On the goodness of fit of Kirk's formula for spread option prices

In this paper we investigate the goodness of fit of the Kirk's approximation formula for spread option prices in the correlated lognormal framework. Towards this end, we use the Malliavin calculus techniques to find an expression for the short-time implied volatility skew of options with random strikes. In particular, we obtain that this skew is very pronounced in the case of spread options with extremely high correlations, which cannot be reproduced by a constant volatility approximation as in the Kirk's formula. This fact agrees with the empirical evidence. Numerical examples are given.

Appropriate management of special situations in Crohn's disease (upper gastro-intestinal; extra-intestinal manifestations; drug safety during pregnancy and breastfeeding): results of a multidisciplinary international expert panel-EPACT II

Introduction: High-grade evidence is lacking for most therapeutic decisions in Crohn's disease. Appropriateness criteria were developed for upper gastro-intestinal, extra-intestinal manifestations and drug safety during conception, pregnancy and breastfeeding in patients with Crohn's disease, to assist the physician in clinical decision making. Methods: The European Panel on the Appropriateness of Crohn's Disease Therapy (EPACT II), a multidisciplinary international European expert panel, rated clinical scenarios based on evidence from the published literature and panelists' own clinical expertise. Median ratings (on a 9-point scale) were stratified into three categories: appropriate (7-9), uncertain (4-6 with or without disagreement) and inappropriate (1-3). Experts were also asked to rank appropriate medications by priority. Results: Proton pump inhibitors, steroids, azathioprine/6-mercaptopurine and infliximab are appropriate for upper gastro-duodenal Crohn's disease; for stenosis, endoscopic balloon dilation is the first-tine therapy, although surgery is also appropriate. Ursodeoxycholic acid is the only appropriate treatment for primary sclerosing cholangitis. Infliximab is appropriate for Pyoderma gangrenosum, ankylosing spondylitis and uveitis, steroids for Pyoderma gangrenosum and ankylosing spondylitis, adalimumab for Pyoderma gangrenosum and ankylosing spondylitis, cyclosporine-A/tacrolimus for Pyoderma gangrenosum. Mesalamine, sulfasalazine, prednisone, azathioprine/6-mercaptopurine, ciprofloxacin, and probiotics, may be administered safety during pregnancy or for patients wishing to conceive, with the exception that mate patients considering conception should avoid sulfasalazine. Metronidazol is considered safe in the 2nd and 3rd trimesters whereas infliximab is rated safe in the 1st trimester but uncertain in the 2nd and 3rd trimesters. Methotrexate is always contraindicated at conception, during pregnancy or during breastfeeding, due to its known teratogenicity. Mesalamine, prednisone, probiotics and infliximab are considered safe during breastfeeding. Conclusion: EPACT II recommendations are freely available online (www.epact.ch). The validity of these criteria should now be tested by prospective evaluation. (C) 2009 European Crohn's and Colitis Organisation. Published by Elsevier B.V. All rights reserved.

The Ins and Outs of Unemployment: A Conditional Analysis

We analyze how unemployment, job finding and job separation rates react to neutral and investment-specific technology shocks. Neutral shocks increase unemployment and explain a substantial portion of unemployment volatility; investment-specific shocks expand employment and hours worked and mostly contribute to hours worked volatility. Movements in the job separation rates are responsible for the impact response of unemployment while job finding rates for movements along its adjustment path. Our evidence qualifies the conclusions by Hall (2005) and Shimer (2007) and warns against using search models with exogenous separation rates to analyze the effects of technology shocks.

