Volatility Smile Dynamics in Scenario Analysis

The objective of this paper is to suggest a method that accounts for the impact of the volatility smile dynamics when performing scenario analysis for a portfolio consisting of vanilla options. As the volatility smile is documented to change at least with the level of implied at-the-money volatility, a suitable model is here included in the calculation process of the simulated market scenarios. By constructing simple portfolios of index options and comparing the ex ante risk exposure measured using different pricing methods to realized market values, ex post, the improvements of the incorporation of the model are monitored. The analyzed examples in the study generate results that statistically support that the most accurate scenarios are those calculated using the model accounting for the dynamics of the smile. Thus, we show that the differences emanating from the volatility smile are apparent and should be accounted for and that the methodology presented herein is one suitable alternative for doing so.

Swedish Premium Pension Funds: Attributes and Performance

This study investigates the relationship between fund attributes and performance. The focus is on funds available in the Swedish Premium Pension system (PPM-funds). The aim has been to investigate whether administration fees, manager tenure or past performance are of importance for pension savers when they pick their PPM-funds. The results indicate that high fees are a disadvantage to pension savers investing in bond funds but not to those investing in stock funds. Manager tenure has no relationship with performance. There is evidence of performance persistency in most of the investigated fund categories.

Pricing Index Options with Stochastic Volatility

The objective of this paper is to investigate the pricing accuracy under stochastic volatility where the volatility follows a square root process. The theoretical prices are compared with market price data (the German DAX index options market) by using two different techniques of parameter estimation, the method of moments and implicit estimation by inversion. Standard Black & Scholes pricing is used as a benchmark. The results indicate that the stochastic volatility model with parameters estimated by inversion using the available prices on the preceding day, is the most accurate pricing method of the three in this study and can be considered satisfactory. However, as the same model with parameters estimated using a rolling window (the method of moments) proved to be inferior to the benchmark, the importance of stable and correct estimation of the parameters is evident.

Evaluacion del efecto de anabolicos de crecimiento (Zeranol over, Overmax L.A. Premium y Zeranol implante) en novillos de engorde en un periodo de cien dias en la finca El Rastro, El Coral, Chontales

Para el estudio se utilizaron 68 novillos producto del cruce de la raza Pardo Suizo x Brahman con un peso inicial de 230 ± 33 kg, con el objetivo de evaluar el efecto de tres tratamientos anabólicos sobre la ganancia de peso total en pastoreo libre durante un periodo de 100 días, siendo los tratamientos los siguientes: T 1 (Zeranol implante: Zeranol Over®), T2 (Zeranol Over® formulación tixotrópico), T3. (Overmax® LA Premium: Zeranol + ivermectina 3.15%), comparado con el T4 Testigo o Control (Sin implante). A los animales pesados y organizados en tres grupos con características semejantes, se les aplicó los tratamientos y cada grupo estuvo conformado por 17 novillos; de igual manera, fueron desparasitados con Vermectina La Premium 3. 15 %, a razón de 1ml por cada 50 kg de peso vivo (kg p.v), antes de aplicar los agentes anabólicos. Se determinó el incremento en peso a partir del peso final e inicial, y se calculó la Ganancia Media Diaria (GMD) en cada uno de los tratamientos. Para el diseño de dos vías se utilizó el test de Fisher (Análisis de Varianza) y el Test de Friedman, y categorización estadística mediante la Mínima Diferencia Significativa (DMS, P=O.OS). El análisis estadístico determinó efecto altamente significativo (P=O.OOl) en la GMD, en donde la GMD fue de 739, 624, 590 y de 536 gramos para los tratamientos T3 (Overeas® LA Premium: Zeranol + ívermectina), TI (Zeranol implante: Zeranol Over®), T2 (Zeranol Over'l formulación tixotrópica) y el Control, respectivamente. El implante Overmax® LA Premium (Zeranol+ivermectina3.15%) superó en más de 27 % al tratamiento sin implante, siendo este el tratamiento de mayor rentabilidad, con 83.43 dólares en ganancia de peso por animal, y una relación Beneficio/Costo de 1.27 por cada unidad monetaria invertida.

Smiling under stochastic volatility

This paper studies the behavior of the implied volatility function (smile) when the true distribution of the underlying asset is consistent with the stochastic volatility model proposed by Heston (1993). The main result of the paper is to extend previous results applicable to the smile as a whole to alternative degrees of moneyness. The conditions under which the implied volatility function changes whenever there is a change in the parameters associated with Hestons stochastic volatility model for a given degree of moneyness are given.