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.

Scale decisions can reverse conclusions on community assembly processes.

AIM: Phylogenetic diversity patterns are increasingly being used to better understand the role of ecological and evolutionary processes in community assembly. Here, we quantify how these patterns are influenced by scale choices in terms of spatial and environmental extent and organismic scales. LOCATION: European Alps. METHODS: We applied 42 sampling strategies differing in their combination of focal scales. For each resulting sub-dataset, we estimated the phylogenetic diversity of the species pools, phylogenetic α-diversities of local communities, and statistics commonly used together with null models in order to infer non-random diversity patterns (i.e. phylogenetic clustering versus over-dispersion). Finally, we studied the effects of scale choices on these measures using regression analyses. RESULTS: Scale choices were decisive for revealing signals in diversity patterns. Notably, changes in focal scales sometimes reversed a pattern of over-dispersion into clustering. Organismic scale had a stronger effect than spatial and environmental extent. However, we did not find general rules for the direction of change from over-dispersion to clustering with changing scales. Importantly, these scale issues had only a weak influence when focusing on regional diversity patterns that change along abiotic gradients. MAIN CONCLUSIONS: Our results call for caution when combining phylogenetic data with distributional data to study how and why communities differ from random expectations of phylogenetic relatedness. These analyses seem to be robust when the focus is on relating community diversity patterns to variation in habitat conditions, such as abiotic gradients. However, if the focus is on identifying relevant assembly rules for local communities, the uncertainty arising from a certain scale choice can be immense. In the latter case, it becomes necessary to test whether emerging patterns are robust to alternative scale choices.

A comparison of the processes of institutionalisation of political economy in Spain and Italy (1860-1900)

[spa] El estudio de los procesos a través de los cuales la economía política se ha transformado en una disciplina académica es un área de creciente interés en la historia del pensamiento económico. Dicho estudio se ha abordado a través del análisis de la importancia de la economía política en un conjunto de instituciones, consideradas clave en la expansión de la economía en las sociedades occidentales en la segunda mitad del siglo XIX y primeras décadas del XX: universidades, sociedades económicas, publicaciones periódicas de contenido económico y los parlamentos nacionales. Este papel presenta una comparación entre los desarrollos del proceso de institutionalización de la economía política en España e Italia, a través del estudio de la presencia de esta disciplina en las instituciones mencionadas para el periodo 1860-1900. El objetivo es medir la posible existencia de una vía común en la institucionalización de la economía política en ambos países, como un primer paso hacia la elaboración de un modelo supranacional de institucionalización de la economía en este periodo.

Why Italy and not Spain?: comparing two industrialization processes from a dissagregate time-series perspective

This study presents new evidence concerning the uneven processes of industrialization innineteenth century Spain and Italy based on a disaggregate analysis of the productivesectors from which the behaviour of the aggregate indices is comprised. The use of multivariate time-series analysis techniques can aid our understanding and characterization of these two processes of industrialization. The identification of those sectors with key rolesin leading industrial growth provides new evidence concerning the factors that governed thebehaviour of the aggregates in the two economies. In addition, the analysis of the existenceof interindustry linkages reveals the scale of the industrialization process, and wheresignificant differences exist, accounts for many of the divergences recorded in the historiography for the period 1850-1913.

The role of oxidative stress during inflammatory processes.

Abstract The production of various reactive oxidant species in excess of endogenous antioxidant defense mechanisms promotes the development of a state of oxidative stress, with significant biological consequences. In recent years, evidence has emerged that oxidative stress plays a crucial role in the development and perpetuation of inflammation, and thus contributes to the pathophysiology of a number of debilitating illnesses, such as cardiovascular diseases, diabetes, cancer, or neurodegenerative processes. Oxidants affect all stages of the inflammatory response, including the release by damaged tissues of molecules acting as endogenous danger signals, their sensing by innate immune receptors from the Toll-like (TLRs) and the NOD-like (NLRs) families, and the activation of signaling pathways initiating the adaptive cellular response to such signals. In this article, after summarizing the basic aspects of redox biology and inflammation, we review in detail the current knowledge on the fundamental connections between oxidative stress and inflammatory processes, with a special emphasis on the danger molecule high-mobility group box-1, the TLRs, the NLRP-3 receptor, and the inflammasome, as well as the transcription factor nuclear factor-κB.