Financial Development, Financial Fragility, and Growth

This paper studies the apparent contradiction between two strands of the literature on the effects of financial intermediation on economic activity. On the one hand, the empirical growth literature finds a positive effect of financial depth as measured by, for instance, private domestic credit and liquid liabilities (e.g., Levine, Loayza, and Beck 2000). On the other hand, the banking and currency crisis literature finds that monetary aggregates, such as domestic credit, are among the best predictors of crises and their related economic downturns (e.g., Kaminski and Reinhart 1999). The paper accounts for these contrasting effects based on the distinction between the short- and long-run impacts of financial intermediation. Working with a panel of cross-country and time-series observations, the paper estimates an encompassing model of short- and long-run effects using the Pooled Mean Group estimator developed by Pesaran, Shin, and Smith (1999). The conclusion from this analysis is that a positive long-run relationship between financial intermediation and output growth co-exists with a, mostly, negative short-run relationship. The paper further develops an explanation for these contrasting effects by relating them to recent theoretical models, by linking the estimated short-run effects to measures of financial fragility (namely, banking crises and financial volatility), and by jointly analyzing the effects of financial depth and fragility in classic panel growth regressions.

The Sustainable Debts of Philip II: A Reconstruction of Spain's Fiscal Position, 1560-1598

The defaults of Philip II have attained mythical status as the origin of sovereign debt crises. Four times during his reign the king failed to honor his debts and had to renegotiate borrowing contracts. In this paper, we reassess the fiscal position of Habsburg Spain. New archival evidence allows us to derive comprehensive estimates of debt and revenue. These show that primary surpluses were sufficient to make the king's debt sustainable in most scenarios. Spain's debt burden was manageable up to the 1580s, and its fiscal position only deteriorated for good after the defeat of the "Invincible Armada." We also estimate fiscal policy reaction functions, and show that Spain under the Habsburgs was at least as "responsible" as the US in the 20th century or as Britain in the 18th century. Our results suggest that the outcome of uncertain events such as wars may influence on a history of default more than strict adherence to fiscal rules.

The Labor Market Effects of Technology Shocks

We analyze the labor market effects of neutral and investment-specific technology shocks along the intensive margin (hours worked) and the extensive margin (unemployment). We characterize the dynamic response of unemployment in terms of the job separation and the job finding rate. Labor market adjustments occur along the extensive margin in response to neutral shocks, along the intensive margin in response to investment specific shocks. The job separation rate accounts for a major portion of the impact response of unemployment. Neutral shocks prompt a contemporaneous increase in unemployment because of a sharp rise in the separation rate. This is prolonged by a persistent fall in the job finding rate. Investment specific shocks rise employment and hours worked. Neutral shocks explain a substantial portion of the volatility of unemployment and output; investment specific shocks mainly explain hours worked volatility. This suggests that neutral progress is consistent with Schumpeterian creative destruction, while investment-specific progress operates as in a neoclassical growth model.

Appropriateness of early management of newly diagnosed Crohn's disease in a European population-based cohort.

OBJECTIVE: The European Panel on the Appropriateness of Crohn's disease Therapy (EPACT) has developed appropriateness criteria. We have applied these criteria retrospectively to the population-based inception cohort of Crohn's disease (CD) patients of the European Collaborative Study Group on Inflammatory Bowel Disease (EC-IBD). MATERIAL AND METHODS: A total of 426 diagnosed CD patients from 13 European centers were enrolled at the time of diagnosis (first flare, naive patients). We used the EPACT definitions to identify 247 patients with active luminal CD. We then assessed the appropriateness of the initial drug prescription according to the EPACT criteria. RESULTS: Among the cohort patients 163 suffered from mild-to-moderate CD and 84 from severe CD. Among the mild-to-moderate disease group, 96 patients (59%) received an appropriate treatment, whereas for 66 patients (40%) the treatment was uncertain and in one case (1%) inappropriate. Among the severe disease group, 86% were treated medically and 14% required surgery. 59 (70%) were appropriately treated, whereas for one patient (1%) the procedure was considered uncertain and for 24 patients (29%) inappropriate. CONCLUSION: Initial treatment was appropriate in the majority of cases for non-complicated luminal CD. Inappropriate or uncertain treatment was given in a significant minority of patients, with an increased potential risk of adverse events.

