Assessing the Impact of Market Microstructure Noise and Random Jumps on the Relative Forecasting Performance of Option-Implied and Returns-Based Volatility

This paper presents a comprehensive empirical evaluation of option-implied and returns-based forecasts of volatility, in which new developments related to the impact on measured volatility of market microstructure noise and random jumps are explicitly taken into account. The option-based component of the analysis also accommodates the concept of model-free implied volatility, such that the forecasting performance of the options market is separated from the issue of misspecification of the option pricing model. The forecasting assessment is conducted using an extensive set of observations on equity and option trades for News Corporation for the 1992 to 2001 period, yielding certain clear results. According to several different criteria, the model-free implied volatility is the best performing forecast, overall, of future volatility, with this result being robust to the way in which alternative measures of future volatility accommodate microstructure noise and jumps. Of the volatility measures considered, the one which is, in turn, best forecast by the option-implied volatility is that measure which adjusts for microstructure noise, but which retains some information about random jumps.Volatility Forecasts; Quadratic Variation; Intraday Volatility Measures; Model-free Implied Volatility.

Does the Option Market Produce Superior Forecasts of Noise-Corrected Volatility Measures?

This paper presents a comprehensive empirical evaluation of option-implied and returns-based forecasts of volatility, in which recent developments related to the impact on measured volatility of market microstructure noise are taken into account. The paper also assesses the robustness of the performance of the option-implied forecasts to the way in which those forecasts are extracted from the option market. Using a test for superior predictive ability, model-free implied volatility, which aggregates information across the volatility 'smile', and at-the-money implied volatility, which ignores such information, are both tested as benchmark forecasts. The forecasting assessment is conducted using intraday data for three Dow Jones Industrial Average (DJIA) stocks and the S&P500 index over the 1996-2006 period, with future volatility proxied by a range of alternative noise-corrected realized measures. The results provide compelling evidence against the model-free forecast, with its poor performance linked to both the bias and excess variability that it exhibits as a forecast of actual volatility. The positive bias, in particular, is consistent with the option market factoring in a substantial premium for volatility risk. In contrast, implied volatility constructed from liquid at-the-money options is given strong support as a forecast of volatility, at least for the DJIA stocks. Neither benchmark is supported for the S&P500 index. Importantly, the qualitative results are robust to the measure used to proxy future volatility, although there is some evidence to suggest that any option-implied forecast may perform less well in forecasting the measure that excludes jump information, namely bi-power variation.Volatility Forecasts; Quadratic Variation; Intraday Volatility Measures

The Siltcatcher: A Sediment-Capture System for Wetland Creation and Coastal Protection in Western Lake Pontchartrain

The West Lake Pontchartrain region faces a number of long-term environmental challenges due to anthropogenic climate disturbance and landscape modification, including sea level rise, increased storm surge risk, shoreline erosion, and wetland degradation. In response, this thesis applies recent research in the fields of landscape architecture and civil engineering to propose a dynamic, natural-systems solution for wetland creation and shoreline protection. The project envisions a series of breakwater-like structures in western Lake Pontchartrain positioned to slow water released from the nearby Bonnet Carré Spillway, causing suspended sediment to settle and create self-building and self-sustaining wetlands capable of keeping pace with future sea level rise. This hybrid grey-green system would reduce erosion of the western Lake Pontchartrain shoreline, provide storm protection for the communities of St. James and St. John the Baptist Parishes, create valuable wildlife habitat, and provide ecosystem services and cultural opportunities for local residents. This proposal seeks to contribute to the ongoing discourse regarding “Engineering with Nature” principles and explore the interdisciplinary potential suggested by their adoption. The project’s design methodology embraces a wide range of tools used by both landscape architecture and engineering including field work, mapping, drawing, image-making, and model making. The research identifies physical and numerical hydrodynamic modeling as key tools for the design of coastal infrastructure and integrates their use into a recursive, non-linear design process typical of architectural practice. In doing so, it seeks to expand the range of tools typically used by landscape architects for design ideation and visualization and posit alternative interdisciplinary workflows for the conceptualization and design of large-scale infrastructure. The resulting proposal complements the already-planned West Shore Lake Pontchartrain Hurricane Protection Levee and Maurepas River Reintroduction projects, providing a forward buffer in keeping with the “Multiple Lines of Defense” strategy promulgated by the Lake Pontchartrain Basin Foundation. In contrast with conventional mono-functional infrastructure, the system proposed in this research offers multiple co-benefits for both human and non-human constituencies. Finally, the design strategies derived from this research represent a novel form of coastal infrastructure with potential applicability to a broad range of sites and scales along the Louisiana coast