Geochemical and H-O-Sr-Nd isotope evidence for magmatic processes and meteoric-water interactions in the basal complex of La Gomera, Canary Islands

The plutonic rocks of the Basal Complex of La Gomera, Canary Islands, Spain, were studied by means of major and trace element contents and by H-O-Sr-Nd isotope compositions in order to distinguish primary magmatic characteristics and late-stage alteration products. Deciphering the effects of alteration allowed us to determine primary, plume-related compositions that indicated D- and (18)O-depletion relative to normal upper mantle, supporting the conclusions of earlier studies on the plutonic rocks of Fuerteventura and La Palma. Late-stage alteration took place during the formation of the intrusive series induced by interaction with meteoric water. Inferred isotopic compositions of the meteoric water indicate that the water infiltrated into the rock edifice at a height of about 1500 m above sea level, suggesting the existence of a subaerial volcano which was active during the intrusive activity and that it has been either distroyed or remain buried by later volcanic and landslide events.

Leadership at the upper echelons : three essays

"IT'S THE ECONOMY STUPID", BUT CHARISMA MATTERS TOO: A DUAL PROCESS MODEL OF PRESIDENTIAL ELECTION OUTCOMES. ABSTRACT Because charisma is assumed to be an important determinant of effective leadership, the extent to which a presidential nominee is more charismatic than his opponent should be an important determinant of voter choices. We computed a composite measure of the rhetorical richness of acceptances speeches given by U.S. presidential candidates at their national party convention. We added this marker of charisma to Ray C. Fair's presidential vote-share equation (1978; 2009). We theorized that voters decide using psychological attribution (i.e., due to macroeconomics and incumbency) as well as inferential processes (i.e., due to leader charismatic behavior) when voting. Controlling for the macro-level variables and incumbency in the Fair model, our results indicated that difference between nominees' charisma is a significant determinant of electoral success, particularly in close elections. This extended model significantly improves the precision of the Fair model and correctly predicts 23 out of the last 24 U.S. presidential elections. Paper 2: IT CEO LEADERSHIP, CORPORATE SOCIAL AND FINANCIAL PERFORMANCE. ABSTRACT We investigated whether CEO leadership predicted corporate financial performance (CFP) and corporate social performance (CSP). Using longitudinal data on 258 CEOs from 117 firms across 19 countries and 10 industry sectors, we found that determinants of CEO leadership (i.e., implicit motives) significantly predicted both CFP and CSP. As expected, the most consistent positive predictor was Responsibility Disposition when interacting with n (need for) Power. n Achievement and n Affiliation were generally negatively related or unrelated to outcomes. CSP was positively related to accounting measures of CFP. Our findings suggest that executive leader characteristics have important consequences for corporate level outcomes. Paper 3. PUNISHING THE POWERFUL: ATTRIBUTIONS OF BLAME AND LEADERSHIP ABSTRACT We propose that individuals are more lenient in attributing blame to leaders than to nonleaders. We advance a motivational explanation building on the perspective of punishment and on system justification theory. We conducted two scenario experiments which supported our proposition. In study 1, wrongdoer leader status was negatively related to blame and the perceived seriousness of the wrongdoing. In study 2, controlling for the Big-Five personality factor and individual differences in moral evaluation (i.e., moral foundations), wrongdoer leader status was negatively related with desired severity of punishment, and fair punishments were perceived as more just for non-leaders than for leaders.

Mean first-passage time of continuous non-Markovian processes driven by colored noise

An equation for mean first-passage times of non-Markovian processes driven by colored noise is derived through an appropriate backward integro-differential equation. The equation is solved in a Bourret-like approximation. In a weak-noise bistable situation, non-Markovian effects are taken into account by an effective diffusion coefficient. In this situation, our results compare satisfactorily with other approaches and experimental data.

Mineralization of the recalcitrant oxalic and oxamic acids by electrochemical advanced oxidation processes using a boron-doped diamond anode

