Hedging Options with Different Time Units in the Pricing Models

This study examined the effects of the Greeks of the options and the trading results of delta hedging strategies, with three different time units or option-pricing models. These time units were calendar time, trading time and continuous time using discrete approximation (CTDA) time. The CTDA time model is a pricing model, that among others accounts for intraday and weekend, patterns in volatility. For the CTDA time model some additional theta measures, which were believed to be usable in trading, were developed. The study appears to verify that there were differences in the Greeks with different time units. It also revealed that these differences influence the delta hedging of options or portfolios. Although it is difficult to say anything about which is the most usable of the different time models, as this much depends on the traders view of the passing of time, different market conditions and different portfolios, the CTDA time model can be viewed as an attractive alternative.

Bootstrap and Fast Double Bootstrap Tests of Cointegration Rank with Financial Time Series

The likelihood ratio test of cointegration rank is the most widely used test for cointegration. Many studies have shown that its finite sample distribution is not well approximated by the limiting distribution. The article introduces and evaluates by Monte Carlo simulation experiments bootstrap and fast double bootstrap (FDB) algorithms for the likelihood ratio test. It finds that the performance of the bootstrap test is very good. The more sophisticated FDB produces a further improvement in cases where the performance of the asymptotic test is very unsatisfactory and the ordinary bootstrap does not work as well as it might. Furthermore, the Monte Carlo simulations provide a number of guidelines on when the bootstrap and FDB tests can be expected to work well. Finally, the tests are applied to US interest rates and international stock prices series. It is found that the asymptotic test tends to overestimate the cointegration rank, while the bootstrap and FDB tests choose the correct cointegration rank.

Unrealized expectations of jumps in volatility: An explanation to the low and time-varying predictive power of implied volatility

The low predictive power of implied volatility in forecasting the subsequently realized volatility is a well-documented empirical puzzle. As suggested by e.g. Feinstein (1989), Jackwerth and Rubinstein (1996), and Bates (1997), we test whether unrealized expectations of jumps in volatility could explain this phenomenon. Our findings show that expectations of infrequently occurring jumps in volatility are indeed priced in implied volatility. This has two important consequences. First, implied volatility is actually expected to exceed realized volatility over long periods of time only to be greatly less than realized volatility during infrequently occurring periods of very high volatility. Second, the slope coefficient in the classic forecasting regression of realized volatility on implied volatility is very sensitive to the discrepancy between ex ante expected and ex post realized jump frequencies. If the in-sample frequency of positive volatility jumps is lower than ex ante assessed by the market, the classic regression test tends to reject the hypothesis of informational efficiency even if markets are informationally effective.

An Empirical Study of the Mixture of Time and Movements in Prices

This paper investigates the persistent pattern in the Helsinki Exchanges. The persistent pattern is analyzed using a time and a price approach. It is hypothesized that arrival times are related to movements in prices. Thus, the arrival times are defined as durations and formulated as an Autoregressive Conditional Duration (ACD) model as in Engle and Russell (1998). The prices are defined as price changes and formulated as a GARCH process including duration measures. The research question follows from market microstructure predictions about price intensities defined as time between price changes. The microstructure theory states that long transaction durations might be associated with both no news and bad news. Accordingly, short durations would be related to high volatility and long durations to low volatility. As a result, the spread will tend to be larger under intensive moments. The main findings of this study are 1) arrival times are positively autocorrelated and 2) long durations are associated with low volatility in the market.

A non-orthogonal distributed space-time coded protocol - Part 1:Signal model and design criteria

In this two-part series of papers, a generalized non-orthogonal amplify and forward (GNAF) protocol which generalizes several known cooperative diversity protocols is proposed. Transmission in the GNAF protocol comprises of two phases - the broadcast phase and the cooperation phase. In the broadcast phase, the source broadcasts its information to the relays as well as the destination. In the cooperation phase, the source and the relays together transmit a space-time code in a distributed fashion. The GNAF protocol relaxes the constraints imposed by the protocol of Jing and Hassibi on the code structure. In Part-I of this paper, a code design criteria is obtained and it is shown that the GNAF protocol is delay efficient and coding gain efficient as well. Moreover GNAF protocol enables the use of sphere decoders at the destination with a non-exponential Maximum likelihood (ML) decoding complexity. In Part-II, several low decoding complexity code constructions are studied and a lower bound on the Diversity-Multiplexing Gain tradeoff of the GNAF protocol is obtained.

