The forward- and the equity-premium puzzles: two symptoms of the same illness?

Using information on US domestic financial data only, we build a stochastic discount factor—SDF— and check whether it accounts for foreign markets stylized facts that escape consumption based models. By interpreting our SDF as the projection of a pricing kernel from a fully specified model in the space of returns, our results indicate that a model that accounts for the behavior of domestic assets goes a long way toward accounting for the behavior of foreign assets prices. We address predictability issues associated with the forward premium puzzle by: i) using instruments that are known to forecast excess returns in the moments restrictions associated with Euler equations, and; ii) by pricing Lustig and Verdelhan (2007)’s foreign currency portfolios. Our results indicate that the relevant state variables that explain foreign-currency market asset prices are also the driving forces behind U.S. domestic assets behavior.

Volatility Triggered Range Forward (VTRF): an instrument for protection against volatility fluctuations in the BRL/USD pair

Este trabalho propõe um instrumento capaz de absorver choques no par BRL/USD, garantindo ao seu detentor a possibilidade de realizar a conversão entre essas moedas a uma taxa observada recentemente. O Volatility Triggered Range Forward assemelha-se a um instrumento forward comum, cujo preço de entrega não é conhecido inicialmente, mas definido no momento em que um nível de volatilidade pré-determinado for atingido na cotação das moedas ao longo da vida do instrumento. Seu cronograma de ajustes pode ser definido para um número qualquer de períodos. Seu apreçamento e controle de riscos é baseado em uma árvore trinomial ponderada entre dois possíveis regimes de volatilidade. Esses regimes são determinados após um estudo na série BRL/USD no período entre 2003 e 2009, basedo em um modelo Switching Autoregressive Conditional Heteroskedasticity (SWARCH).

The forward- and the equity-premium puzzles: two symptoms of the same illness?

Using information on US domestic financial data only, we build a stochastic discount factor—SDF— and check whether it accounts for foreign markets stylized facts that escape consumption based models. By interpreting our SDF as the projection of a pricing kernel from a fully specified model in the space of returns, our results indicate that a model that accounts for the behavior of domestic assets goes a long way toward accounting for the behavior of foreign assets prices. We address predictability issues associated with the forward premium puzzle by: i) using instruments that are known to forecast excess returns in the moments restrictions associated with Euler equations, and; ii) by comparing this out-of-sample results with the one obtained performing an in-sample exercise, where the return-based SDF captures sources of risk of a representative set of developed and emerging economies government bonds. Our results indicate that the relevant state variables that explain foreign-currency market asset prices are also the driving forces behind U.S. domestic assets behavior.

The forward and the equity-premium puzzles: a straightforward test of whether they are two symptoms of the same illness

We build a stochastic discount factor—SDF— using information on US domestic financial data only, and provide evidence that it accounts for foreign markets stylized facts that escape SDF’s generated by consumption based models. By interpreting our SDF as the projection of the pricing kernel from a fully specified model in the space of returns, our results indicate that a model that accounts for the behavior of domestic assets goes a long way toward accounting for the behavior of foreign assets prices. In our tests, we address predictability, a defining feature of the Forward Premium Puzzle—FPP— by using instruments that are known to forecast excess returns in the moments restrictions associated with Euler equations both in the equity and the foreign markets.

A note on the forward and the equity-premium puzzles: two symptoms of the same illness?

We build a stochastic discount factor—SDF— using information on US domestic financial data only, and provide evidence that it accounts for foreign markets stylized facts that escape SDF’s generated by consumption based models. By interpreting our SDF as the projection of the pricing kernel from a fully specified model in the space of returns, our results indicate that a model that accounts for the behavior of domestic assets goes a long way toward accounting for the behavior of foreign assets prices. In our tests, we address predictability, a defining feature of the Forward Premium Puzzle—FPP— by using instruments that are known to forecast excess returns in the moments restrictions associated with Euler equations both in the equity and the foreign markets.

An empirical comparison of forward-rate and spot-rate models for valuing interest-rate options

Our main goal is to investigate the question of which interest-rate options valuation models are better suited to support the management of interest-rate risk. We use the German market to test seven spot-rate and forward-rate models with one and two factors for interest-rate warrants for the period from 1990 to 1993. We identify a one-factor forward-rate model and two spot-rate models with two faetors that are not significant1y outperformed by any of the other four models. Further rankings are possible if additional cri teria are applied.

The forward and the equity premium puzzles: two symptoms of the same illness?

The Forward Premium Puzzle (FPP) is how the empirical observation of a negative relation between future changes in the spot rates and the forward premium is known. Modeling this forward bias as a risk premium and under weak assumptions on the behavior of the pricing kernel, we characterize the potential bias that is present in the regressions where the FPP is observed and we identify the necessary and sufficient conditions that the pricing kernel has to satisfy to account for the predictability of exchange rate movements. Next, we estimate the pricing kernel applying two methods: i) one, du.e to Araújo et aI. (2005), that exploits the fact that the pricing kernel is a serial correlation common feature of asset prices, and ii) a traditional principal component analysis used as a procedure 1;0 generate a statistical factor modeI. Then, using on the sample and out of the sample exercises, we are able to show that the same kernel that explains the Equity Premi um Puzzle (EPP) accounts for the FPP in all our data sets. This suggests that the quest for an economic mo deI that generates a pricing kernel which solves the EPP may double its prize by simultaneously accounting for the FPP.

