Options listing and the volatility of the underling asset: a study on the derivative market function

There are basic misunderstandings on derivative markets. Some professionals believe that they are a kind of casinos and have no utility for the investors. This work looks at the effects of options introduction in the Brazilian market, seeking for another benefit for this introduction: changes in the stocks risk leveI. Our results are the same found in the US and other markets: the options introduction reduces the stocks volatility. We also found that there is a slight indication that the volatility becames more stochastic with this alternative.

Options listing and the volatility of the underlying asset: a study on the derivative market function

Os mercados de derivativos são vistos com muita desconfiança por inúmeras pessoas. O trabalho analisa o efeito da introdução de opções sobre ações no mercado brasileiro buscando identificar uma outra justificativa para a existência destes mercados: a alteração no nível de risco dos ativos objetos destas opções. A evidência empírica encontrada neste mercado está de acordo com os resultados obtidos em outros mercados - a introdução de opções é benéfica para o investidor posto que reduz a volatilidade do ativo objeto. Existe também uma tênue indicação de que a volatilidade se torna mais estocástica com a introdução das opções.

O Impacto da introdução de opções sobre a volatilidade do ativo objeto: um estudo sobre a função dos mercados derivativos

There is a lot of misunderstanding about derivative markets. Many people believe that they are a kind of casinos and have no utility to the investors. This work looks on the effects of options introduction in the Brazilian market, seeking for another benefit for this introduction: changes in the stocks risk level due to this introduction. Our results are the same found in the US and other markets: the options introduction reduces the stocks volatility. We also found that there is a slight indication that the volatility became more stochastic with this introducion.

Price risk management in the copper market using commodity derivatives and options strategies

Metals price risk management is a key issue related to financial risk in metal markets because of uncertainty of commodity price fluctuation, exchange rate, interest rate changes and huge price risk either to metals’ producers or consumers. Thus, it has been taken into account by all participants in metal markets including metals’ producers, consumers, merchants, banks, investment funds, speculators, traders and so on. Managing price risk provides stable income for both metals’ producers and consumers, so it increases the chance that a firm will invest in attractive projects. The purpose of this research is to evaluate risk management strategies in the copper market. The main tools and strategies of price risk management are hedging and other derivatives such as futures contracts, swaps and options contracts. Hedging is a transaction designed to reduce or eliminate price risk. Derivatives are financial instruments, whose returns are derived from other financial instruments and they are commonly used for managing financial risks. Although derivatives have been around in some form for centuries, their growth has accelerated rapidly during the last 20 years. Nowadays, they are widely used by financial institutions, corporations, professional investors, and individuals. This project is focused on the over-the-counter (OTC) market and its products such as exotic options, particularly Asian options. The first part of the project is a description of basic derivatives and risk management strategies. In addition, this part discusses basic concepts of spot and futures (forward) markets, benefits and costs of risk management and risks and rewards of positions in the derivative markets. The second part considers valuations of commodity derivatives. In this part, the options pricing model DerivaGem is applied to Asian call and put options on London Metal Exchange (LME) copper because it is important to understand how Asian options are valued and to compare theoretical values of the options with their market observed values. Predicting future trends of copper prices is important and would be essential to manage market price risk successfully. Therefore, the third part is a discussion about econometric commodity models. Based on this literature review, the fourth part of the project reports the construction and testing of an econometric model designed to forecast the monthly average price of copper on the LME. More specifically, this part aims at showing how LME copper prices can be explained by means of a simultaneous equation structural model (two-stage least squares regression) connecting supply and demand variables. A simultaneous econometric model for the copper industry is built: {█(Q_t^D=e^((-5.0485))∙P_((t-1))^((-0.1868) )∙〖GDP〗_t^((1.7151) )∙e^((0.0158)∙〖IP〗_t ) @Q_t^S=e^((-3.0785))∙P_((t-1))^((0.5960))∙T_t^((0.1408))∙P_(OIL(t))^((-0.1559))∙〖USDI〗_t^((1.2432))∙〖LIBOR〗_((t-6))^((-0.0561))@Q_t^D=Q_t^S )┤ P_((t-1))^CU=e^((-2.5165))∙〖GDP〗_t^((2.1910))∙e^((0.0202)∙〖IP〗_t )∙T_t^((-0.1799))∙P_(OIL(t))^((0.1991))∙〖USDI〗_t^((-1.5881))∙〖LIBOR〗_((t-6))^((0.0717) Where, Q_t^D and Q_t^Sare world demand for and supply of copper at time t respectively. P(t-1) is the lagged price of copper, which is the focus of the analysis in this part. GDPt is world gross domestic product at time t, which represents aggregate economic activity. In addition, industrial production should be considered here, so the global industrial production growth that is noted as IPt is included in the model. Tt is the time variable, which is a useful proxy for technological change. A proxy variable for the cost of energy in producing copper is the price of oil at time t, which is noted as POIL(t ) . USDIt is the U.S. dollar index variable at time t, which is an important variable for explaining the copper supply and copper prices. At last, LIBOR(t-6) is the 6-month lagged 1-year London Inter bank offering rate of interest. Although, the model can be applicable for different base metals' industries, the omitted exogenous variables such as the price of substitute or a combined variable related to the price of substitutes have not been considered in this study. Based on this econometric model and using a Monte-Carlo simulation analysis, the probabilities that the monthly average copper prices in 2006 and 2007 will be greater than specific strike price of an option are defined. The final part evaluates risk management strategies including options strategies, metal swaps and simple options in relation to the simulation results. The basic options strategies such as bull spreads, bear spreads and butterfly spreads, which are created by using both call and put options in 2006 and 2007 are evaluated. Consequently, each risk management strategy in 2006 and 2007 is analyzed based on the day of data and the price prediction model. As a result, applications stemming from this project include valuing Asian options, developing a copper price prediction model, forecasting and planning, and decision making for price risk management in the copper market.