Can Computers Motivate? The Association Between End User Computing Levels, Job Motivation, And Job Core Characteristics: A Field Study

While end user computing (EUC) has been studied from the standpoint of classification and management, less attention has been placed on how the utilization of the technology impacts on users jobs.  This study proposes that differing levels of EUC activity will be associated with differing levels of job characteristics and computer related job outcomes.  The study focused on the jobs of 121 middle managers and professional workers enrolled in an MBA program at a southeastern university.  The study finds that with successive levels of complexity in EUC utilization, there are corresponding increases in the levels of users' experiencing of job core characteristics

Competitive swimmers modify racing start depth upon request

To expand upon recent findings showing that competitive swimmers complete significantly shallower racing starts in shallower pools, 12 more experienced and 13 less experienced swimmers were filmed underwater during completion of competitive starts. Two starts (1 routine and 1 “requested shallow”) were executed from a 0.76 m block height into water 3.66 m deep. Dependent measures were maximum head depth, head speed at maximum head depth, and distance from the starting wall at maximum head depth. Statistical analyses yielded significant main effects (p < 0.05) for both start type and swimmer experience. Starts executed by the more experienced swimmers were deeper and faster than those executed by the less experienced swimmers. When asked to dive shallowly, maximum head depth decreased (0.19 m) and head speed increased (0.33 ms-1) regardless of experience. The ability of all swimmers to modify start depth implies that spinal cord injuries during competitive swimming starts are not necessarily due to an inherent inability to control the depth of the start

Block height influences the head depth of competitive racing starts

The purpose of this study was to determine whether or not starting block height has an effect on the head depth and head speed of competitive racing starts. Eleven experienced, collegiate swimmers executed competitive racing starts from three different starting heights: 0.21 m (pool deck), 0.46 m (intermediate block), and 0.76 m (standard block). One-way repeated measures ANOVA indicated that starting height had a significant effect on the maximum depth of the center of the head, head speed at maximum head depth, and distance from starting wall at maximum head depth. Racing starts from the standard block and pool deck were significantly deeper, faster, and farther at maximum head depth than starts from the intermediate block. There were no differences between depth, speed, or distance between the standard block and pool deck. We conclude that there is not a positive linear relationship between starting depth and starting height, which means that starts do not necessarily get deeper as the starting height increases

Racing start safety: head depth and head speed during competitive starts into a water depth of 1.22 m

From the perspective of swimmer safety, there have been no quantitative 3-dimensional studies of the underwater phase of racing starts during competition. To do so, 471 starts were filmed during a meet with a starting depth of 1.22 m and block height of 0.76 m. Starts were stratified according to age (8 & U, 9–10, 11–12, 13–14, and 15 & O) and stroke during the first lap (freestyle, breaststroke, and butterfly). Dependent measures were maximum head depth, head speed at maximum head depth, and distance from the wall at maximum head depth. For all three variables, there were significant main effects for age, F(4, 456) = 12.53, p < .001, F(4, 456) = 27.46, p < .001, and F(4, 456) = 54.71, p < .001, respectively, and stroke, F(2, 456) = 16.91, p < .001, F(2, 456) = 8.45, p < .001, and F(2, 456) = 18.15, p < .001, respectively. The older swimmers performed starts that were deeper and faster than the younger swimmers and as a result, the older swimmers may be at a greater risk for injury when performing starts in this pool depth

Water depth influences the head depth of competitive racing starts

Recent research suggests that swimmers perform deeper starts in deeper water (Blitvich, McElroy, Blanksby, Clothier, & Pearson, 2000; Cornett, White, Wright, Willmott, & Stager, 2011). To provide additional information relevant to the depth adjustments swimmers make as a function of water depth and the validity of values reported in prior literature, 11 collegiate swimmers were asked to execute racing starts in three water depths (1.53 m, 2.14 m, and 3.66 m). One-way repeated measures ANOVA revealed that the maximum depth of the center of the head was significantly deeper in 3.66 m as compared to the shallower water depths. No differences due to water depth were detected in head speed at maximum head depth or in the distance from the wall at which maximum head depth occurred. We concluded that swimmers can and do make head depth adjustments as a function of water depth. Earlier research performed in deep water may provide overestimates of maximum head depth following the execution of a racing start in water depth typical of competitive venues