Pricing Options in Incomplete Equity Markets via the Instantaneous Sharpe Ratio

We use a continuous version of the standard deviation premium principle for pricing in incomplete equity markets by assuming that the investor issuing an unhedgeable derivative security requires compensation for this risk in the form of a pre-specified instantaneous Sharpe ratio. First, we apply our method to price options on non-traded assets for which there is a traded asset that is correlated to the non-traded asset. Our main contribution to this particular problem is to show that our seller/buyer prices are the upper/lower good deal bounds of Cochrane and Sa\'{a}-Requejo (2000) and of Bj\"{o}rk and Slinko (2006) and to determine the analytical properties of these prices. Second, we apply our method to price options in the presence of stochastic volatility. Our main contribution to this problem is to show that the instantaneous Sharpe ratio, an integral ingredient in our methodology, is the negative of the market price of volatility risk, as defined in Fouque, Papanicolaou, and Sircar (2000).Comment: Keywords: Pricing derivative securities, incomplete markets, Sharpe ratio, correlated assets, stochastic volatility, non-linear partial differential equations, good deal bound

Stochastic volatility and leverage effect

We prove that a wide class of correlated stochastic volatility models exactly measure an empirical fact in which past returns are anticorrelated with future volatilities: the so-called ``leverage effect''. This quantitative measure allows us to fully estimate all parameters involved and it will entail a deeper study on correlated stochastic volatility models with practical applications on option pricing and risk management.Comment: 4 pages, 2 figure

POLAR: a space borne GRB polarimeter

International audienceThe direction and the level of polarization of high energy photons emitted by astrophysics sources are valuable observables for the understanding of the corresponding emission mechanisms, source geometry and strength of magnetic fields at work. POLAR is a novel compact space-borne detector conceived for a precise measurement of hard X-ray polarization and optimized for the detection of Gamma-Ray Burst (GRB) photons in the energy range 50-500 keV. In POLAR, the GRB photons undergo Compton scattering in a target made out of 1600 plastic scintillator bars. The azimuthal distribution of the scattered photons inside the target provides the information on the GRB polarization. The target is divided into 5x5 units, each one consisting of 8x8 scintillator bars optically coupled with a multi-anode photomultiplier. POLAR, thanks to its large modulation factor (mu_100=40%), its large effective area (Aeff = 250 cm2), and its large field of view ( 1/3 of the sky) will be able to determine the degree and angle of polarization of a strong GRB with a minimum detectable polarization of less than 10% (3sigma). In this communication the present design and status of the POLAR project is presented. Expected results through deep Monte Carlo simulation studies as well as the recent results of laboratory measurements are detailed

Modeling the non-Markovian, non-stationary scaling dynamics of financial markets

A central problem of Quantitative Finance is that of formulating a probabilistic model of the time evolution of asset prices allowing reliable predictions on their future volatility. As in several natural phenomena, the predictions of such a model must be compared with the data of a single process realization in our records. In order to give statistical significance to such a comparison, assumptions of stationarity for some quantities extracted from the single historical time series, like the distribution of the returns over a given time interval, cannot be avoided. Such assumptions entail the risk of masking or misrepresenting non-stationarities of the underlying process, and of giving an incorrect account of its correlations. Here we overcome this difficulty by showing that five years of daily Euro/US-Dollar trading records in the about three hours following the New York market opening, provide a rich enough ensemble of histories. The statistics of this ensemble allows to propose and test an adequate model of the stochastic process driving the exchange rate. This turns out to be a non-Markovian, self-similar process with non-stationary returns. The empirical ensemble correlators are in agreement with the predictions of this model, which is constructed on the basis of the time-inhomogeneous, anomalous scaling obeyed by the return distribution.Comment: Throughout revision. 15 pages, 6 figures. Presented by A.L. Stella in a Talk at the "Econophysics - Kolkata V'' International Workshop, March 2010, Saha Institute of Nuclear Physics, Kolkata, Indi

Search for antihelium in cosmic rays

The Alpha Magnetic Spectrometer (AMS) was flown on the space shuttle Discovery during flight STS-91 in a 51.7 degree orbit at altitudes between 320 and 390 km. A total of 2.86 * 10^6 helium nuclei were observed in the rigidity range 1 to 140 GV. No antihelium nuclei were detected at any rigidity. An upper limit on the flux ratio of antihelium to helium of < 1.1 * 10^-6 is obtained.Comment: 18 pages, Latex, 9 .eps figure

Protons in near earth orbit

The proton spectrum in the kinetic energy range 0.1 to 200 GeV was measured by the Alpha Magnetic Spectrometer (AMS) during space shuttle flight STS-91 at an altitude of 380 km. Above the geomagnetic cutoff the observed spectrum is parameterized by a power law. Below the geomagnetic cutoff a substantial second spectrum was observed concentrated at equatorial latitudes with a flux ~ 70 m^-2 sec^-1 sr^-1. Most of these second spectrum protons follow a complicated trajectory and originate from a restricted geographic region.Comment: 19 pages, Latex, 7 .eps figure

