Mathematical Aspects of Financial Markets with Frictions

Frictions are factors that hinder trading of securities in financial markets. Typical frictions include limited market depth, transaction costs, lack of infinite divisibility of securities, and taxes. Conventional models used in mathematical finance often gloss over these issues, which affect almost all financial markets, by arguing that the impact of frictions is negligible and, consequently, the frictionless models are valid approximations. This dissertation consists of three research papers, which are related to the study of the validity of such approximations in two distinct modeling problems. Models of price dynamics that are based on diffusion processes, i.e., continuous strong Markov processes, are widely used in the frictionless scenario. The first paper establishes that diffusion models can indeed be understood as approximations of price dynamics in markets with frictions. This is achieved by introducing an agent-based model of a financial market where finitely many agents trade a financial security, the price of which evolves according to price impacts generated by trades. It is shown that, if the number of agents is large, then under certain assumptions the price process of security, which is a pure-jump process, can be approximated by a one-dimensional diffusion process. In a slightly extended model, in which agents may exhibit herd behavior, the approximating diffusion model turns out to be a stochastic volatility model. Finally, it is shown that when agents' tendency to herd is strong, logarithmic returns in the approximating stochastic volatility model are heavy-tailed. The remaining papers are related to no-arbitrage criteria and superhedging in continuous-time option pricing models under small-transaction-cost asymptotics. Guasoni, Rásonyi, and Schachermayer have recently shown that, in such a setting, any financial security admits no arbitrage opportunities and there exist no feasible superhedging strategies for European call and put options written on it, as long as its price process is continuous and has the so-called conditional full support (CFS) property. Motivated by this result, CFS is established for certain stochastic integrals and a subclass of Brownian semistationary processes in the two papers. As a consequence, a wide range of possibly non-Markovian local and stochastic volatility models have the CFS property.

Modeling Asymmetries in Financial Data with Multiplicative Error Models

This thesis addresses modeling of financial time series, especially stock market returns and daily price ranges. Modeling data of this kind can be approached with so-called multiplicative error models (MEM). These models nest several well known time series models such as GARCH, ACD and CARR models. They are able to capture many well established features of financial time series including volatility clustering and leptokurtosis. In contrast to these phenomena, different kinds of asymmetries have received relatively little attention in the existing literature. In this thesis asymmetries arise from various sources. They are observed in both conditional and unconditional distributions, for variables with non-negative values and for variables that have values on the real line. In the multivariate context asymmetries can be observed in the marginal distributions as well as in the relationships of the variables modeled. New methods for all these cases are proposed. Chapter 2 considers GARCH models and modeling of returns of two stock market indices. The chapter introduces the so-called generalized hyperbolic (GH) GARCH model to account for asymmetries in both conditional and unconditional distribution. In particular, two special cases of the GARCH-GH model which describe the data most accurately are proposed. They are found to improve the fit of the model when compared to symmetric GARCH models. The advantages of accounting for asymmetries are also observed through Value-at-Risk applications. Both theoretical and empirical contributions are provided in Chapter 3 of the thesis. In this chapter the so-called mixture conditional autoregressive range (MCARR) model is introduced, examined and applied to daily price ranges of the Hang Seng Index. The conditions for the strict and weak stationarity of the model as well as an expression for the autocorrelation function are obtained by writing the MCARR model as a first order autoregressive process with random coefficients. The chapter also introduces inverse gamma (IG) distribution to CARR models. The advantages of CARR-IG and MCARR-IG specifications over conventional CARR models are found in the empirical application both in- and out-of-sample. Chapter 4 discusses the simultaneous modeling of absolute returns and daily price ranges. In this part of the thesis a vector multiplicative error model (VMEM) with asymmetric Gumbel copula is found to provide substantial benefits over the existing VMEM models based on elliptical copulas. The proposed specification is able to capture the highly asymmetric dependence of the modeled variables thereby improving the performance of the model considerably. The economic significance of the results obtained is established when the information content of the volatility forecasts derived is examined.