How do Small Players Deduce Beliefs about Uncertainty? A Look at Texas Shale Oil Investments

Thesis (Ph.D.)--University of Washington, 2016-08

Three Essays in Empirical Asset Pricing

The financial crisis of 2007-2008 led to extraordinary government intervention in firms and markets. The scope and depth of government action rivaled that of the Great Depression. Many traded markets experienced dramatic declines in liquidity leading to the existence of conditions normally assumed to be promptly removed via the actions of profit seeking arbitrageurs. These extreme events motivate the three essays in this work. The first essay seeks and fails to find evidence of investor behavior consistent with the broad 'Too Big To Fail' policies enacted during the crisis by government agents. Only in limited circumstances, where government guarantees such as deposit insurance or U.S. Treasury lending lines already existed, did investors impart a premium to the debt security prices of firms under stress. The second essay introduces the Inflation Indexed Swap Basis (IIS Basis) in examining the large differences between cash and derivative markets based upon future U.S. inflation as measured by the Consumer Price Index (CPI). It reports the consistent positive value of this measure as well as the very large positive values it reached in the fourth quarter of 2008 after Lehman Brothers went bankrupt. It concludes that the IIS Basis continues to exist due to limitations in market liquidity and hedging alternatives. The third essay explores the methodology of performing debt based event studies utilizing credit default swaps (CDS). It provides practical implementation advice to researchers to address limited source data and/or small target firm sample size.

A general decomposition formula for derivative prices in stochastic volatility models

We see that the price of an european call option in a stochastic volatilityframework can be decomposed in the sum of four terms, which identifythe main features of the market that affect to option prices: the expectedfuture volatility, the correlation between the volatility and the noisedriving the stock prices, the market price of volatility risk and thedifference of the expected future volatility at different times. We alsostudy some applications of this decomposition.