Fast-forward/fast-backward substitutions on vector computers

This paper deals with approaches for sparse matrix substitutions using vector processing. Many publications have used the W-matrix method to solve the forward/backward substitutions on vector computer. Recently a different approach has been presented using dependency-based substitution algorithm (DBSA). In this paper the focus is on new algorithms able to explore the sparsity of the vectors. The efficiency is tested using linear systems from power systems with 118, 320, 725 and 1729 buses. The tests were performed on a CRAY Y MP2E/232. The speedups for a fast-forward/fast-backward using a 1729-bus system are near 19 and 14 for real and complex arithmetic operations, respectively. When forward/backward is employed the speedups are about 8 and 6 to perform the same simulations.

Effect of haematocrit on pump and kidney dysfunction after myocardial revascularization

Objective - Kidney dysfunction is a common complication after cardiac surgery. It occurs in 7 to 31% of the patients. The lowest haematocrit after cardiopulmonary bypass surgery (LHCT) has been identified as a risk factor for kidney dysfunction after cardiac surgery. The aim of this study is to determine whether different levels of haematocrit during cardiopulmonary bypass surgery are related to kidney dysfunction.Methods and results-A prospective study was conducted on consecutive adult patients undergoing myocardial revascularization. Preoperative renal function was assessed by baseline serum creatinine level (CrPre). Peak postoperative creatinine (CrPost) was defined as the highest daily in-hospital postoperative value. Peak fractional change in creatinine (% Delta Cr) was defined as the difference between the CrPre and CrePost represented as a percentage of the preoperative value. The LHTC was defined as the lowest recorded haematocrit prior to weaning from the initial pump run. A category variable was created for haematocrit based on the distribution of values. The category variable had the following cut-off points: less than 23%, 23.1 to 28% and greater than 28.1 %. Lowest haematocrit (26.62 +/- 4.15%), CPB (74.71 +/- 24.90 min), CrPre (1.23 +/- 0.37 mg/dl) and highest CrPost (1.52 +/- 0.47 mg/dl) data varied in near-normal fashion. Statistical significance has been observed in the < 23% lowest haematocrit group (CrIPOD and Cr5POD; P = 0.006) and the 23.1 28% lowest haematocrit level group (CrPre and Cr2POD; P = 0.047). CrPre and Cr5POD did not differ between groups (P > 0.05). The multiple linear regression model confirmed that the determinants for higher %Delta Cr were age, body surface area and preoperative serum creatinine level.Conclusion - The LHTC was not identified as a risk factor for kidney dysfunction after myocardial revascularization.

gamma p and gamma gamma scattering from (p)over-bar-p, pp forward amplitudes in a QCD eikonal model with a dynamical gluon mass

We examine the gamma p photoproduction and the hadronic gamma gamma total cross sections by means of a QCD eikonal model with a dynamical infrared mass scale. In this model, where the dynamical gluon mass is the natural regulator for the tree level gluon-gluon scattering, the gamma p and gamma gamma total cross sections are derived from the pp and (p) over barp forward scattering amplitudes assuming vector meson dominance and the additive quark model. We show that the validity of the cross section factorization relation sigma(pp)/sigma(gamma p)=sigma(gamma p)/sigma(gamma gamma) is fulfilled depending on the Monte Carlo model used to unfold the hadronic gamma gamma cross section data, and we discuss in detail the case of sigma(gamma gamma -> hadrons) data with W-gamma gamma> 10 GeV unfolded by the Monte Carlo generators PYTHIA and PHOJET. The data seems to favor a mild dependence with the energy of the probability (P-had) that the photon interacts as a hadron.

Measurement of the forward-backward charge asymmetry in top-quark pair production

We present the first measurement of the integrated forward-backward charge asymmetry in top-quark-top-antiquark pair (t (t) over bar) production in proton-antiproton (p (p) over bar) collisions in the lepton+jets final state. Using a b-jet tagging algorithm and kinematic reconstruction assuming t (t) over bar +X production and decay, a sample of 0.9 fb(-1) of data, collected by the D0 experiment at the Fermilab Tevatron Collider, is used to measure the asymmetry for different jet multiplicities. The result is also used to set upper limits on t (t) over bar +X production via a Z' resonance.

Measurement of the Forward-Backward Charge Asymmetry and Extraction of sin(2)theta(eff)(W) in pp -> Z/gamma(*)+X -> e(+)e(-)+X Events Produced at s=1.96 TeV

We present a measurement of the forward-backward charge asymmetry (A(FB)) in pp -> Z/gamma(*)+X -> e(+)e(-)+X events at a center-of-mass energy of 1.96 TeV using 1.1 fb(-1) of data collected with the D0 detector at the Fermilab Tevatron collider. A(FB) is measured as a function of the invariant mass of the electron-positron pair, and found to be consistent with the standard model prediction. We use the A(FB) measurement to extract the effective weak mixing angle sin(2)theta(eff)(W)=0.2326 +/- 0.0018(stat)+/- 0.0006(syst).

Measurement of sin(2)theta(l)(eff) and Z-light quark couplings using the forward-backward charge asymmetry in p(p)over-bar -> Z/gamma* -> e(+)e(-) events with L=5.0 fb(-1) at root s=1.96 TeV

Conselho Nacional de Desenvolvimento Científico e Tecnológico (CNPq)

Forward-backward asymmetry in top quark-antiquark production

Conselho Nacional de Desenvolvimento Científico e Tecnológico (CNPq)

Forward energy flow, central charged-particle multiplicities, and pseudorapidity gaps in W and Z boson events from pp collisions at root s=7 TeV

Conselho Nacional de Desenvolvimento Científico e Tecnológico (CNPq)