The Risk Management of Minimum Return Guarantees

Contracts paying a guaranteed minimum rate of return and a fraction of a positive excess rate, which is specified relative to a benchmark portfolio, are closely related to unit-linked life-insurance products and can be considered as alternatives to direct investment in the underlying benchmark. They contain an embedded power option, and the key issue is the tractable and realistic hedging of this option, in order to rigorously justify valuation by arbitrage arguments and prevent the guarantees from becoming uncontrollable liabilities to the issuer. We show how to determine the contract parameters conservatively and implement robust risk-management strategies.

Determination of the minimum alveolar concentration of isoflurane in Shetland ponies using constant current or constant voltage electrical stimulation

OBJECTIVE: To determine the minimum alveolar concentration (MAC) of isoflurane in Shetland ponies using a sequence of three different supramaximal noxious stimulations at each tested concentration of isoflurane rather than a single stimulation. STUDY DESIGN: Prospective, experimental trial. ANIMALS: Seven 4-year-old, gelding Shetland ponies. METHODS: The MAC of isoflurane was determined for each pony. Three different modes of electrical stimulation were applied consecutively (2 minute intervals): two using constant voltage (90 V) on the gingiva via needle- (CVneedle) or surface-electrodes (CVsurface) and one using constant current (CC; 40 mA) via surface electrodes applied to the skin over the digital nerve. The ability to clearly interpret the responses as positive, the latency of the evoked responses and the inter-electrode resistance were recorded for each stimulus. RESULTS: Individual isoflurane MAC (%) values ranged from 0.60 to 1.17 with a mean (+/-SD) of 0.97 (+/-0.17). The responses were more clearly interpreted with CC, but did not reach statistical significance. The CVsurface mode produced responses with a longer delay. The CVneedle mode was accompanied by variable inter-electrode resistances resulting in uncontrolled stimulus intensity. At 0.9 MAC, the third stimulation induced more positive responses than the first stimulation, independent of the mode of stimulation used. CONCLUSIONS: The MAC of isoflurane in the Shetland ponies was lower than expected with considerable variability among individuals. Constant current surface electrode stimulations were the most repeatable. A summation over the sequence of three supramaximal stimulations was observed around 0.9 MAC. CLINICAL RELEVANCE: The possibility that Shetland ponies require less isoflurane than horses needs further investigation. Constant current surface-electrode stimulations were the most repeatable. Repetitive supramaximal stimuli may have evoked movements at isoflurane concentrations that provide immobility when single supramaximal stimulation was applied.

Forcing of stratospheric chemistry and dynamics during the Dalton Minimum

The response of atmospheric chemistry and dynamics to volcanic eruptions and to a decrease in solar activity during the Dalton Minimum is investigated with the fully coupled atmosphere–ocean chemistry general circulation model SOCOL-MPIOM (modeling tools for studies of SOlar Climate Ozone Links-Max Planck Institute Ocean Model) covering the time period 1780 to 1840 AD. We carried out several sensitivity ensemble experiments to separate the effects of (i) reduced solar ultra-violet (UV) irradiance, (ii) reduced solar visible and near infrared irradiance, (iii) enhanced galactic cosmic ray intensity as well as less intensive solar energetic proton events and auroral electron precipitation, and (iv) volcanic aerosols. The introduced changes of UV irradiance and volcanic aerosols significantly influence stratospheric dynamics in the early 19th century, whereas changes in the visible part of the spectrum and energetic particles have smaller effects. A reduction of UV irradiance by 15%, which represents the presently discussed highest estimate of UV irradiance change caused by solar activity changes, causes global ozone decrease below the stratopause reaching as much as 8% in the midlatitudes at 5 hPa and a significant stratospheric cooling of up to 2 °C in the mid-stratosphere and to 6 °C in the lower mesosphere. Changes in energetic particle precipitation lead only to minor changes in the yearly averaged temperature fields in the stratosphere. Volcanic aerosols heat the tropical lower stratosphere, allowing more water vapour to enter the tropical stratosphere, which, via HOx reactions, decreases upper stratospheric and mesospheric ozone by roughly 4%. Conversely, heterogeneous chemistry on aerosols reduces stratospheric NOx, leading to a 12% ozone increase in the tropics, whereas a decrease in ozone of up to 5% is found over Antarctica in boreal winter. The linear superposition of the different contributions is not equivalent to the response obtained in a simulation when all forcing factors are applied during the Dalton Minimum (DM) – this effect is especially well visible for NOx/NOy. Thus, this study also shows the non-linear behaviour of the coupled chemistry-climate system. Finally, we conclude that especially UV and volcanic eruptions dominate the changes in the ozone, temperature and dynamics while the NOx field is dominated by the energetic particle precipitation. Visible radiation changes have only very minor effects on both stratospheric dynamics and chemistry.

Impact of a potential 21st century “grand solar minimum” on surface temperatures and stratospheric ozone

We investigate the effects of a recently proposed 21st century Dalton minimum like decline of solar activity on the evolution of Earth's climate and ozone layer. Three sets of two member ensemble simulations, radiatively forced by a midlevel emission scenario (Intergovernmental Panel on Climate Change RCP4.5), are performed with the atmosphere-ocean chemistry-climate model AOCCM SOCOL3-MPIOM, one with constant solar activity, the other two with reduced solar activity and different strength of the solar irradiance forcing. A future grand solar minimum will reduce the global mean surface warming of 2 K between 1986–2005 and 2081–2100 by 0.2 to 0.3 K. Furthermore, the decrease in solar UV radiation leads to a significant delay of stratospheric ozone recovery by 10 years and longer. Therefore, the effects of a solar activity minimum, should it occur, may interfere with international efforts for the protection of global climate and the ozone layer.