A Hull and White formula for a general stochastic volatility jump-diffusion model with applications to the study of the short-time behavior of the implied volatility

In this paper, generalizing results in Alòs, León and Vives (2007b), we see that the dependence of jumps in the volatility under a jump-diffusion stochastic volatility model, has no effect on the short-time behaviour of the at-the-money implied volatility skew, although the corresponding Hull and White formula depends on the jumps. Towards this end, we use Malliavin calculus techniques for Lévy processes based on Løkka (2004), Petrou (2006), and Solé, Utzet and Vives (2007).

On the short-time behavior of the implied volatility for jump-diffusion models with stochastic volatility

In this paper we use Malliavin calculus techniques to obtain an expression for the short-time behavior of the at-the-money implied volatility skew for a generalization of the Bates model, where the volatility does not need to be neither a difussion, nor a Markov process as the examples in section 7 show. This expression depends on the derivative of the volatility in the sense of Malliavin calculus.

Nurture versus nature: long-term impact of forced right-handedness on structure of pericentral cortex and basal ganglia.

Does a conflict between inborn motor preferences and educational standards during childhood impact the structure of the adult human brain? To examine this issue, we acquired high-resolution T1-weighted magnetic resonance scans of the whole brain in adult "converted" left-handers who had been forced as children to become dextral writers. Analysis of sulcal surfaces revealed that consistent right- and left-handers showed an interhemispheric asymmetry in the surface area of the central sulcus with a greater surface contralateral to the dominant hand. This pattern was reversed in the converted group who showed a larger surface of the central sulcus in their left, nondominant hemisphere, indicating plasticity of the primary sensorimotor cortex caused by forced use of the nondominant hand. Voxel-based morphometry showed a reduction of gray matter volume in the middle part of the left putamen in converted left-handers relative to both consistently handed groups. A similar trend was found in the right putamen. Converted subjects with at least one left-handed first-degree relative showed a correlation between the acquired right-hand advantage for writing and the structural changes in putamen and pericentral cortex. Our results show that a specific environmental challenge during childhood can shape the macroscopic structure of the human basal ganglia. The smaller than normal putaminal volume differs markedly from previously reported enlargement of cortical gray matter associated with skill acquisition. This indicates a differential response of the basal ganglia to early environmental challenges, possibly related to processes of pruning during motor development.

Natural development of stand structure in peatland Scots pine following drainage : results based on long-term monitoring of permanent sample plots

Abstract

The Forecast Performance of Model-Free Implied Volatility: Evidence from DAX Index Options

Volatility has a central role in various theoretical and practical applications in financial markets. These include the applications related to portfolio theory, derivatives pricing and financial risk management. Both theoretical and practical applications require good estimates and forecasts for the asset return volatility. The goal of this study is to examine the forecast performance of one of the more recent volatility measures, model-free implied volatility. Model-free implied volatility is extracted from the prices in the option markets, and it aims to provide an unbiased estimate for the market’s expectation on the future level of volatility. Since it is extracted from the option prices, model-free implied volatility should contain all the relevant information that the market participants have. Moreover, model-free implied volatility requires less restrictive assumptions than the commonly used Black-Scholes implied volatility, which means that it should be less biased estimate for the market’s expectations. Therefore, it should also be a better forecast for the future volatility. The forecast performance of model-free implied volatility is evaluated by comparing it to the forecast performance of Black-Scholes implied volatility and GARCH(1,1) forecast. Weekly forecasts for six years period were calculated for the forecasted variable, German stock market index DAX. The data consisted of price observations for DAX index options. The forecast performance was measured using econometric methods, which aimed to capture the biasedness, accuracy and the information content of the forecasts. The results of the study suggest that the forecast performance of model-free implied volatility is superior to forecast performance of GARCH(1,1) forecast. However, the results also suggest that the forecast performance of model-free implied volatility is not as good as the forecast performance of Black-Scholes implied volatility, which is against the hypotheses based on theory. The results of this study are consistent with the majority of prior research on the subject.

The information content of Canadian implied volatility indexes

For predicting future volatility, empirical studies find mixed results regarding two issues: (1) whether model free implied volatility has more information content than Black-Scholes model-based implied volatility; (2) whether implied volatility outperforms historical volatilities. In this thesis, we address these two issues using the Canadian financial data. First, we examine the information content and forecasting power between VIXC - a model free implied volatility, and MVX - a model-based implied volatility. The GARCH in-sample test indicates that VIXC subsumes all information that is reflected in MVX. The out-of-sample examination indicates that VIXC is superior to MVX for predicting the next 1-, 5-, 10-, and 22-trading days' realized volatility. Second, we investigate the predictive power between VIXC and alternative volatility forecasts derived from historical index prices. We find that for time horizons lesser than 10-trading days, VIXC provides more accurate forecasts. However, for longer time horizons, the historical volatilities, particularly the random walk, provide better forecasts. We conclude that VIXC cannot incorporate all information contained in historical index prices for predicting future volatility.

Some Implications of the Zero Lower Bound on Interest Rates for the Term Structure and Monetary Policy

In an economy where cash can be stored costlessly (in nominal terms), the nominal interest rate is bounded below by zero. This paper derives the implications of this nonnegativity constraint for the term structure and shows that it induces a nonlinear and convex relation between short- and long-term interest rates. As a result, the long-term rate responds asymmetrically to changes in the short-term rate, and by less than predicted by a benchmark linear model. In particular, a decrease in the short-term rate leads to a decrease in the long-term rate that is smaller in magnitude than the increase in the long-term rate associated with an increase in the short-term rate of the same size. Up to the extent that monetary policy acts by affecting long-term rates through the term structure, its power is considerably reduced at low interest rates. The empirical predictions of the model are examined using data from Japan.