Fine-tuning of unmanned aerial surveillance for ecological systems

Much of our understanding and management of ecological processes requires knowledge of the distribution and abundance of species. Reliable abundance or density estimates are essential for managing both threatened and invasive populations, yet are often challenging to obtain. Recent and emerging technological advances, particularly in unmanned aerial vehicles (UAVs), provide exciting opportunities to overcome these challenges in ecological surveillance. UAVs can provide automated, cost-effective surveillance and offer repeat surveys for pest incursions at an invasion front. They can capitalise on manoeuvrability and advanced imagery options to detect species that are cryptic due to behaviour, life-history or inaccessible habitat. UAVs may also cause less disturbance, in magnitude and duration, for sensitive fauna than other survey methods such as transect counting by humans or sniffer dogs. The surveillance approach depends upon the particular ecological context and the objective. For example, animal, plant and microbial target species differ in their movement, spread and observability. Lag-times may exist between a pest species presence at a site and its detectability, prompting a need for repeat surveys. Operationally, however, the frequency and coverage of UAV surveys may be limited by financial and other constraints, leading to errors in estimating species occurrence or density. We use simulation modelling to investigate how movement ecology should influence fine-scale decisions regarding ecological surveillance using UAVs. Movement and dispersal parameter choices allow contrasts between locally mobile but slow-dispersing populations, and species that are locally more static but invasive at the landscape scale. We find that low and slow UAV flights may offer the best monitoring strategy to predict local population densities in transects, but that the consequent reduction in overall area sampled may sacrifice the ability to reliably predict regional population density. Alternative flight plans may perform better, but this is also dependent on movement ecology and the magnitude of relative detection errors for different flight choices. Simulated investigations such as this will become increasingly useful to reveal how spatio-temporal extent and resolution of UAV monitoring should be adjusted to reduce observation errors and thus provide better population estimates, maximising the efficacy and efficiency of unmanned aerial surveys.

The perfect corporate fit: New knowledge for new times

This study examines the impact of corporate practice on schooling and on teachers' professional development at the end of the millennium. It is argued that the production of new forms of knowledge is creating new sites of struggle over who owns educational knowledge, and this has profound implications for professional identity formation in all areas of social and economic endeavour, including education. As schools are re-shaped into corporations, school administrators and teachers are under increasing pressure to improve their productivity and to develop themselves as enterprising leaders and managers. To do so they are drawing more and more heavily on the growing non-academic literature of selfimprovement and self-development. Concern is expressed that such literature tends to value mindless optimism over radical doubt.

The economic consequences of financial reporting on Twitter

The use of social media has spread into many different areas including marketing, customer service, and corporate disclosure. However, our understanding of the timely effect of financial reporting information on Twitter is still limited. In this paper, we propose to examine the timely effect of financial reporting information on Twitter in Australian context, as reflect in the stock market trading. We aim to find out whether the level of information asymmetry within the stock market will be reduced, after the introduction of Twitter and the use of Twitter for financial reporting purpose

The nature and extent of use of Twitter for financial reporting by ASX listed companies: An exploratory study

We investigate the extent and nature of use of use of twitter for financial reporting by ASX listed companies. We consider 199 financial information related tweets from 14 ASX listed companies’ Twitter accounts. A thematic analysis of these tweets shows ‘Earnings’ and ‘Operational Performance’ are the most discussed financial reporting themes. Further, a comparison across industry sectors reveals that listed companies from varies industries show different usage patterns of financial reporting on Twitter. The examination of tweet sentiments also indicates a reporting bias within these tweets, as listed companies are more willing to disclose positive financial reporting tweets.

