predict future cash flows. Disaggregating pension earnings components and accruals results in an increase in predictive power. During the 2008-2009 financial crisis, however, investors placed a greater (and negative) weight on the incremental information contained in the individual components of accruals. The inferences are robust to alternative specifications of accruals. Finally, in my third essay I investigate how investors view under-funded plans. On average, investors: view deficits arising from under-funded plans as belonging to the firm; reward firms with fully or over-funded pension plans; and encourage those funds with unfunded pension plans to become funded. Investors also encourage conservative pension asset allocations to mitigate firm risk, and smaller firms are perceived as being better able to handle the risk associated with underfunded plans. During the financial crisis of 2008-2009 underfunded status had a lower negative association with market value. In all three models, there are significant differences in pre- and post- SFAS 158 periods. These results are robust to various scenarios of the timing of the financial crisis and an alternative measure of funding.

Essays in International Finance and Macroeconomics

Thesis (Ph.D.)--University of Washington, 2016-08

Impaired Compensatory Beta-cell Function And Growth In Response To High-fat Diet In Ldl Receptor Knockout Mice.

In this study, we investigated the effect of low density lipoprotein receptor (LDLr) deficiency on gap junctional connexin 36 (Cx36) islet content and on the functional and growth response of pancreatic beta-cells in C57BL/6 mice fed a high-fat (HF) diet. After 60 days on regular or HF diet, the metabolic state and morphometric islet parameters of wild-type (WT) and LDLr-/- mice were assessed. HF diet-fed WT animals became obese and hypercholesterolaemic as well as hyperglycaemic, hyperinsulinaemic, glucose intolerant and insulin resistant, characterizing them as prediabetic. Also they showed a significant decrease in beta-cell secretory response to glucose. Overall, LDLr-/- mice displayed greater susceptibility to HF diet as judged by their marked cholesterolaemia, intolerance to glucose and pronounced decrease in glucose-stimulated insulin secretion. HF diet induced similarly in WT and LDLr-/- mice, a significant decrease in Cx36 beta-cell content as revealed by immunoblotting. Prediabetic WT mice displayed marked increase in beta-cell mass mainly due to beta-cell hypertrophy/replication. Nevertheless, HF diet-fed LDLr-/- mice showed no significant changes in beta-cell mass, but lower islet-duct association (neogenesis) and higher beta-cell apoptosis index were seen as compared to controls. The higher metabolic susceptibility to HF diet of LDLr-/- mice may be explained by a deficiency in insulin secretory response to glucose associated with lack of compensatory beta-cell expansion.

Macrophage Cell Activation With Acute Apical Abscess Contents Determined By Interleukin-1 Beta And Tumor Necrosis Factor Alpha Production.

This clinical study has investigated the antigenic activity of bacterial contents from exudates of acute apical abscesses (AAAs) and their paired root canal contents regarding the stimulation capacity by levels of interleukin (IL)-1 beta and tumor necrosis factor alpha (TNF-α) throughout the root canal treatment against macrophage cells. Paired samples of infected root canals and exudates of AAAs were collected from 10 subjects. Endodontic contents were sampled before (root canal sample [RCS] 1) and after chemomechanical preparation (RCS2) and after 30 days of intracanal medication with calcium hydroxide + chlorhexidine gel (Ca[OH]2 + CHX gel) (RCS3). Polymerase chain reaction (16S rDNA) was used for detection of the target bacteria, whereas limulus amebocyte lysate was used to measure endotoxin levels. Raw 264.7 macrophages were stimulated with AAA exudates from endodontic contents sampled in different moments of root canal treatment. Enzyme-linked immunosorbent assays were used to measure the levels of TNF-α and IL-1 beta. Parvimonas micra, Porphyromonas endodontalis, Dialister pneumosintes, and Prevotella nigrescens were the most frequently detected species. Higher levels of endotoxins were found in samples from periapical exudates at RCS1 (P < .005). In fact, samples collected from periapical exudates showed a higher stimulation capacity at RCS1 (P < .05). A positive correlation was found between endotoxins from exudates with IL-1 beta (r = 0.97) and TNF-α (r = 0.88) production (P < .01). The significant reduction of endotoxins and bacterial species achieved by chemomechanical procedures (RCS2) resulted in a lower capacity of root canal contents to stimulate the cells compared with that at RCS1 (P < .05). The use of Ca(OH)2 + CHX gel as an intracanal medication (RCS3) improved the removal of endotoxins and bacteria from infected root canals (P < .05) whose contents induced a lower stimulation capacity against macrophages cells at RCS1, RCS2, and RCS3 (P < .05). AAA exudates showed higher levels of endotoxins and showed a greater capacity of macrophage stimulation than the paired root canal samples. Moreover, the use of intracanal medication improved the removal of bacteria and endotoxins from infected root canals, which may have resulted in the reduction of the inflammatory potential of the root canal content.

