Reverse engineering the last-minute on-line pricing practices: an application to hotels

We suggest a nonlinear time series methodology to model the (last-minute) price adjustments that hotels active in the online market make to adapt their early-booking rates in response to unpredictable fluctuations in demand. We use this approach to reverse-engineer the pricing strategies of six hotels in Milan, Italy, each with different features and services. The results reveal that the hotels’ ability to align lastminute adjustments with early-booking decisions and account for stochastic demand seasonality varies depending on factors such as size, star rating, and brand affiliation. As a primary empirical finding, we show that the autocorrelations of the first four moments of the last-minute price adjustment can be used to gain crucial insights into the hoteliers’ pricing strategies. Scaling up this approach has the potential to equip policymakers in smart destinations with a reliable and transparent tool for the real-time monitoring of demand dynamics

Score-Driven Modeling with Jumps: An Application to S&P500 Returns and Options

We introduce a novel score-driven model with two sources of shock, allowing for both time-varying volatility and jumps. A theoretical investigation is performed which yields sufficient conditions to ensure stationarity and ergodicity. We extend the model to consider a time-varying jump intensity. Both an in-sample and an out-of-sample analysis based on the S&P500 time series show that the proposed methodology provides excellent agreement with observed returns, outperforming more standard Generalized Autoregressive Conditional Heteroskedasticity (GARCH) specifications with jumps. Finally, we apply our models to option pricing via risk neutralization. Results show this novel approach produces reliable implied volatility surfaces. Supplementary Materials including proofs, the derivation of the conditional Fisher information, and two figures showing additional empirical results are available onlin

A new bivariate approach for modeling the interaction between stock volatility and interest rate: An application to S&P500 returns and options

The GARCH models developed so far do not take into account the interaction between the volatility of asset returns and the dynamics of the interest rate. In this paper, we propose a bivariate GARCH model in which interest rate movements and asset price volatility are fully coupled. This approach yields explicit and simple to implement recursion formulas for the moment generating function, which can be exploited to compute option prices by applying the fast Fourier transform or other convolution techniques. We perform a thorough and comprehensive empirical analysis based on real S&P500 return and option data showing the usefulness and robustness of the suggested methodology. Both in-sample and out-of-sample results reveal the superiority of our approach over the GARCH model with constant interest rates

Antigenic relationship among zoonotic flaviviruses from Italy

Here we report studies of the antigenic relationship of West Nile virus (WNV) and Usutu virus (USUV), two zoonotic flaviviruses from Italy, together with a Japanese encephalitis virus (JEV) strain and compared them with their genetic relationship using the immunodominant viral E protein. Thirty-nine isolates and reference strains were inactivated and used to immunize rabbits to produce hyper immune sera. Serum samples were tested by neutralization against all isolates and results visualized by generating antigenic map. Strains of WNV, USUV, and JEV grouped in separate clusters on the antigenic map. JEV was closer antigenically to USUV (mean of 3.5 Antigenic Unit, AU, equivalent to a 2-fold change in antibody titer) than to WNV strains (mean of 6 AU). A linear regression model predicted, on average, one unit of antigenic change, equivalent to a 2-fold change in antibody titer, for every 22 amino acid substitutions in the E protein ectodomain. Overall, antigenic map was demonstrated to be robust and consistent with phylogeny of the E protein. Indeed, the map provided a reliable means of visualizing and quantifying the relationship between these flaviviruses. Further antigenic analyses employing representative strains of extant serocomplexes are currently underway. This will provide a more in deep knowledge of antigenic relationships between flaviviruses