Optimal Risk Adoption: A Real Options Approach

This study develops a real options approach for analyzing the optimal risk adoption policy in an environment where the adoption means a switch from one stochastic flow representation into another. We establish that increased volatility needs not decelerate investment, as predicted by the standard literature on real options, once the underlying volatility of the state is made endogenous. We prove that for a decision maker with a convex (concave) objective function, increased post-adoption volatility increases (decreases) the expected cumulative present value of the post-adoption profit flow, which consequently decreases (increases) the option value of waiting and, therefore, accelerates (decelerates) current investment.

Hedging Options with Different Time Units in the Pricing Models

This study examined the effects of the Greeks of the options and the trading results of delta hedging strategies, with three different time units or option-pricing models. These time units were calendar time, trading time and continuous time using discrete approximation (CTDA) time. The CTDA time model is a pricing model, that among others accounts for intraday and weekend, patterns in volatility. For the CTDA time model some additional theta measures, which were believed to be usable in trading, were developed. The study appears to verify that there were differences in the Greeks with different time units. It also revealed that these differences influence the delta hedging of options or portfolios. Although it is difficult to say anything about which is the most usable of the different time models, as this much depends on the traders view of the passing of time, different market conditions and different portfolios, the CTDA time model can be viewed as an attractive alternative.

Real Estate Investment and Uncertainty: Econometric Modelling using Finnish Data

The purpose of this paper is to test for the effect of uncertainty in a model of real estate investment in Finland during the hihhly cyclical period of 1975 to 1998. We use two alternative measures of uncertainty. The first measure is the volatility of stock market returns and the second measure is the heterogeneity in the answers of the quarterly business survey of the Confederation of Finnish Industry and Employers. The econometric analysis is based on the autoregressive distributed lag (ADL) model and the paper applies a 'general-to-specific' modelling approach. We find that the measure of heterogeneity is significant in the model, but the volatility of stock market returns is not. The empirical results give some evidence of an uncertainty-induced threshold slowing down real estate investment in Finland.

The Day of the Week Effect and Option Pricing - A Study of the German Option Market

The use of different time units in option pricing may lead to inconsistent estimates of time decay and spurious jumps in implied volatilities. Different time units in the pricing model leads to different implied volatilities although the option price itself is the same.The chosen time unit should make it necessary to adjust the volatility parameter only when there are some fundamental reasons for it and not due to wrong specifications of the model. This paper examined the effects of option pricing using different time hypotheses and empirically investigated which time frame the option markets in Germany employ over weekdays. The paper specifically tries to get a picture of how the market prices options. The results seem to verify that the German market behaves in a fashion that deviates from the most traditional time units in option pricing, calendar and trading days. The study also showed that the implied volatility of Thursdays was somewhat higher and thus differed from the pattern of other days of the week. Using a GARCH model to further investigate the effect showed that although a traditional tests, like the analysis of variance, indicated a negative return for Thursday during the same period as the implied volatilities used, this was not supported using a GARCH model.

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.

Short-Horizon Asymmetric Mean-Reversion and Overreactions: Evidence from the Nordic Stock Markets

This paper examines the asymmetric behavior of conditional mean and variance. Short-horizon mean-reversion behavior in mean is modeled with an asymmetric nonlinear autoregressive model, and the variance is modeled with an Exponential GARCH in Mean model. The results of the empirical investigation of the Nordic stock markets indicates that negative returns revert faster to positive returns when positive returns generally persist longer. Asymmetry in both mean and variance can be seen on all included markets and are fairly similar. Volatility rises following negative returns more than following positive returns which is an indication of overreactions. Negative returns lead to increased variance and positive returns leads even to decreased variance.

Intraday Seasonalities and Macroeconomic News Announcements

Using a data set consisting of three years of 5-minute intraday stock index returns for major European stock indices and U.S. macroeconomic surprises, the conditional mean and volatility behaviors in European market were investigated. The findings suggested that the opening of the U.S market significantly raised the level of volatility in Europe, and that all markets respond in an identical fashion. Furthermore, the U.S. macroeconomic surprises exerted an immediate and major impact on both European stock markets’ returns and volatilities. Thus, high frequency data appear to be critical for the identification of news that impacted the markets.

An Empirical Study of the Mixture of Time and Movements in Prices

This paper investigates the persistent pattern in the Helsinki Exchanges. The persistent pattern is analyzed using a time and a price approach. It is hypothesized that arrival times are related to movements in prices. Thus, the arrival times are defined as durations and formulated as an Autoregressive Conditional Duration (ACD) model as in Engle and Russell (1998). The prices are defined as price changes and formulated as a GARCH process including duration measures. The research question follows from market microstructure predictions about price intensities defined as time between price changes. The microstructure theory states that long transaction durations might be associated with both no news and bad news. Accordingly, short durations would be related to high volatility and long durations to low volatility. As a result, the spread will tend to be larger under intensive moments. The main findings of this study are 1) arrival times are positively autocorrelated and 2) long durations are associated with low volatility in the market.