Distributed space-time codes with reduced decoding complexity

We address the problem of distributed space-time coding with reduced decoding complexity for wireless relay network. The transmission protocol follows a two-hop model wherein the source transmits a vector in the first hop and in the second hop the relays transmit a vector, which is a transformation of the received vector by a relay-specific unitary transformation. Design criteria is derived for this system model and codes are proposed that achieve full diversity. For a fixed number of relay nodes, the general system model considered in this paper admits code constructions with lower decoding complexity compared to codes based on some earlier system models.

Minimum-Decoding-Complexity, maximum-rate Space-Time Block Codes from Clifford algebras

It is well known that Alamouti code and, in general, Space-Time Block Codes (STBCs) from complex orthogonal designs (CODs) are single-symbol decodable/symbolby-symbol decodable (SSD) and are obtainable from unitary matrix representations of Clifford algebras. However, SSD codes are obtainable from designs that are not CODs. Recently, two such classes of SSD codes have been studied: (i) Coordinate Interleaved Orthogonal Designs (CIODs) and (ii) Minimum-Decoding-Complexity (MDC) STBCs from Quasi-ODs (QODs). In this paper, we obtain SSD codes with unitary weight matrices (but not CON) from matrix representations of Clifford algebras. Moreover, we derive an upper bound on the rate of SSD codes with unitary weight matrices and show that our codes meet this bound. Also, we present conditions on the signal sets which ensure full-diversity and give expressions for the coding gain.

Non-unitary-weight Space-Time Block Codes with Minimum Decoding Complexity

Space-Time Block Codes (STBCs) from Complex Orthogonal Designs (CODs) are single-symbol decodable/symbol-by-symbol decodable (SSD); however, SSD codes are obtainable from designs that are not CODs. Recently, two such classes of SSD codes have been studied: (i) Coordinate Interleaved Orthogonal Designs (CIODs) and (ii) Minimum-Decoding-Complexity (MDC) STBCs from Quasi-ODs (QODs). The class of CIODs have non-unitary weight matrices when written as a Linear Dispersion Code (LDC) proposed by Hassibi and Hochwald, whereas the other class of SSD codes including CODs have unitary weight matrices. In this paper, we construct a large class of SSD codes with nonunitary weight matrices. Also, we show that the class of CIODs is a special class of our construction.

Approximate linear time ML decoding on tail-biting trellises in two rounds

A linear time approximate maximum likelihood decoding algorithm on tail-biting trellises is presented, that requires exactly two rounds on the trellis. This is an adaptation of an algorithm proposed earlier with the advantage that it reduces the time complexity from O(m log m) to O(m) where m is the number of nodes in the tail-biting trellis. A necessary condition for the output of the algorithm to differ from the output of the ideal ML decoder is deduced and simulation results on an AWGN channel using tail-biting trellises for two rate 1/2 convolutional codes with memory 4 and 6 respectively, are reported.

Wavelength/Time Multiple-Pulses-per-Row codes: Construction and verification

Two dimensional Optical Orthogonal Codes (OOCs) named Wavelength/Time Multiple-Pulses-per-Row (W/T MPR) codes suitable for use in incoherent fiber-optic code division multiple access (FO-CDMA) networks are reported in [6]. In this paper, we report the construction of W/T MPR codes, using Greedy Algorithm (GA), with distinct 1-D OOCs [1] as the row vectors. We present the W/T MPR codes obtained using the GA. Further, we verify the correlation properties of the generated W/T MPR codes using Matlab.

Real-time image denoising algorithm in teleradiology systems - art.no.606304

Denoising of medical images in wavelet domain has potential application in transmission technologies such as teleradiology. This technique becomes all the more attractive when we consider the progressive transmission in a teleradiology system. The transmitted images are corrupted mainly due to noisy channels. In this paper, we present a new real time image denoising scheme based on limited restoration of bit-planes of wavelet coefficients. The proposed scheme exploits the fundamental property of wavelet transform - its ability to analyze the image at different resolution levels and the edge information associated with each sub-band. The desired bit-rate control is achieved by applying the restoration on a limited number of bit-planes subject to the optimal smoothing. The proposed method adapts itself to the preference of the medical expert; a single parameter can be used to balance the preservation of (expert-dependent) relevant details against the degree of noise reduction. The proposed scheme relies on the fact that noise commonly manifests itself as a fine-grained structure in image and wavelet transform allows the restoration strategy to adapt itself according to directional features of edges. The proposed approach shows promising results when compared with unrestored case, in context of error reduction. It also has capability to adapt to situations where noise level in the image varies and with the changing requirements of medical-experts. The applicability of the proposed approach has implications in restoration of medical images in teleradiology systems. The proposed scheme is computationally efficient.

