On Markovian solutions to Markov Chain BSDEs

We study (backward) stochastic differential equations with noise coming from a finite state Markov chain. We show that, for the solutions of these equations to be `Markovian', in the sense that they are deterministic functions of the state of the underlying chain, the integrand must be of a specific form. This allows us to connect these equations to coupled systems of ODEs, and hence to give fast numerical methods for the evaluation of Markov-Chain BSDEs

Emission lines in the atmosphere of the irradiated brown dwarf WD0137−349B

ESL acknowledges the support of STFC studentship. SLC acknowledges support from the University of Leicester College of Science and Engineering. CH highlights the financial support of the European community under the FP7 ERC starting grant 257431. This work was supported by the Science and Technology Facilities Council [ST/M001040/1].We present new optical and near-infrared spectra of WD0137−349; a close white dwarf–brown dwarf non-interacting binary system with a period of ≈114 min. We have confirmed the presence of H α emission and discovered He, Na, Mg, Si, K, Ca, Ti and Fe emission lines originating from the brown-dwarf atmosphere. This is the first brown-dwarf atmosphere to have been observed to exhibit metal emission lines as a direct result of intense irradiation. The equivalent widths of many of these lines show a significant difference between the day-side and night-side of the brown dwarf. This is likely an indication that efficient heat redistribution may not be happening on this object, in agreement with models of hot Jupiter atmospheres. The H α line strength variation shows a strong phase dependency as does the width. We have simulated the Ca ii emission lines using a model that includes the brown-dwarf Roche geometry and limb darkening, and we estimate the mass ratio of the system to be 0.135 ± 0.004. We also apply a gas-phase equilibrium code using a prescribed drift-phoenix model to examine how the chemical composition of the brown-dwarf upper atmosphere would change given an outward temperature increase, and discuss the possibility that this would induce a chromosphere above the brown-dwarf atmosphere.Publisher PDFPeer reviewe

Readiness to change drinking behaviour among heavy-drinking university students in England

There is growing literature on possible ways of reducing alcohol consumption and alcohol-related harm among university students (Larimer and Cronce, 2002; Siegers and Carey, 2010). However, interventions with this aim might be made more effective by information on students’ readiness to change their drinking behaviour (Carey et al., 2007a), where an assessment of readiness to change might influence the kind of approach that is thought most likely to be successful. For example, it has been found that readiness to change moderated the effects of a brief intervention among heavy-drinking students (either brief motivational intervention or alcohol expectancy challenge) such that high readiness to change made an expectancy challenge relatively more effective in reducing drinking (Capone and Wood, 2009). This study also reported an association between higher readiness to change and greater reductions in alcohol consumption in the overall sample, thus supporting previous findings (Fromme and Corbin, 2004; Carey et al., 2007b). Although high readiness to change may increase the chances of successful brief intervention among heavy-drinking students, it has been found that, even among individuals referred to a university-based alcohol intervention programme, there was limited acknowledgement of a drinking problem or interest in changing behaviour (Caldwell, 2002; Vik et al., 2000). Such research has been conducted mainly in the USA and, with the exception of one study (Hosier, 2001), it is unknown whether a comparable lack of concern about heavy drinking is true of students in England. Moreover, there is limited understanding of the different factors associated with, and predictive of, readiness to change in heavy-drinking students. The aims of this paper are therefore (i) to assess levels of readiness to change among heavy-drinking students at universities in England, (ii) to identify variables predictive of readiness to change among heavy-drinking students and (iii) to generate hypotheses that could be tested in further research

Monetary Policy, Bank Bailouts and the Sovereign-Bank Risk Nexus in the Euro Area

The paper analyses the empirical relationship between bank risk and sovereign credit risk in the euro area. Using structural VAR with daily financial markets data for 2003-13, the analysis confirms two-way causality between shocks to sovereign risk and bank risk, with the former being overall more important in explaining bank risk, than vice versa. The paper focuses specifically on the impact of non-standard monetary policy measures by the European Central Bank and on the effects of bank bailout policies by national governments. Testing specific hypotheses formulated in the literature, we find that bank bailout policies have reduced solvency risk in the banking sector mostly at the expense of raising the credit risk of sovereigns. By contrast, monetary policy was in most, but not all cases effective in lowering credit risk among both sovereigns and banks. Finally, we find spillover effects in particular from sovereigns in the euro area periphery to the core countries

A Hedged Monte Carlo Approach to Real Option Pricing

In this work we are concerned with valuing optionalities associated to invest or to delay investment in a project when the available information provided to the manager comes from simulated data of cash flows under historical (or subjective) measure in a possibly incomplete market. Our approach is suitable also to incorporating subjective views from management or market experts and to stochastic investment costs. It is based on the Hedged Monte Carlo strategy proposed by Potters et al (2001) where options are priced simultaneously with the determination of the corresponding hedging. The approach is particularly well-suited to the evaluation of commodity related projects whereby the availability of pricing formulae is very rare, the scenario simulations are usually available only in the historical measure, and the cash flows can be highly nonlinear functions of the prices.Comment: 25 pages, 14 figure