The benefit of modeling jumps in realized volatility for risk prediction : evidence from Chinese mainland stocks

Recent literature has focused on realized volatility models to predict financial risk. This paper studies the benefit of explicitly modeling jumps in this class of models for value at risk (VaR) prediction. Several popular realized volatility models are compared in terms of their VaR forecasting performances through a Monte Carlo study and an analysis based on empirical data of eight Chinese stocks. The results suggest that careful modeling of jumps in realized volatility models can largely improve VaR prediction, especially for emerging markets where jumps play a stronger role than those in developed markets.

Corporate credit risk prediction under stochastic volatility and jumps

This paper examines the impact of allowing for stochastic volatility and jumps (SVJ) in a structural model on corporate credit risk prediction. The results from a simulation study verify the better performance of the SVJ model compared with the commonly used Merton model, and three sources are provided to explain the superiority. The empirical analysis on two real samples further ascertains the importance of recognizing the stochastic volatility and jumps by showing that the SVJ model decreases bias in spread prediction from the Merton model, and better explains the time variation in actual CDS spreads. The improvements are found particularly apparent in small firms or when the market is turbulent such as the recent financial crisis.

Reorientation of Water Inside Carbon Nanorings by Large Angular Jumps

Molecular dynamics simulations of the orientational dynamics of water molecules confined inside narrow carbon nanorings reveal that reorientational relaxation is mediated by large amplitude angular jumps. The distribution of waiting time between jumps peaks at about 60 fs, and has a slowly decaying exponential tail with a timescale of about 440 fs. These time scales are much faster than the mean waiting time between jumps of the water molecules in bulk.

Vibrational phase relaxation of O–H stretch in bulk water: Role of large amplitude angular jumps and negative cross-correlations among the forces on the O–H bond

The ultrafast vibrational phase relaxation of O–H stretch in bulk water is investigated in molecular dynamics simulations. The dephasing time (T2) of the O–H stretch in bulk water calculated from the frequency fluctuation time correlation function (Cω(t)) is in the range of 70–80 femtosecond (fs), which is comparable to the characteristic timescale obtained from the vibrational echo peak shift measurements using infrared photon echo [W.P. de Boeij, M.S. Pshenichnikov, D.A. Wiersma, Ann. Rev. Phys. Chem. 49 (1998) 99]. The ultrafast decay of Cω(t) is found to be responsible for the ultrashort T2 in bulk water. Careful analysis reveals the following two interesting reasons for the ultrafast decay of Cω(t). (A) The large amplitude angular jumps of water molecules (within 30–40 fs time duration) provide a large scale contribution to the mean square vibrational frequency fluctuation and gives rise to the rapid spectral diffusion on 100 fs time scale. (B) The projected force, due to all the atoms of the solvent molecules on the oxygen (FO(t)) and hydrogen (FH(t)) atom of the O–H bond exhibit a large negative cross-correlation (NCC). We further find that this NCC is partly responsible for a weak, non-Arrhenius temperature dependence of the dephasing rate.

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.

Barkhausen jumps and related magnetic properties of iron nanowires encapsulated in aligned carbon nanotube bundles

Iron nanowires encapsulated in aligned carbon nanotube bundles show interesting magnetic properties. Besides the increased coercivity, Barkhausen jumps with 5 emu/g steps in magnetization are observed due to magnetization reversal or depinning of domains. (C) 2002 Elsevier Science B.V. All rights reserved.

Asymptotics of the invariant measure in mean field models with jumps

We consider the asymptotics of the invariant measure for the process of spatial distribution of N coupled Markov chains in the limit of a large number of chains. Each chain reflects the stochastic evolution of one particle. The chains are coupled through the dependence of transition rates on the spatial distribution of particles in the various states. Our model is a caricature for medium access interactions in wireless local area networks. Our model is also applicable in the study of spread of epidemics in a network. The limiting process satisfies a deterministic ordinary differential equation called the McKean-Vlasov equation. When this differential equation has a unique globally asymptotically stable equilibrium, the spatial distribution converges weakly to this equilibrium. Using a control-theoretic approach, we examine the question of a large deviation from this equilibrium.