Oxalic and oxamic acids are the ultimate and more persistent by-products of the degradation of N-aromatics by electrochemical advanced oxidation processes (EAOPs). In this paper, the kinetics and oxidative paths of these acids have been studied for several EAOPs using a boron-doped diamond (BDD) anode and a stainless steel or an air-diffusion cathode. Anodic oxidation (AO-BDD) in the presence of Fe2+ (AO-BDD-Fe2+) and under UVA irradiation (AO-BDD-Fe2+-UVA), along with electro-Fenton (EF-BDD), was tested. The oxidation of both acids and their iron complexes on BDD was clarified by cyclic voltammetry. AO-BDD allowed the overall mineralization of oxalic acid, but oxamic acid was removed much more slowly. Each acid underwent a similar decay in AO-BDD-Fe2+ and EFBDD, as expected if its iron complexes were not attacked by hydroxyl radicals in the bulk. The faster and total mineralization of both acids was achieved in AO-BDD-Fe2+-UVA due to the high photoactivity of their Fe(III) complexes that were continuously regenerated by oxidation of their Fe(II) complexes. Oxamic acid always released a larger proportion of NH4 + than NO3- ion, as well as volatile NOx species. Both acids were independently oxidized at the anode in AO-BDD, but in AO-BDD-Fe2+-UVA oxamic acid was more slowlydegraded as its content decreased, without significant effect on oxalic acid decay. The increase in current density enhanced the oxidation power of the latter method, with loss of efficiency. High Fe2+ contents inhibited the oxidation of Fe(II) complexes by the competitive oxidation of Fe2+ to Fe3+. Low current densities and Fe2+ contents are preferable to remove more efficiently these acids by the most potent AO-BDD-Fe2+-UVA method.

Unravelling the interaction between tectonic and sedimentary processes during lithospheric thinning in the Alpine Tethys margins

The discovery of exhumed continental mantle and hyper-extended crust in present-day magma-poor rifted margins is at the origin of a paradigm shift within the research field of deep-water rifted margins. It opened new questions about the strain history of rifted margins and the nature and composition of sedimentary, crustal and mantle rocks in rifted margins. Thanks to the benefit of more than one century of work in the Alps and access to world-class outcrops preserving the primary relationships between sediments and crustal and mantle rocks from the fossil Alpine Tethys margins, it is possible to link the subsidence history and syn-rift sedimentary evolution with the strain distribution observed in the crust and mantle rocks exposed in the distal rifted margins. In this paper, we will focus on the transition from early to late rifting that is associated with considerable crustal thinning and a reorganization of the rift system. Crustal thinning is at the origin of a major change in the style of deformation from high-angle to low-angle normal faulting which controls basin-architecture, sedimentary sources and processes and the nature of basement rocks exhumed along the detachment faults in the distal margin. Stratigraphic and isotopic ages indicate that this major change occurred in late Sinemurian time, involving a shift of the syn-rift sedimentation toward the distal domain associated with a major reorganization of the crustal structure with exhumation of lower and middle crust. These changes may be triggered by mantle processes, as indicated by the infiltration of MOR-type magmas in the lithospheric mantle, and the uplift of the Brianconnais domain. Thinning and exhumation of the crust and lithosphere also resulted in the creation of new paleogeographic domains, the Proto Valais and Liguria-Piemonte domains. These basins show a complex, 3D temporal and spatial evolution that might have evolved, at least in the case of the Liguria-Piemonte basin, in the formation of an embryonic oceanic crust. The re-interpretation of the rift evolution and the architecture of the distal rifted margins in the Alps have important implications for the understanding of rifted margins worldwide, but also for the paleogeographic reconstruction of the Alpine domain and its subsequent Alpine compressional overprint.

Weakening processes in thrust faults: insights from the Monte Perdido thrust fault (southern Pyrenees, Spain)

The Monte Perdido thrust fault (southern Pyrenees) consists of a 6-m-thick interval of intensely deformed clay-bearing rocks. The fault zone is affected by a pervasive pressure solution seam and numerous shear surfaces. Calcite extensional-shear veins are present along the shear surfaces. The angular relationships between the two structures indicate that shear surfaces developed at a high angle (70°) to the local principal maximum stress axis r1. Two main stages of deformation are present. The first stage corresponds to the development of calcite shear veins by a combination of shear surface reactivation and extensional mode I rupture. The second stage of deformation corresponds to chlorite precipitation along the previously reactivated shear surfaces. The pore fluid factor k computed for the two deformation episodes indicates high fluid pressures during the Monte Perdido thrust activity. During the first stage of deformation, the reactivation of the shear surface was facilitated by a suprahydrostatic fluid pressure with a pore fluid factor kv equal to 0.89. For the second stage, the fluid pressure remained still high (with a k value ranging between 0.77 and 0.84) even with the presence of weak chlorite along the shear surfaces. Furthermore, evidence of hydrostatic fluid pressure during calcite cement precipitation supports that incremental shear surface reactivations are correlated with cyclic fluid pressure fluctuations consis- tent with a fault-valve model.