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.

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.

Autorregresive conditional volatility, skewness and kurtosis

This paper proposes a GARCH-type model allowing for time-varying volatility, skewness and kurtosis. The model is estimated assuming a Gram-Charlier series expansion of the normal density function for the error term, which is easier to estimate than the non-central t distribution proposed by Harvey and Siddique (1999). Moreover, this approach accounts for time-varying skewness and kurtosis while the approach by Harvey and Siddique (1999) only accounts for nonnormal skewness. We apply this method to daily returns of a variety of stock indices and exchange rates. Our results indicate a significant presence of conditional skewness and kurtosis. It is also found that specifications allowing for time-varying skewness and kurtosis outperform specifications with constant third and fourth moments.

Analysis of volatility transmissions in integrated and interconnected markets: The case of the Iberian and French markets

This paper models the mean and volatility spillovers of prices within the integrated Iberian and the interconnected Spanish and French electricity markets. Using the constant (CCC) and dynamic conditional correlation (DCC) bivariate models with three different specifications of the univariate variance processes, we study the extent to which increasing interconnection and harmonization in regulation have favoured price convergence. The data consist of daily prices calculated as the arithmetic mean of the hourly prices over a span from July 1st 2007 until February 29th 2012. The DCC model in which the variances of the univariate processes are specified with a VARMA(1,1) fits the data best for the integrated MIBEL whereas a CCC model with a GARCH(1,1) specification for the univariate variance processes is selected to model the price series in Spain and France. Results show that there are significant mean and volatility spillovers in the MIBEL, indicating strong interdependence between the two markets, while there is a weaker evidence of integration between the Spanish and French markets. We provide new evidence that the EU target of achieving a single electricity market largely depends on increasing trade between countries and homogeneous rules of market functioning.

Blue-yellow ZnO homostructural light-emitting diode realized by metalorganic chemical vapor deposition technique

We report on the realization of ZnO homojunction light-emitting diodes (LEDs) fabricated by metalorganic chemical vapor deposition on (0001) ZnO bulk substrate. The p-type ZnO epilayer was formed by nitrogen incorporation using N2O gas as oxidizing and doping sources. Distinct electroluminescence (EL) emissions in the blue and yellow regions were observed at room temperature by the naked eye under forward bias. The EL peak energy coincided with the photoluminescence peak energy of the ZnO epilayer, suggesting that the EL emissions emerge from the ZnO epilayer. In addition, the current-voltage and light output-voltage characteristics of ZnO homojunction LEDs have also been studied. (c) 2006 American Institute of Physics.

Validation of a method for estimating realized annual fecundity in a multiple spawner, the long-snouted seahorse (Hippocampus guttulatus), using underwater visual census

The long-snouted seahorse (Hippocampus guttulatus) (Cuvier, 1829), was used to validate the pre-dictive accuracy of three progressively realistic models for estimating the realized annual fecundity of asyn-chronous, indeterminate, multiple spawners. Underwater surveys and catch data were used to estimate the duration of the reproductive season, female spawning frequency, male brooding frequency, and batch fecun-dity. The most realistic model, a generalization of the spawning fraction method, produced unbiased estimates of male brooding frequency (mean ±standard deviation [SD]=4.2 ±1.6 broods/year). Mean batch fecundity and realized annual fecundity were 213.9 (±110.9) and 903.6 (±522.4), respectively. However, females prepared significantly more clutches than the number of broods produced by males. Thus, methods that infer spawning frequency from patterns in female egg production may lead to significant overestimates of realized annual fecundity. The spawning fraction method is broadly applicable to many taxa that exhibit parental care and can be applied nondestructively to species for which conservation is a concern.

New generation of two-dimensional spintronic systems realized by coupling of Rashba and Dirac fermions

Intriguing phenomena and novel physics predicted for two-dimensional (2D) systems formed by electrons in Dirac or Rashba states motivate an active search for new materials or combinations of the already revealed ones. Being very promising ingredients in themselves, interplaying Dirac and Rashba systems can provide a base for next generation of spintronics devices, to a considerable extent, by mixing their striking properties or by improving technically significant characteristics of each other. Here, we demonstrate that in BiTeI@PbSb2Te4 composed of a BiTeI trilayer on top of the topological insulator (TI) PbSb2Te4 weakly- and strongly-coupled Dirac-Rashba hybrid systems are realized. The coupling strength depends on both interface hexagonal stacking and trilayer-stacking order. The weakly-coupled system can serve as a prototype to examine, e.g., plasmonic excitations, frictional drag, spin-polarized transport, and charge-spin separation effect in multilayer helical metals. In the strongly-coupled regime, within similar to 100 meV energy interval of the bulk TI projected bandgap a helical state substituting for the TI surface state appears. This new state is characterized by a larger momentum, similar velocity, and strong localization within BiTeI. We anticipate that our findings pave the way for designing a new type of spintronics devices based on Rashba-Dirac coupled systems.