Derivative hedging strategies for bitumen price risk

The objective of the study is to extend the existing hedging literature of the commodity price risks by investigating what kind of hedging strategies can be used in companies using bitumen as raw material in their production. Five different alternative swap hedging strategies in bitumen markets are empirically tested. Strategies tested are full hedge strategy, simple, conservative, and aggressive term structure strategies, and implied volatility strategy. The effectiveness of the alternative strategies is measured by excess returns compared to no hedge strategy. In addition, the downside risk of each strategy is measured with target absolute semi-deviation. Results indicate that any of the tested strategies does not outperform the no hedge strategy in terms of excess returns in all maturities. The best-performing aggressive term structure strategy succeeds to create positive excess returns only in short maturities. However, risk seems to increase hand-in-hand with the excess returns so that the best-performing strategies get the highest risk metrics as well. This implicates that the company willing to gain from favorable price movements must be ready to bear a greater risk. Thus, no superior hedging strategy over the others is found.

Persistence of volatility in futures markets

This article examines the characteristics of key measures of volatility for different types of futures contracts to provide a better foundation for modeling volatility behavior and derivative values. Particular attention is focused on analyzing how different measures of volatility affect volatility persistence relationships. Intraday realized measures of volatility are found to be more persistent than daily measures, the type of GARCH procedure used for conditional volatility analysis is critical, and realized volatility persistence is not coherent with conditional volatility persistence. Specifically, although there is a good fit between the realized and conditional volatilities, no coherence exists between their degrees of persistence, a counterintuitive finding that shows realized and conditional volatility measures are not a substitute for one another

The Applicability Of Ordered Mesoporous Sba-15 And Its Hydrophobic Glutaraldehyde-bridge Derivative To Improve Ibuprofen-loading In Releasing System.

The mesoporous SBA-15 silica with uniform hexagonal pore, narrow pore size distribution and tuneable pore diameter was organofunctionalized with glutaraldehyde-bridged silylating agent. The precursor and its derivative silicas were ibuprofen-loaded for controlled delivery in simulated biological fluids. The synthesized silicas were characterized by elemental analysis, infrared spectroscopy, (13)C and (29)Si solid state NMR spectroscopy, nitrogen adsorption, X-ray diffractometry, thermogravimetry and scanning electron microscopy. Surface functionalization with amine containing bridged hydrophobic structure resulted in significantly decreased surface area from 802.4 to 63.0 m(2) g(-1) and pore diameter 8.0-6.0 nm, which ultimately increased the drug-loading capacity from 18.0% up to 28.3% and a very slow release rate of ibuprofen over the period of 72.5h. The in vitro drug release demonstrated that SBA-15 presented the fastest release from 25% to 27% and SBA-15GA gave near 10% of drug release in all fluids during 72.5 h. The Korsmeyer-Peppas model better fits the release data with the Fickian diffusion mechanism and zero order kinetics for synthesized mesoporous silicas. Both pore sizes and hydrophobicity influenced the rate of the release process, indicating that the chemically modified silica can be suggested to design formulation of slow and constant release over a defined period, to avoid repeated administration.

A New Goniothalamin N-acylated Aza-derivative Strongly Downregulates Mediators Of Signaling Transduction Associated With Pancreatic Cancer Aggressiveness.

In this study, a novel concise series of molecules based on the structure of goniothalamin (1) was synthesized and evaluated against a highly metastatic human pancreatic cancer cell line (Panc-1). Among them, derivative 8 displayed a low IC50 value (2.7 μM) and its concentration for decreasing colony formation was 20-fold lower than goniothalamin (1). Both compounds reduced the levels of the receptor tyrosine kinase (AXL) and cyclin D1 which are known to be overexpressed in pancreatic cancer cells. Importantly, despite the fact that goniothalamin (1) and derivative 8 caused pancreatic cancer cell cycle arrest and cell death, only derivative 8 was able to downregulate pro-survival and proliferation pathways mediated by mitogen activated protein kinase ERK1/2. Another interesting finding was that Panc-1 cells treated with derivative 8 displayed a strong decrease in the transcription factor (c-Myc), hypoxia-inducible factor-1α (HIF-1α) and vascular endothelial growth factor (VEGF) protein levels. Notably, the molecular effects caused by derivative 8 might not be related to ROS generation, since no significant production of ROS was observed in low concentrations of this compound (from 1.5 up to 3 μM). Therefore, the downregulation of important mediators of pancreatic cancer aggressiveness by derivative 8 reveals its great potential for the development of new chemotherapeutic agents for pancreatic cancer treatment.