Intraday Linkages across International Equity Markets

Utilizing concurrent 5-minute returns, the intraday dynamics and inter-market dependencies in international equity markets were investigated. A strong intraday cyclical autocorrelation structure in the volatility process was observed to be caused by the diurnal pattern. A major rise in contemporaneous cross correlation among European stock markets was also noticed to follow the opening of the New York Stock Exchange. Furthermore, the results indicated that the returns for UK and Germany responded to each other’s innovations, both in terms of the first and second moment dependencies. In contrast to earlier research, the US stock market did not cause significant volatility spillover to the European markets.

Dynamics and local structure of colossal magnetoresistance manganites

We report Extended X-ray Absorption Fine Structure and anelastic spectroscopy measurements on on hole doped manganese oxides La1-xCaxMnO3 which present the colossal magnetoresistance effect. EXAFS measurements were realized both in the absence and presence of an applied magnetic field of 1.1 Tesla, in a wide temperature range (between 330 and 77 K) and at various dopings (x = 0.25 and x = 0.33). The magnetic field orders the magnetic moments so favouring the electron mobility and the reduction of Mn-O octahedra distortions. We observe the presence of four short and two long Mn-O distances (1.93 and 2.05 Angstrom respectively) above and also below the metal-insulator phase transition. The overall distortion decreases but does not completely disappear in the metallic phase suggesting the possible coexistence of metallic and insulating regions at low temperatures. The magnetic field reduces the lattice distortions showing evidence of a microscopic counterpart of the macroscopic colossal magnetoresistance. We also present preliminary anelastic relaxation spectra in a wide temperature range from 900 K to 1 K on a sample with x = 0.40, in order to study the structural phase transitions and the lattice dynamics. A double peak has been observed at the metal-insulator transition in the imaginary part of Young's modulus. This double peak indicates that the metal-insulator transition could be a more complex phenomenon than a simple second order phase transition. In particular the peak at lower temperatures can be connected with the possible presence of inhomogeneous phase structures. Another intense dissipation peak has been observed corresponding to the structural orthorhombic-trigonal transition around 750 K.

World parliament – fact or fiction? On the feasibility of world parliamentary models

Cosmopolitan ideals have been on the philosophical agenda for several millennia but the end of the Cold War started a new discussion on state sovereignty, global democracy, the role of international law and global institutions. The Westphalian state system in practice since the 17th century is transforming and the democracy deficit needs new solutions. An impetus has been the fact that in the present world, an international body representing global citizens does not exist. In this Master’s thesis, the possibility of establishing a world parliament is examined. In a case analysis, 17 models on world parliament from two journals, a volume of essays and two other publications are discussed. Based on general observations, the models are divided into four thematic groups. The models are analyzed with an emphasis on feasible and probable elements. Further, a new scenario with a time frame of thirty years is proposed based on the methodology of normative futures studies, taking special interest in causal relationships and actions leading to change. The scenario presents three gradual steps that each need to be realized before a sustainable world parliament is established. The theoretical framework is based on social constructivism, and changes in international and multi-level governance are examined with the concepts of globalization, democracy and sovereignty. A feasible, desirable and credible world parliament is constituted gradually by implying electoral, democratic and legal measures for members initially from exclusively democratic states, parliamentarians, non-governmental organizations and other groups. The parliament should be located outside the United Nations context, since a new body avoids the problem of inefficiency currently prevailing in the UN. The main objectives of the world parliament are to safeguard peace and international law and to offer legal advice in cases when international law has been violated. A feasible world parliament is advisory in the beginning but it is granted legislative powers in the future. The number of members in the world parliament could also be extended following the example of the EU enlargement process.

Preparation and characterization of rubidium-beta-alumina by the gel-to-crystallite conversion method

Preparation of Rb-beta -alumina was realized by the gel-to-crystallite conversion method. Reaction of hydrated aluminum hydroxide gel with RbOH in ethanol medium gave rise to the Rb+-inserted pseudoboehmite precursor under wet chemical conditions. The thermal decomposition of the precursor yielded Rb-beta -alumina. The Rb2O:Al2O3 ratio of monophasic Rb-beta -alumina ranged from 1:10 to 1:22. The extended stability in the compositional range is due to the fact that the conduction planes containing Rb+ and O2- ions can have lower occupancy of Rb+ ions for larger sized alkali ions, permitting the steric separation of the adjoining spinel blocks. High-resolution electron microscopy revealed that the decreasing occupancy of alkali ions in the conduction plane is balanced by changing widths of spinel blocks arising from the shift of tetrahedral Al3+ ions to octahedral sites and an accompanying increase in stacking defects. (C) 2000 Elsevier Science Ltd. All rights reserved.