The Power of Bootstrap Tests of Cointegration Rank with Financial Time Series

Bootstrap likelihood ratio tests of cointegration rank are commonly used because they tend to have rejection probabilities that are closer to the nominal level than the rejection probabilities of the correspond- ing asymptotic tests. The e¤ect of bootstrapping the test on its power is largely unknown. We show that a new computationally inexpensive procedure can be applied to the estimation of the power function of the bootstrap test of cointegration rank. The bootstrap test is found to have a power function close to that of the level-adjusted asymp- totic test. The bootstrap test estimates the level-adjusted power of the asymptotic test highly accurately. The bootstrap test may have low power to reject the null hypothesis of cointegration rank zero, or underestimate the cointegration rank. An empirical application to Euribor interest rates is provided as an illustration of the findings.

Time Dimension in Consumers’ Image Construction Processes: Introducing Image Heritage and Image-in-use

This paper focuses on the time dimension in consumers’ image construction processes. Two new concepts are introduced to cover past consumer experiences about the company – image heritage, and the present image construction process - image-in-use. Image heritage and image-in-use captures the dynamic, relational, social, and contextual features of corporate image construction processes. Qualitative data from a retailing context were collected and analysed following a grounded theory approach. The study demonstrates that consumers’ corporate images have long roots in past experiences. Understanding consumers’ image heritage provides opportunities for understanding how consumers might interpret management initiatives and branding activities in the present.

Time Scale Separated Nonlinear Partial Integrated Guidance and Control of Interceptors in the Terminal Phase

The paper proposes a time scale separated partial integrated guidance and control of an interceptor for engaging high speed targets in the terminal phase. In this two loop design, the outer loop is an optimal control formulation based on nonlinear model predictive spread control philosophies. It gives the commanded pitch and yaw rates whereas necessary roll-rate command is generated from a roll-stabilization loop. The inner loop tracks the outer loop commands using the dynamicinversion philosophy. However, unlike conventional designs, in both the loops the Six degree of freedom (Six-DOF) interceptor model is used directly. This intelligent manipulation preserves the inherent time scale separation property between the translational and rotational dynamics, and hence overcomes the deficiency of current IGC designs, while preserving its benefits. Six-DOF simulation studies have been carried out accounting for three dimensional engagement geometry. Different comparison studies were also conducted to measure the performance of the algorithm.

Double time window targeting technique: Real-time DMRG dynamics in the Pariser-Parr-Pople model

We present a generalized adaptive time-dependent density matrix renormalization-group (DMRG) scheme, called the double time window targeting (DTWT) technique, which gives accurate results with nominal computational resources, within reasonable computational time. This procedure originates from the amalgamation of the features of pace keeping DMRG algorithm, first proposed by Luo et al. [Phys. Rev. Lett. 91, 049701 (2003)] and the time-step targeting algorithm by Feiguin and White [Phys. Rev. B 72, 020404 (2005)]. Using the DTWT technique, we study the phenomena of spin-charge separation in conjugated polymers (materials for molecular electronics an spintronics), which have long-range electron-electron interactions and belong to the class of strongly correlated low-dimensional many-body systems. The issue of real-time dynamics within the Pariser-Parr-Pople (PPP) model which includes long-range electron correlations has not been addressed in the literature so far. The present study on PPP chains has revealed that, (i) long-range electron correlations enable both the charge and spin degree of freedom of the electron, to propagate faster in the PPP model compared to Hubbard model, (ii) for standard parameters of the PPP model as applied to conjugated polymers, the charge velocity is almost twice that of the spin velocity, and (iii) the simplistic interpretation of long-range correlations by merely renormalizing the U value of the Hubbard model fails to explain the dynamics of doped holes/electrons in the PPP model.