Optimal Design of Permit Markets with an Ex Ante Pollution Target, August 2006

In this paper, we examine the design of permit trading programs when the objective is to minimize the cost of achieving an ex ante pollution target, that is, one that is defined in expectation rather than an ex post deterministic value. We consider two potential sources of uncertainty, the presence of either of which can make our model appropriate: incomplete information on abatement costs and uncertain delivery coefficients. In such a setting, we find three distinct features that depart from the well-established results on permit trading: (1) the regulator’s information on firms’ abatement costs can matter; (2) the optimal permit cap is not necessarily equal to the ex ante pollution target; and (3) the optimal trading ratio is not necessarily equal to the delivery coefficient even when it is known with certainty. Intuitively, since the regulator is only required to meet a pollution target on average, she can set the trading ratio and total permit cap such that there will be more pollution when abatement costs are high and less pollution when abatement costs are low. Information on firms’ abatement costs is important in order for the regulator to induce the optimal alignment between pollution level and abatement costs.

Downsizing, Job Insecurity, and Firm Reputation

This paper studies how firms make layoff decisions in the presence of adverse shocks. In this uncertain environment, workers' expectations about their job security affect their on-the-job performance. This productivity effect on job insecurity forces firms to strike a balance between laying off redundant workers and maintaining survivors' commitment when deciding on the amount and timing of downsizing. This framework offers an explanation of conservative employment practices (such as zero or reduced layoffs) based on firms having private information about their future profits. High retention rates and wages can signal that the firm has a bright future, boosting workers' confidence. Moreover, the model provides clear predictions about when waves of downsizing will occur as opposed to one-time massive cuts.

Blood pressure and low-density lipoprotein-cholesterol lowering for prevention of strokes and cognitive decline: a review of available trial evidence.

BACKGROUND AND OBJECTIVES: It is well established by a large number of randomized controlled trials that lowering blood pressure (BP) and low-density lipoprotein cholesterol (LDL-C) by drugs are powerful means to reduce stroke incidence, but the optimal BP and LDL-C levels to be achieved are largely uncertain. Concerning BP targets, two hypotheses are being confronted: first, the lower the BP, the better the treatment outcome, and second, the hypothesis that too low BP values are accompanied by a lower benefit and even higher risk. It is also unknown whether BP lowering and LDL-C lowering have additive beneficial effects for the primary and secondary prevention of stroke, and whether these treatments can prevent cognitive decline after stroke. RESULTS: A review of existing data from randomized controlled trials confirms that solid evidence on optimal BP and LDL-C targets is missing, possible interactions between BP and LDL-C lowering treatments have never been directly investigated, and evidence in favour of a beneficial effect of BP or LDL-C lowering on cognitive decline is, at best, very weak. CONCLUSION: A new, large randomized controlled trial is needed to determine the optimal level of BP and LDL-C for the prevention of recurrent stroke and cognitive decline.

Long-term follow-up of European APL 2000 trial, evaluating the role of cytarabine combined with ATRA and Daunorubicin in the treatment of nonelderly APL patients.

All-trans retinoic acid (ATRA) combined to anthracycline-based chemotherapy is the reference treatment of acute promyelocytic leukemia (APL). Whereas, in high-risk patients, cytarabine (AraC) is often considered useful in combination with anthracycline to prevent relapse, its usefulness in standard-risk APL is uncertain. In APL 2000 trial, patients with standard-risk APL [i.e., with baseline white blood cell (WBC) count <10,000/mm(3) ] were randomized between treatment with ATRA with Daunorubicin (DNR) and AraC (AraC group) and ATRA with DNR but without AraC (no AraC group). All patients subsequently received combined maintenance treatment. The trial had been prematurely terminated due to significantly more relapses in the no AraC group (J Clin Oncol, (24) 2006, 5703-10), but follow-up was still relatively short. With long-term follow-up (median 103 months), the 7-year cumulative incidence of relapses was 28.6% in the no AraC group, compared to 12.9% in the AraC group (P = 0.0065). In standard-risk APL, at least when the anthracycline used is DNR, avoiding AraC may lead to an increased risk of relapse suggesting that the need for AraC is regimen-dependent.