A comparison of tests of non-linear cointegration with an application to the predictability of US interest rates using the term structure

We test whether there are nonlinearities in the response of short- and long-term interest rates to the spread in interest rates, and assess the out-of-sample predictability of interest rates using linear and nonlinear models. We find strong evidence of nonlinearities in the response of interest rates to the spread. Nonlinearities are shown to result in more accurate short-horizon forecasts, especially of the spread.

The role of no-arbitrage on forecasting: lessons from a parametric term structure model

Parametric term structure models have been successfully applied to innumerous problems in fixed income markets, including pricing, hedging, managing risk, as well as studying monetary policy implications. On their turn, dynamic term structure models, equipped with stronger economic structure, have been mainly adopted to price derivatives and explain empirical stylized facts. In this paper, we combine flavors of those two classes of models to test if no-arbitrage affects forecasting. We construct cross section (allowing arbitrages) and arbitrage-free versions of a parametric polynomial model to analyze how well they predict out-of-sample interest rates. Based on U.S. Treasury yield data, we find that no-arbitrage restrictions significantly improve forecasts. Arbitrage-free versions achieve overall smaller biases and Root Mean Square Errors for most maturities and forecasting horizons. Furthermore, a decomposition of forecasts into forward-rates and holding return premia indicates that the superior performance of no-arbitrage versions is due to a better identification of bond risk premium.

A comparison of test of non-linear cointegration with an application to the predictability of US interest rates using the term structure

We evaluate the forecasting performance of a number of systems models of US shortand long-term interest rates. Non-linearities, induding asymmetries in the adjustment to equilibrium, are shown to result in more accurate short horizon forecasts. We find that both long and short rates respond to disequilibria in the spread in certain circumstances, which would not be evident from linear representations or from single-equation analyses of the short-term interest rate.

Impact of family structure on long-term survivors of osteosarcoma

Long-term outcomes of osteosarcoma have dramatically improved with the use of modern combination therapies. Such aggressive treatments, however, entail chronic complications. In the present study, we assessed the functional, psychological, and familial status of long-term survivors of osteosarcoma treated at our institution.

The forecast performance of competing implied volatility measures:the case of individual stocks

This study examines the information content of alternative implied volatility measures for the 30 components of the Dow Jones Industrial Average Index from 1996 until 2007. Along with the popular Black-Scholes and \model-free" implied volatility expectations, the recently proposed corridor implied volatil- ity (CIV) measures are explored. For all pair-wise comparisons, it is found that a CIV measure that is closely related to the model-free implied volatility, nearly always delivers the most accurate forecasts for the majority of the firms. This finding remains consistent for different forecast horizons, volatility definitions, loss functions and forecast evaluation settings.

Ecosystem Structure and Function Still Altered Two Decades After Short-Term Fertilization of a Seagrass Meadow

An oligotrophic phosphorus (P) limited seagrass ecosystem in Florida Bay was experimentally fertilized in a unique way. Perches were installed to encourage seabirds to roost and deliver an external source of nutrients via defecation. Two treatments were examined: (1) a chronic 23-year fertilization and (2) an earlier 28-month fertilization that was discontinued when the chronic treatment was initiated. Because of the low mobility of P in carbonate sediments, we hypothesized long-term changes to ecosystem structure and function in both treatments. Structural changes in the chronic treatment included a shift in the dominant seagrass species from Thalassia testudinum to Halodule wrightii, large increases in epiphytic biomass and sediment chlorophyll-a, and a decline in species richness. Functional changes included increased benthic metabolism and quantum efficiency. Initial changes in the 28-month fertilization were similar, but after 23 years of nutrient depuration T. testudinum has reestablished itself as the dominant species. However, P remains elevated in the sediment and H. wrightii has maintained a presence. Functionally the discontinued treatment remains altered. Biomass exceeds that in the chronic treatment and indices of productivity, elevated relative to control, are not different from the chronic fertilization. Cessation of nutrient loading has resulted in a superficial return to the pre-disturbance character of the community, but due to the nature of P cycles functional changes persist.

Evidence of Term-Structure Differences among Folksonomies and Controlled Indexing Languages

With the advent of Internet-based technologies for information organization, many groups have constructed their own indexing languages. Biologists, Library and Information Science practitioners, and now social taggers have worked together to create large and many times complex indexing languages. In this environment of diversity, two questions surface: (1) what are the measurable characteristics of these indexing languages, and (2) do measurements of these indexing languages speciate along these characteristics? This poster presents data from this exploratory work.

Long-term potentiation of synaptic transmission in the avian hippocampus

The avian hippocampus plays a pivotal role in memory required for spatial navigation and food storing. Here we have examined synaptic transmission and plasticity within the hippocampal formation of the domestic chicken using an in vitro slice preparation. With the use of sharp microelectrodes we have shown that excitatory synaptic inputs in this structure are glutamatergic and activate both NMDA-and AMPA-type receptors on the postsynaptic membrane. In response to tetanic stimulation, the EPSP displayed a robust long-term potentiation (LTP) lasting >1 hr. This LTP was unaffected by blockade of NMDA receptors or chelation of postsynaptic calcium. Application of forskolin increased the EPSP and reduced paired-pulse facilitation: (PPF), indicating an increase in release probability. In contrast, LTP was not associated with a change in the PPF ratio. Induction of LTP did not occlude the effects of forskolin. Thus, in contrast to NMDA receptor-independent LTP in the mammalian brain, LTP in the chicken hippocampus is not attributable to a change in the probability of transmitter release and does not require activation of adenylyl cyclase, These findings indicate that a novel form of synaptic plasticity might underlie learning in the avian hippocampus.