Preference Mapping Of Dulce De Leche Commercialized In Brazilian Markets.

Dulce de leche samples available in the Brazilian market were submitted to sensory profiling by quantitative descriptive analysis and acceptance test, as well sensory evaluation using the just-about-right scale and purchase intent. External preference mapping and the ideal sensory characteristics of dulce de leche were determined. The results were also evaluated by principal component analysis, hierarchical cluster analysis, partial least squares regression, artificial neural networks, and logistic regression. Overall, significant product acceptance was related to intermediate scores of the sensory attributes in the descriptive test, and this trend was observed even after consumer segmentation. The results obtained by sensometric techniques showed that optimizing an ideal dulce de leche from the sensory standpoint is a multidimensional process, with necessary adjustments on the appearance, aroma, taste, and texture attributes of the product for better consumer acceptance and purchase. The optimum dulce de leche was characterized by high scores for the attributes sweet taste, caramel taste, brightness, color, and caramel aroma in accordance with the preference mapping findings. In industrial terms, this means changing the parameters used in the thermal treatment and quantitative changes in the ingredients used in formulations.

Higher-derivative supersymmetric gauge theory

We study the one-loop low-energy effective action for the higher-derivative superfield gauge theory coupled to chiral matter.

Potent Cardioprotective Effect of the 4-Anilinoquinazoline Derivative PD153035: Involvement of Mitochondrial K(ATP) Channel Activation

Background: The aim of the present study was to evaluate the protective effects of the 4-anilinoquinazoline derivative PD153035 on cardiac ischemia/reperfusion and mitochondrial function. Methodology/Principal Findings: Perfused rat hearts and cardiac HL-1 cells were used to determine cardioprotective effects of PD153035. Isolated rat heart mitochondria were studied to uncover mechanisms of cardioprotection. Nanomolar doses of PD153035 strongly protect against heart and cardiomyocyte damage induced by ischemia/reperfusion and cyanide/aglycemia. PD153035 did not alter oxidative phosphorylation, nor directly prevent Ca(2+) induced mitochondrial membrane permeability transition. The protective effect of PD153035 on HL-1 cells was also independent of AKT phosphorylation state. Interestingly, PD153035 activated K(+) transport in isolated mitochondria, in a manner prevented by ATP and 5-hydroxydecanoate, inhibitors of mitochondrial ATP-sensitive K(+) channels (mitoK(ATP)). 5-Hydroxydecanoate also inhibited the cardioprotective effect of PD153035 in cardiac HL-1 cells, demonstrating that this protection is dependent on mitoK(ATP) activation. Conclusions/Significance: We conclude that PD153035 is a potent cardioprotective compound and acts in a mechanism involving mitoK(ATP) activation.

In Vitro Sun Protection Factor Evaluation of Sunscreens Containing Rutin and its Derivative

This research aimed at determining spectrophotometrically (290 to 320nm) the in vitro Sun Protection Factor (SPF) of sunscreens developed with rutin (R) or succinate rutin (SR), in association or not with UVB filter. Formulations were developed based on phosphate-base O/W emulsions, with (B) or not (A) the presence of polyacrylamide/C13-14 isoparaffin/laureth-7 (PIL), in accordance with the following associations: (a) control; (b) 1.0 % SR; (c) 0.1 % R; (d) 7.5 % ethylhexyl methoxycinnamate (EHMC); (e) 7.5 % EHMC + 0.1 % RS; (0 7.5 % EHMC + 0.1 % R. It was verified a statistical significative elevation of the SPF from 13.93 +/- 0.02 (Af) to 16.63 +/- 0.27 (Bf) and also in relation to 15.53 +/- 0.14 (Bd). According to the results, the EHMC had distinct behavior depending on the presence of bioactive substance and viscosity agent, thus, rutin obtained better profile as a SPF booster in these experimental conditions with the presence of PIL.