Hybridization and speciation.

Hybridization has many and varied impacts on the process of speciation. Hybridization may slow or reverse differentiation by allowing gene flow and recombination. It may accelerate speciation via adaptive introgression or cause near-instantaneous speciation by allopolyploidization. It may have multiple effects at different stages and in different spatial contexts within a single speciation event. We offer a perspective on the context and evolutionary significance of hybridization during speciation, highlighting issues of current interest and debate. In secondary contact zones, it is uncertain if barriers to gene flow will be strengthened or broken down due to recombination and gene flow. Theory and empirical evidence suggest the latter is more likely, except within and around strongly selected genomic regions. Hybridization may contribute to speciation through the formation of new hybrid taxa, whereas introgression of a few loci may promote adaptive divergence and so facilitate speciation. Gene regulatory networks, epigenetic effects and the evolution of selfish genetic material in the genome suggest that the Dobzhansky-Muller model of hybrid incompatibilities requires a broader interpretation. Finally, although the incidence of reinforcement remains uncertain, this and other interactions in areas of sympatry may have knock-on effects on speciation both within and outside regions of hybridization.

Delirium: guidelines for general hospitals.

OBJECTIVE: Delirium is highly prevalent in general hospitals but remains underrecognized and undertreated despite its association with increased morbidity, mortality, and health services utilization. To enhance its management, we developed guidelines covering all aspects, from risk factor identification to preventive, diagnostic, and therapeutic interventions in adult patients. METHODS: Guidelines, systematic reviews, randomized controlled trials (RCT), and cohort studies were systematically searched and evaluated. Based on a synthesis of retrieved high-quality documents, recommendation items were submitted to a multidisciplinary expert panel. Experts scored the appropriateness of recommendation items, using an evidence-based, explicit, multidisciplinary panel approach. Each recommendation was graded according to this process' results. RESULTS: Rated recommendations were mostly supported by a low level of evidence (1.3% RCT and systematic reviews, 14.3% nonrandomized trials vs. 84.4% observational studies or expert opinions). Nevertheless, 71.1% of recommendations were considered appropriate by the experts. Prevention of delirium and its nonpharmacological management should be fostered. Haloperidol remains the first-choice drug, whereas the role of atypical antipsychotics is still uncertain. CONCLUSIONS: While many topics addressed in these guidelines have not yet been adequately studied, an explicit panel and evidence-based approach allowed the proposal of comprehensive recommendations for the prevention and management of delirium in general hospitals.

Development of appropriateness criteria for the surgical treatment of symptomatic lumbar degenerative spondylolisthesis (LDS).

PURPOSE: Spine surgery rates are increasing worldwide. Treatment failures are often attributed to poor patient selection and inappropriate treatment, but for many spinal disorders there is little consensus on the precise indications for surgery. With an aging population, more patients with lumbar degenerative spondylolisthesis (LDS) will present for surgery. The aim of this study was to develop criteria for the appropriateness of surgery in symptomatic LDS. METHODS: A systematic review was carried out to summarize the current level of evidence for the treatment of LDS. Clinical scenarios were generated comprising combinations of signs and symptoms in LDS and other relevant variables. Based on the systematic review and their own clinical experience, twelve multidisciplinary international experts rated each scenario on a 9-point scale (1 highly inappropriate, 9 highly appropriate) with respect to performing decompression only, fusion, and instrumented fusion. Surgery for each theoretical scenario was classified as appropriate, inappropriate, or uncertain based on the median ratings and disagreement in the ratings. RESULTS: 744 hypothetical scenarios were generated; overall, surgery (of some type) was rated appropriate in 27 %, uncertain in 41 % and inappropriate in 31 %. Frank panel disagreement was low (7 % scenarios). Face validity was shown by the logical relationship between each variable's subcategories and the appropriateness ratings, e.g., no/mild disability had a mean appropriateness rating of 2.3 ± 1.5, whereas the rating for moderate disability was 5.0 ± 1.6 and for severe disability, 6.6 ± 1.6. Similarly, the average rating for no/minimal neurological abnormality was 2.3 ± 1.5, increasing to 4.3 ± 2.4 for moderate and 5.9 ± 1.7 for severe abnormality. The three variables most likely (p < 0.0001) to be components of scenarios rated "appropriate" were: severe disability, no yellow flags, and severe neurological deficit. CONCLUSION: This is the first study to report criteria for determining candidacy for surgery in LDS developed by a multidisciplinary international panel using a validated method (RAM). The panel ratings followed logical clinical rationale, indicating good face validity. The work refines clinical classification and the phenotype of degenerative spondylolisthesis. The predictive validity of the criteria should be evaluated prospectively to examine whether patients treated "appropriately" have better clinical outcomes.