Enhanced Glucose-induced Intracellular Signaling Promotes Insulin Hypersecretion: Pancreatic Beta-cell Functional Adaptations In A Model Of Genetic Obesity And Prediabetes.

Obesity is associated with insulin resistance and is known to be a risk factor for type-2 diabetes. In obese individuals, pancreatic beta-cells try to compensate for the increased insulin demand in order to maintain euglycemia. Most studies have reported that this adaptation is due to morphological changes. However, the involvement of beta-cell functional adaptations in this process needs to be clarified. For this purpose, we evaluated different key steps in the glucose-stimulated insulin secretion (GSIS) in intact islets from female ob/ob obese mice and lean controls. Obese mice showed increased body weight, insulin resistance, hyperinsulinemia, glucose intolerance and fed hyperglycemia. Islets from ob/ob mice exhibited increased glucose-induced mitochondrial activity, reflected by enhanced NAD(P)H production and mitochondrial membrane potential hyperpolarization. Perforated patch-clamp examination of beta-cells within intact islets revealed several alterations in the electrical activity such as increased firing frequency and higher sensitivity to low glucose concentrations. A higher intracellular Ca(2+) mobilization in response to glucose was also found in ob/ob islets. Additionally, they displayed a change in the oscillatory pattern and Ca(2+) signals at low glucose levels. Capacitance experiments in intact islets revealed increased exocytosis in individual ob/ob beta-cells. All these up-regulated processes led to increased GSIS. In contrast, we found a lack of beta-cell Ca(2+) signal coupling, which could be a manifestation of early defects that lead to beta-cell malfunction in the progression to diabetes. These findings indicate that beta-cell functional adaptations are an important process in the compensatory response to obesity.

Partial-hepatectomized (70%) Model Shows A Correlation Between Hepatocyte Growth Factor Levels And Beta-cell Mass.

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Caracterização do complexo de inclusão ropivacaína: beta-ciclodextrina

Characteriza of the inclusion complex ropivacaine: beta-cyclodextrin. Ropivacaine (RVC) is a widely used local anesthetic. The complexation of RVC with beta-cyclodextrin (beta-CD) is of great interest for the development of more efficient local anesthetic formulations. The present work focuses on the characterization of the RVC:beta-CD complex by nuclear magnetic resonance (NMR). The stoichiometry of the complex is 1:2 RVC:beta-CD. DOSY-NMR shows that the association constant is 55.5 M-1. Longitudinal relaxation time results show that RVC changes its mobility in the presence of beta-CD. This study is focused on the physicochemical characterization of inclusion complexes that are potentials options for pain treatment.

Indução assimétrica 1,5-Anti na adição de enolatos de boro de metilcetonas beta-oxigenadas a aldeídos

High levels of substrate-based 1,5-stereoinduction are obtained in the boron-mediated aldol reactions of beta-oxygenated methyl ketones with achiral and chiral aldehydes. Remote induction from the boron enolates gives the 1,5-anti adducts, with the enolate pi-facial selectivity critically dependent upon the nature of the beta-alkoxy protecting group. This 1,5-anti aldol methodology has been strategically employed in the total synthesis of several natural products. At present, the origin of the high level of 1,5-anti induction obtained with the boron enolates is unclear, although a model based on a hydrogen bonding between the alkoxy oxygen and the formyl hydrogen has been recently proposed.