A Simple Five-Level Inverter Topology for Induction Motor Drive Using Conventional Two-Level Inverters and Flying Capacitor Technique

This paper proposes a new five-level inverter topology for open-end winding induction motor (IM) drive. The popular existing circuit configurations for five-level inverter include the NPC inverter and flying capacitor topologies. Compared to the NPC inverter, the proposed topology eliminates eighteen clamping diodes having different voltage ratings in the present circuit. Moreover it requires only one capacitor bank per phase, whereas flying capacitor schemes for five level topologies require six capacitor banks per phase. The proposed topology is realized by feeding the phase winding of an open-end induction motor with two-level inverters in series with flying capacitors. The flying capacitor voltages are balanced using the switching state redundancy for full modulation range. The proposed inverter scheme is capable of producing two-level to five-level pulse width modulated voltage across the phase winding depending on the modulation range. Additionally, in case of any switch failure in the flying capacitor connection, the proposed inverter topology can be operated as a three-level inverter for full modulation range. The proposed scheme is experimentally verified on a four pole, 5hp induction motor drive.

Microstructure related influence on the electrical properties of pulsed laser ablated (Ba, Sr)TiO3 thin films

The microstructural dependence of electrical properties of (Ba, Sr)TiO3(BST) thin films were studied from the viewpoint of dc and ac electrical properties. The films were grown using a pulsed laser deposition technique in a temperature range of 300 to 600 degrees C, inducing changes in grain size, structure, and morphology. Consequently, two different types of films were realized, of which type I, was polycrystalline, multigrained, while type II was [100] oriented possessing a densely packed fibrous microstructure. Leakage current measurements were done at elevated temperatures to provide evidence of the conduction mechanism present in these films. The results revealed a contribution from both electronic and ionic conduction. In the case of type I films, two trapping levels were identified with energies around 0.5 and 2.73 eV, which possibly originate from oxygen vacancies V-O and Ti3+ centers, respectively. These levels act as shallow and deep traps and are reflected in the current-voltage characteristics of the BST thin films. The activation energy associated with oxygen vacancy motion in this case was obtained as 1.28 eV. On the contrary, type II films showed no evidence of deep trap energy levels, while the identified activation energy associated with shallow traps was obtained as 0.38 eV. The activation energy obtained for oxygen vacancy motion in type II films was around 1.02 eV. The dc measurement results were further elucidated through ac impedance analysis, which revealed a grain boundary dominated response in type I in comparison to type II films where grain response is highlighted. A comparison of the mean relaxation time of the two films revealed three orders of magnitude higher relaxation time in the case of type I films. Due to smaller grain size in type I films the grains were considered to be completely depleted giving rise to only grain boundary response for the bulk of the film. The activation energy obtained from conductivity plots agree very well with that of dc measurements giving values 1.3 and 1.07 eV for type I and type II films, respectively. Since oxygen vacancy transport have been identified as the origin of resistance degradation in BST thin films, type I films with their higher value of activation energy for oxygen ion mobility explains the improvement in breakdown characteristics under constant high dc field stress. The role of microstructure in controlling the rate of degradation is found useful in this instance to enhance the film properties under high electric field stresses. (C) 2000 American Institute of Physics. [S0021-8979(00)00418-7].

Jac. Ahrenberg ja historian perintö : Restaurointisuunnitelmat Viipurin ja Turun linnoihin 1800-luvun lopussa

Jac. Ahrenberg and Patrimony Restoration Plans for Viipuri and Turku Castles at the End of the 19th Century This dissertation examines the unrealized restoration plans for two castles in the Grand Duchy of Finland one located at Viipuri (Vyborg, nowadays in Russia), the other at Turku (in Swedish, Åbo) during the last decades of the 19th century. Both castles were used as prisons, barracks and warehouses. From the middle of the 19th century on, their restoration and transformation into museums and "national monuments" were demanded in the newspapers. The prison reform in the 1860s stimulated the documentation and debate concerning their future, but it was only at the beginning of the 1880s when their restoration became an official state-run project. The undertaking was carried out by Johan Jacob (Jac.) Ahrenberg (1847 1914), architect of the National Board of Public Buildings. By combining written sources with drawings and photographs, this dissertation examines the restoration projects, the two castles' significance and the ways in which they were investigated by scholars. The plans are analyzed in connection with restoration practices in France and Sweden and in the context of contemporary discussions concerning national art and patrimony. The thesis argues that these former castles of the Swedish crown were used to manifest the western roots of Finnish law and order, the lineage of power and the capacity of the nation to defend itself. However, because of their symbolism, their restoration became a politically delicate question concerning the role of the Swedish heritage in Finland's nation-building process. According to Jac. Ahrenberg's plans, the two castles were to be restored to their assumed appearance at the time of the Vasa dynasty. Consequently, the structures would have resembled castles in Sweden. It is suggested that one aim of the restoration plans was to transform the two buildings into monuments testifying to the common history of Sweden and Finland. They were meant to consolidate the Swedish basis of Finnish culture and autonomy and thus to secure them against the threatening implications of Russian imperialism. It seems that along with the changing ideals of architectural restoration and the need for an original Finnish architectural heritage, the political connotations associated with the castles were one reason why Jac. Ahrenberg's restoration plans were never realized.