Genetic Loci Associated with C-reactive Protein Levels and Risk of Coronary Heart Disease.

CONTEXT: Plasma levels of C-reactive protein (CRP) are independently associated with risk of coronary heart disease, but whether CRP is causally associated with coronary heart disease or merely a marker of underlying atherosclerosis is uncertain. OBJECTIVE: To investigate association of genetic loci with CRP levels and risk of coronary heart disease. DESIGN, SETTING, AND PARTICIPANTS: We first carried out a genome-wide association (n = 17,967) and replication study (n = 13,615) to identify genetic loci associated with plasma CRP concentrations. Data collection took place between 1989 and 2008 and genotyping between 2003 and 2008. We carried out a mendelian randomization study of the most closely associated single-nucleotide polymorphism (SNP) in the CRP locus and published data on other CRP variants involving a total of 28,112 cases and 100,823 controls, to investigate the association of CRP variants with coronary heart disease. We compared our finding with that predicted from meta-analysis of observational studies of CRP levels and risk of coronary heart disease. For the other loci associated with CRP levels, we selected the most closely associated SNP for testing against coronary heart disease among 14,365 cases and 32,069 controls. MAIN OUTCOME MEASURE: Risk of coronary heart disease. RESULTS: Polymorphisms in 5 genetic loci were strongly associated with CRP levels (% difference per minor allele): SNP rs6700896 in LEPR (-14.8%; 95% confidence interval [CI], -17.6% to -12.0%; P = 6.2 x 10(-22)), rs4537545 in IL6R (-11.5%; 95% CI, -14.4% to -8.5%; P = 1.3 x 10(-12)), rs7553007 in the CRP locus (-20.7%; 95% CI, -23.4% to -17.9%; P = 1.3 x 10(-38)), rs1183910 in HNF1A (-13.8%; 95% CI, -16.6% to -10.9%; P = 1.9 x 10(-18)), and rs4420638 in APOE-CI-CII (-21.8%; 95% CI, -25.3% to -18.1%; P = 8.1 x 10(-26)). Association of SNP rs7553007 in the CRP locus with coronary heart disease gave an odds ratio (OR) of 0.98 (95% CI, 0.94 to 1.01) per 20% lower CRP level. Our mendelian randomization study of variants in the CRP locus showed no association with coronary heart disease: OR, 1.00; 95% CI, 0.97 to 1.02; per 20% lower CRP level, compared with OR, 0.94; 95% CI, 0.94 to 0.95; predicted from meta-analysis of the observational studies of CRP levels and coronary heart disease (z score, -3.45; P < .001). SNPs rs6700896 in LEPR (OR, 1.06; 95% CI, 1.02 to 1.09; per minor allele), rs4537545 in IL6R (OR, 0.94; 95% CI, 0.91 to 0.97), and rs4420638 in the APOE-CI-CII cluster (OR, 1.16; 95% CI, 1.12 to 1.21) were all associated with risk of coronary heart disease. CONCLUSION: The lack of concordance between the effect on coronary heart disease risk of CRP genotypes and CRP levels argues against a causal association of CRP with coronary heart disease.