The economic consequences of corporate financial reporting on Twitter

The use of social media has spread into many different areas including marketing, customer service, and corporate disclosure. However, our understanding of the timely effect of financial reporting information on Twitter is still limited. In this paper, we examine the timely effect of financial reporting information on Twitter in the Australian context, as reflected in the follow-up stock market reaction. With the use of event methodology and comparative setting, we find that financial reporting disclosure on Twitter reduces the information asymmetry level. This is evidenced by reduction of bid-ask spread and increase of share trading volume. The results of this study imply that financial reporting disclosure on social media assists the dissemination of information and the stock market response to this information

Financial statement, Hebra Hased Ve-Amet

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Estimation of Execution Times of Process Control Algorithms on Microcomputers

An important question which has to be answered in evaluting the suitability of a microcomputer for a control application is the time it would take to execute the specified control algorithm. In this paper, we present a method of obtaining closed-form formulas to estimate this time. These formulas are applicable to control algorithms in which arithmetic operations and matrix manipulations dominate. The method does not require writing detailed programs for implementing the control algorithm. Using this method, the execution times of a variety of control algorithms on a range of 16-bit mini- and recently announced microcomputers are calculated. The formulas have been verified independently by an analysis program, which computes the execution time bounds of control algorithms coded in Pascal when they are run on a specified micro- or minicomputer.

Constructing Ethical Patterns in Times of Globalization : Hans Küng's Global Ethic Project and Beyond

The purpose of this study is to evaluate contemporary philosophical models for global ethics in light of the Catholic theologian Hans Küng s Global Ethic Project (Projekt Weltethos). Küng s project starts with the motto, No survival without world ethos. No global peace without peace between religions. I will use the philosophically multidimensional potential of Projekt Weltethos in terms of its possible philosophical interpretations to evaluate the general discussion of global ethics within political philosophy today. This is important in its own right, but also because through it, opportunities will emerge to articulate Küng s relatively general argument in a way that leaves less room for mutually contradictory concretizations of what global ethics ultimately should be like. The most important question in this study is the problem of religious and ideological exclusivism and its relation to the ethically consistent articulation of global ethics. I will first explore the question of the role of religion as the basis for ethics in general and what Küng may mean by his claim that only the unconditional can oblige unconditionally. I will reconstruct two different overall philosophical interpretations of the relationship between religious faith and human rationality, each having two different sub-divisions: a liberal interpretation amounts to either a Kantian-Scheiermacherian or a Jaspersian view, whereas what I call postliberal interpretation amounts to either an Aristotelian-Thomistic or an Augustinian view. Thereafter, I will further clarify how Küng views the nature of ethics beyond the question of its principal foundation in religious faith: Küng searches for a middle way between consequentialist and non-consequentialist ethics, a way in which the latter dimension has the final stake. I will then set out to concretize further this more or less general notion of the theoretical potential of Projekt Weltethos in terms of certain precise philosophico-political models. I categorize these models according to their liberal or postliberal orientation. The liberal concretization leads me to consider a wide spectrum of post-Kantian and post-Hegelian models from Rawls to Derrida, while the alternative concretization opens up my ultimate argument in favor of a postliberal type of modus vivendi. I will suggest that the only theoretically and practically plausible way to promote global ethics, in itself a major imperative today, is the recognition of a fundamental and necessary contest between mutually exclusive ideologies in the public sphere. On this basis I will proceed to my postliberal proposal, namely, that a constructive and peaceful encountering of exclusive difference as an ethical vantage point for an intercultural and inter-religious peace dialogue is the most acute challenge for global ethics today.

Flow field and traverse times for fan forced injection of fumigant via circular or annular inlet into stored grain

Fan forced injection of phosphine gas fumigant into stored grain is a common method to treat infestation by insects. For low injection velocities the transport of fumigant can be modelled as Darcy flow in a porous medium where the gas pressure satisfies Laplace's equation. Using this approach, a closed form series solution is derived for the pressure, velocity and streamlines in a cylindrically stored grain bed with either a circular or annular inlet, from which traverse times are numerically computed. A leading order closed form expression for the traverse time is also obtained and found to be reasonable for inlet configurations close to the central axis of the grain storage. Results are interpreted for the case of a representative 6m high farm wheat store, where the time to advect the phosphine to almost the entire grain bed is found to be approximately one hour.

