O mercado de opções de Petrobras é eficiente? Um estudo a partir da estratégia delta-gama-neutra

This study aims to verify if the Petrobras options market is efficient in the semi-strong form, that is, if all public information is reflected in these derivative prices. For this purpose, this work tries to achieve profit systematically through the Delta-GammaNeutral strategy using the company's stock and options. In order to simulate the strategy exactly as it would be used in the real world, we built the order books every five minutes considering all buying and selling orders sent to the underlying asset and to the options. We apply the strategy when distortions between implied volatilities extracted from the options are detected. The results show that the Petrobras options market is not efficient, since in 371 day trade strategies, which have an average investment of R$81,000 and average duration of one hour and thirteen minutes, the average return was 0.49% - which corresponds to more than 1,600% of the 1-day risk free interest rate - and 85% of strategies were profitable.

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.

Essays on the determinants of private investment: The effects of relative price uncertainty and political instability

The objective of this study was to provide empirical evidence on the effects of relative price uncertainty and political instability on private investment. My effort is expressed in a single-equation model using macroeconomic and socio-political data from eight Latin American countries for the period 1970–1996. Relative price uncertainty is measured by the implied volatility of the exchange rate and political instability is measured by using indicators of social unrest and political violence. ^ I found that, after controlling for other variables, relative price uncertainty and political instability are negatively associated with private investment. Macroeconomic and political stability are key ingredients for the achievement of a strong investment response. This highlights the need to develop the state and build a civil society in which citizens can participate in decision-making and express consent without generating social turmoil. At the same time the government needs to implement structural policies along with relative price adjustments to eliminate excess volatility in price movements in order to provide a stable environment for investment. ^

Crashes, volatility, and the equity premium: Lessons from S&P 500 options

We use a novel pricing model to imply time series of diffusive volatility and jump intensity from S&P 500 index options. These two measures capture the ex ante risk assessed by investors. Using a simple general equilibrium model, we translate the implied measures of ex ante risk into an ex ante risk premium. The average premium that compensates the investor for the ex ante risks is 70% higher than the premium for realized volatility. The equity premium implied from option prices is shown to significantly predict subsequent stock market returns.

Regime-Switching in the Impact of Oil Price Shocks on Stock Market Volatility: Evidence from Oil-Importing and Oil-Exporting Countries

Research has highlighted the adequacy of Markov regime-switching model to address dynamic behavior in long term stock market movements. Employing a purposed Extended regime-switching GARCH(1,1) model, this thesis further investigates the regime dependent nonlinear relationship between changes in oil price and stock market volatility in Saudi Arabia, Norway and Singapore for the period of 2001-2014. Market selection is prioritized to national dependency on oil export or import, which also rationalizes the fitness of implied bivariate volatility model. Among two regimes identified by the mean model, high stock market return-low volatility regime reflects the stable economic growth periods. The other regime characterized by low stock market return-high volatility coincides with episodes of recession and downturn. Moreover, results of volatility model provide the evidence that shocks in stock markets are less persistent during the high volatility regime. While accelerated oil price rises the stock market volatility during recessions, it reduces the stock market risk during normal growth periods in Singapore. In contrast, oil price showed no significant notable impact on stock market volatility of target oil-exporting countries in either of the volatility regime. In light to these results, international investors and policy makers could benefit the risk management in relation to oil price fluctuation.

An Eigenfunction Approach for Volatility Modeling.

In this paper, we introduce a new approach for volatility modeling in discrete and continuous time. We follow the stochastic volatility literature by assuming that the variance is a function of a state variable. However, instead of assuming that the loading function is ad hoc (e.g., exponential or affine), we assume that it is a linear combination of the eigenfunctions of the conditional expectation (resp. infinitesimal generator) operator associated to the state variable in discrete (resp. continuous) time. Special examples are the popular log-normal and square-root models where the eigenfunctions are the Hermite and Laguerre polynomials respectively. The eigenfunction approach has at least six advantages: i) it is general since any square integrable function may be written as a linear combination of the eigenfunctions; ii) the orthogonality of the eigenfunctions leads to the traditional interpretations of the linear principal components analysis; iii) the implied dynamics of the variance and squared return processes are ARMA and, hence, simple for forecasting and inference purposes; (iv) more importantly, this generates fat tails for the variance and returns processes; v) in contrast to popular models, the variance of the variance is a flexible function of the variance; vi) these models are closed under temporal aggregation.

Stochastic Volatility.

This paper prepared for the Handbook of Statistics (Vol.14: Statistical Methods in Finance), surveys the subject of stochastic volatility. the following subjects are covered: volatility in financial markets (instantaneous volatility of asset returns, implied volatilities in option prices and related stylized facts), statistical modelling in discrete and continuous time and, finally, statistical inference (methods of moments, quasi-maximum likelihood, likelihood-based and bayesian methods and indirect inference).

American option valuation: implied calibration of GARCH pricing models

This study analyzes the issue of American option valuation when the underlying exhibits a GARCH-type volatility process. We propose the usage of Rubinstein's Edgeworth binomial tree (EBT) in contrast to simulation-based methods being considered in previous studies. The EBT-based valuation approach makes an implied calibration of the pricing model feasible. By empirically analyzing the pricing performance of American index and equity options, we illustrate the superiority of the proposed approach.