Numerical study of laminar, standing hydraulic jumps in a planar geometry

We solve the two-dimensional, planar Navier-Stokes equations to simulate a laminar, standing hydraulic jump using a Volume-of-Fluid method. The geometry downstream of the jump has been designed to be similar to experimental conditions by including a pit at the edge of the platform over which liquid film flows. We obtain jumps with and without separation. Increasing the inlet Froude number pushes the jump downstream and makes the slope of the jump weaker, consistent with experimental observations of circular jumps, and decreasing the Reynolds number brings the jump upstream while making it steeper. We study the effect of the length of the domain and that of a downstream obstacle on the structure and location of the jump. The transient flow which leads to a final steady jump is described for the first time to our knowledge. In the moderate Reynolds number regime, we obtain steady undular jumps with a separated bubble underneath the first few undulations. Interestingly, surface tension leads to shortening of wavelength of these undulations. We show that the undulations can be explained using the inviscid theory of Benjamin and Lighthill (Proc. R. Soc. London, Ser. A, 1954). We hope this new finding will motivate experimental verification.

Propagators and ridge jumps in a back-arc basin, the West Philippine Basin

We explore the tectono-magmatic processes in the western West Philippine Basin, Philippine Sea Plate, using bathymetric data acquired in 2003 and 2004. The northwestern part of the basin formed through a series of northwestward propagating rifts. We identify at least five sequences of propagating rifts, probably triggered by mantle flow away from the mantle thermal anomaly that is responsible for the origin of the Benham and Urdenata plateaus. Gravitational forces caused by along-axis topographic gradient and a similar to 30 degrees ridge reorientation appear to also be driving the rift propagations. The along-axis mantle flow appears to be reduced and deflected along the Luzon-Okinawa fracture zone, because the spreading system remained stable west of this major fault zone. North-east of the Benham plateau, a left-lateral fracture zone has turned into a NE-SW-trending spreading axis. As a result, a microplate developed at the triple junction.

Towards an intelligent score following system: Handling of mistakes and jumps encountered during piano practicing

Score following has been an important area of research in AI and music since the mid 80's. Various systems were developed, but they were predominantly for providing automated accompaniment to live concert performances, dealing mostly with issues relating to pitch detection and identification of embellished melodies. They have a big potential in the area of education where student performers benefit in practice situations. Current accompaniment systems are not designed to deal with errors that may occur during practising. In this paper we present a system developed to provide accompaniment for students practising at home. First a survey of score following will be given. Then the capabilities of the system will be explained, and the results from the first experiments of the monophonic score following system will be presented.

Fronts, jumps and secondary introductions suggested as different invasion patterns in marine species, with an increase in spread rates over time

Not all introduced (invasive) species in a region will spread from a single point of introduction. Long-distance dispersal or further introductions can obscure the pattern of spread, but the regional importance of such processes is difficult to gauge. These difficulties are further compounded when information on the multiple scale process of invasive species range expansion is reduced to one-dimensional estimates of spread (e. g. km yr(-1)). We therefore compared the results of two different metrics of range expansion: maximum linear rate of spread and accumulation of occupied grid squares (50 x 50 km) over time. An analysis of records for 54 species of introduced marine macrophytes in the Mediterranean and northeast Atlantic revealed cases where the invasion process was probably missed (e. g. Atlantic Bonnemaisonia hamifera) and suggested cases of secondary introductions or erratic jump dispersal (Dasysiphonia sp. and Womersleyella setacea). A majority of species analysed showed evidence for an accumulation of invaded sites without a clear invasion front. Estimates of spread rate are increasing for more recent introductions. The increase is greater than can be accounted for by temporally varying search effort and implies a historical increase in vector efficiency and/or a decreased resistance of native communities to invasion.