Foreign Capital and Finland : Central government's first period of reliance on international financial markets, 1862-1938

The main objective of the study is to evaluate the Finnish central government s foreign borrowing between the years 1862 and 1938. Most of this period was characterised by deep capital market integration that bears resemblance to the liberal world financial order at the turn of the millennium. The main aim is to analyse the credit risk associated with the state and its determination by evaluating the world financial market centres perception of Finland. By doing this, the study is also expected to provide an additional dimension to Finland s political and economic history by incorporating into the research the assessments of international capital markets regarding Finland during a period that witnessed profound political and economic changes in Finnish society. The evaluation of the credit risk mainly relies on exchange-rate risk free time series of the state s foreign bonds. They have been collected from quotations in the stock exchanges in Helsinki, Hamburg, Paris and London. In addition, it investigates Finland s exposure to short-term debt and Moody s credit ratings assigned to Finland. The study emphasises the importance of the political risk. It suggests that the hey-day of the state s reliance on foreign capital markets took place during last few decades of the 19th century when Finland enjoyed a wide autonomy in the Russian Empire and prudently managed its economy, highlighted in Finland s adherence to the international gold standard. Political confrontations in Finland and, in particular, in Russia and the turbulence of the world financial system prevented the return of this beneficial position again. Through its issuance of foreign bonds the state was able to import substantial amounts of foreign capital, which was sorely needed to foster economic development in Finland. Moreover, the study argues that the state s presence in the western capital markets not only had economic benefits, but it also increased the international awareness of Finland s distinct and separate status in the Russian Empire and later underlined its position as an independent republic.

Pyrrolidine ring conformations in prolyl peptides from 13C spin-lattice relaxation times

A method was developed in the framework of a bistable jump model to obtain the pyrrolidine ring conformations in proline peptides from 13C spin-lattice relaxation times. Equations are presented expressing the ring torsions in terms of the 13C spin-lattice relaxation times of the ring carbons. This method was applied to 26 pyrrolidine ring systems and acceptable conformations were obtained.

Social organization of household finance: Understanding artful financial systems in the home

In this paper we discuss results of a field study focused on understanding the ways money and financial issues are handled within family settings. Families develop ‘systems’ or methods through which they coordinate and manage their everyday financial activities. Through an analysis of our fieldwork data collected from fifteen families, we provide several examples of such systems, highlighting their qualities and illustrating how such systems come to support the handling of financial activities in the home. Our results show that these systems are developed with a careful consideration of familial values, relationships and routines; and incorporate the use of physical and digital tools. Consequently, we suggest that design should consider the use and non-use of technology when supporting household financial management, taking into account the richness of families’ existing organically formed practices surrounding financial systems. Finally, our findings point to the fact that financial management in the domestic setting is socially organized and is closely connected to supporting everyday household activities.

A Spatial Planning Support System for Managing Bangalore's Urban Sprawl

Urban sprawl is the outgrowth along the periphery of cities and along highways. Although an accurate definition of urban sprawl may be debated, a consensus is that urban sprawl is characterized by an unplanned and uneven pattern of growth, driven by multitude of processes and leading to inefficient resource utilization. Urbanization in India has never been as rapid as it is in recent times. As one of the fastest growing economies in the world, India faces stiff challenges in managing the urban sprawl, while ensuring effective delivery of basic services in urban areas. The urban areas contribute significantly to the national economy (more than 50% of GDP), while facing critical challenges in accessing basic services and necessary infrastructure, both social and economic. The overall rise in the population of the urban poor or the increase in travel times due to congestion along road networks are indicators of the effectiveness of planning and governance in assessing and catering for this demand. Agencies of governance at all levels: local bodies, state government and federal government, are facing the brunt of this rapid urban growth. It is imperative for planning and governance to facilitate, augment and service the requisite infrastructure over time systematically. Provision of infrastructure and assurance of the delivery of basic services cannot happen overnight and hence planning has to facilitate forecasting and service provision with appropriate financial mechanisms.