Estimating the term structure of volatility and fixed income derivative pricing

Estimating the parameters of the instantaneous spot interest rate process is of crucial importance for pricing fixed income derivative securities. This paper presents an estimation for the parameters of the Gaussian interest rate model for pricing fixed income derivatives based on the term structure of volatility. We estimate the term structure of volatility for US treasury rates for the period 1983 - 1995, based on a history of yield curves. We estimate both conditional and first differences term structures of volatility and subsequently estimate the implied parameters of the Gaussian model with non-linear least squares estimation. Results for bond options illustrate the effects of differing parameters in pricing.

Perception Of Oral And Maxillofacial Surgeons, Orthodontists And Laypersons In Relation To The Harmony Of The Smile.

Harmony is one of the main objectives in surgical and orthodontic treatment and this harmony must be present in the smile, as well as in the face. The aim of the present study was to assess the perceptions of professionals and laypersons in relation to the harmony of the smile of patients with or without vertical maxillary alterations. Sixty observers (oral and maxillofacial surgeons, orthodontists and laypersons) reported the degree of harmony of six smiles using an objective questionnaire and the participants indicated if there was a need for corrective surgery or not. The classification of observers was recorded on a Likert scale from 1 to 5. Mixed regression was used to determine differences between the three groups. Statistically significant differences were found only for the harmony of the smile between the oral and maxillofacial surgeons and laypersons, with laypersons being more critical when assessing the smile. There was no statistical difference between the other groups for the harmony of the smile or the indication of corrective surgery. The patterns of greater or lesser harmony determined by observers during the smile were similar to those found in the literature as the ideal standard in relation to vertical maxillary positioning. Laypersons had a tendency to be more critical in relation to facial harmony than surgeons, although no statistical differences were found in the other groups in relation to the harmony of the smile or indication for the corrective surgery. In addition, the patterns of greater or lesser harmony of the smile determined by the participants were similar to those found in the literature as the ideal standard in relation to vertical maxillary positioning. Overall, the present study demonstrates that adequate interaction between surgeons, orthodontists and laypersons is essential in order to achieve facial harmony with orthodontic and/or surgical treatment. Opinion of specialists and laypersons about the smile in relation to the vertical positioning of the maxilla.

Características clínico-epidemiológicas da doença Lyme-símile em crianças

OBJETIVO: Determinar a prevalência, distribuição etária, sazonalidade, características clínicas da doença Lyme-símile em menores de 15 anos. MÉTODOS: De julho/1998 a dezembro/2000 foi conduzido um estudo transversal em 333 pacientes, com exantema e febre. Foram coletadas amostras pareadas de sangue para a identificação de patógenos. Somente em 193 amostras, negativas aos outros patógenos (Parvovirus B19, Herpesvírus 6 humano, Sarampo, Rubéola, Dengue, Escarlatina e Enterovírus), foram realizadas a pesquisa da borreliose pelos métodos de Enzyme-Linked Immunosorbent Assay e Western-blotting. Outras variáveis clínicas, socioeconômicas, demográficas e climáticas foram estudadas. RESULTADOS: A prevalência da doença foi de 6,2%(12/193). Das variáveis estudadas, houve predomínio em <6anos(83,2%); sexo feminino (66,7%); procedência da cidade de Franco da Rocha (58,3%); com sazonalidade no outono-verão. O intervalo de atendimento foi de quatro dias. Sinais e sintomas com significância estatística: prurido, ausência da fissura labial e bom estado clínico. Outros dados presentes foram: irritabilidade (80%); febre (?38ºC) (58,3%) com duração de um a três dias. O exantema foi do tipo máculo-papular (33,3%), urticariforme (25%) e escarlatiniforme (16,7%); predominando em tronco (60%). Não houve apresentação clínica característica para diagnóstico da doença de Lyme-símile nestes pacientes. A sensibilidade e especificidade para o diagnóstico clínico contraposta com o diagnóstico laboratorial foi zero. O acompanhamento de 10 casos durante dois anos não evidenciou complicações cardiológicas ou neurológicas. Este é o primeiro estudo desta doença em crianças brasileiras. CONCLUSÃO: A prevalência da doença Lyme-símile foi baixa, não tendo sido lembrada no diagnóstico inicial dos exantemas, mas seu conhecimento é necessário, necessitando maior atenção médica.

Myotomy of the Levator Labii Superioris Muscle and Lip Repositioning: A Combined Approach for the Correction of Gummy Smile

Background: Treatment of excessive gingival display usually involves procedures such as Le Fort impaction or maxillary gingivectomies. The authors propose an alternative technique that reduces the muscular function of the elevator of the upper lip muscle and repositioning of the upper lip. Methods: Fourteen female patients with excessive gingival exposure were operated on between February of 2008 and March of 2009. They were filmed before and at least 6 months after the procedure. They were asked to perform their fullest smile, and the maximum gingival exposures were measured and analyzed using ImageJ software. Patients were operated on under local anesthesia. Their gingival mucosa was freed from the maxilla using a periosteum elevator. Skin and subcutaneous tissue were dissected bluntly from the underlying musculature of the upper lip. A frenuloplasty was performed to lengthen the upper lip. Both levator labii superioris muscles were dissected and divided. Results: The postoperative course was uneventful in all of the patients. The mean gingival exposure before surgery was 5.22 +/- 1.48 mm; 6 months after surgery, it was 1.91 +/- 1.50 mm. The mean gingival exposure reduction was 3.31 +/- 1.05 mm (p < 0.001), ranging from 1.59 to 4.83 mm. Conclusion: This study shows that the proposed technique was efficient in reducing the amount of exposed gum during smile in all patients in this series. (Plast. Reconstr. Surg. 126: 1014, 2010.)