A Study of Cosmic Ray Secondaries Induced by the Mir Space Station Using AMS-01

The Alpha Magnetic Spectrometer (AMS-02) is a high energy particle physics experiment that will study cosmic rays in the $\sim 100 \mathrm{MeV}$ to $1 \mathrm{TeV}$ range and will be installed on the International Space Station (ISS) for at least 3 years. A first version of AMS-02, AMS-01, flew aboard the space shuttle \emph{Discovery} from June 2 to June 12, 1998, and collected $10^8$ cosmic ray triggers. Part of the \emph{Mir} space station was within the AMS-01 field of view during the four day \emph{Mir} docking phase of this flight. We have reconstructed an image of this part of the \emph{Mir} space station using secondary $\pi^-$ and $\mu^-$ emissions from primary cosmic rays interacting with \emph{Mir}. This is the first time this reconstruction was performed in AMS-01, and it is important for understanding potential backgrounds during the 3 year AMS-02 mission.Comment: To be submitted to NIM B Added material requested by referee. Minor stylistic and grammer change

Young and Intermediate-age Distance Indicators

Distance measurements beyond geometrical and semi-geometrical methods, rely mainly on standard candles. As the name suggests, these objects have known luminosities by virtue of their intrinsic proprieties and play a major role in our understanding of modern cosmology. The main caveats associated with standard candles are their absolute calibration, contamination of the sample from other sources and systematic uncertainties. The absolute calibration mainly depends on their chemical composition and age. To understand the impact of these effects on the distance scale, it is essential to develop methods based on different sample of standard candles. Here we review the fundamental properties of young and intermediate-age distance indicators such as Cepheids, Mira variables and Red Clump stars and the recent developments in their application as distance indicators.Comment: Review article, 63 pages (28 figures), Accepted for publication in Space Science Reviews (Chapter 3 of a special collection resulting from the May 2016 ISSI-BJ workshop on Astronomical Distance Determination in the Space Age

Candida albicans-produced farnesol stimulates Pseudomonas quinolone signal production in LasR-defective Pseudomonas aeruginosa strains

Candida albicans has been previously shown to stimulate the production of Pseudomonas aeruginosa phenazine toxins in dual-species colony biofilms. Here, we report that P. aeruginosa lasR mutants, which lack the master quorum sensing system regulator, regain the ability to produce quorum-sensing-regulated phenazines when cultured with C. albicans. Farnesol, a signalling molecule produced by C. albicans, was sufficient to stimulate phenazine production in LasR− laboratory strains and clinical isolates. P. aeruginosa ΔlasR mutants are defective in production of the Pseudomonas quinolone signal (PQS) due to their inability to properly induce pqsH, which encodes the enzyme necessary for the last step in PQS biosynthesis. We show that expression of pqsH in a ΔlasR strain was sufficient to restore PQS production, and that farnesol restored pqsH expression in ΔlasR mutants. The farnesol-mediated increase in pqsH required RhlR, a transcriptional regulator downstream of LasR, and farnesol led to higher levels of N-butyryl-homoserine lactone, the small molecule activator of RhlR. Farnesol promotes the production of reactive oxygen species (ROS) in a variety of species. Because the antioxidant N-acetylcysteine suppressed farnesol-induced RhlR activity in LasR− strains, and hydrogen peroxide was sufficient to restore PQS production in las mutants, we propose that ROS are responsible for the activation of downstream portions of this quorum sensing pathway. LasR mutants frequently arise in the lungs of patients chronically infected with P. aeruginosa. The finding that C. albicans, farnesol or ROS stimulate virulence factor production in lasR strains provides new insight into the virulence potential of these strains

Side channel analysis of some hash based MACs:A response to SHA-3 requirements

The forthcoming NIST's Advanced Hash Standard (AHS) competition to select SHA-3 hash function requires that each candidate hash function submission must have at least one construction to support FIPS 198 HMAC application. As part of its evaluation, NIST is aiming to select either a candidate hash function which is more resistant to known side channel attacks (SCA) when plugged into HMAC, or that has an alternative MAC mode which is more resistant to known SCA than the other submitted alternatives. In response to this, we perform differential power analysis (DPA) on the possible smart card implementations of some of the recently proposed MAC alternatives to NMAC (a fully analyzed variant of HMAC) and HMAC algorithms and NMAC/HMAC versions of some recently proposed hash and compression function modes. We show that the recently proposed BNMAC and KMDP MAC schemes are even weaker than NMAC/HMAC against the DPA attacks, whereas multi-lane NMAC, EMD MAC and the keyed wide-pipe hash have similar security to NMAC against the DPA attacks. Our DPA attacks do not work on the NMAC setting of MDC-2, Grindahl and MAME compression functions. This talk outlines our results