Optimal Hedging with Higher Moments

This study proposes a utility-based framework for the determination of optimal hedge ratios that can allow for the impact of higher moments on the hedging decision. The approach is applied to a set of 20 commodities that are hedged with futures contracts. We find that in sample, the performance of hedges constructed allowing for non-zero higher moments is only very slightly better than the performance of the much simpler OLS hedge ratio. When implemented out of sample, utility-based hedge ratios are usually less stable over time, and can make investors worse off for some assets compared to hedging using the traditional methods. We conclude, in common with a growing body of very recent literature, by suggesting that higher moments matter in theory but not in practice.Utility-based hedging, OLS, Non-normality, risk, commodity futures, skewness, kurtosis

Phase noise due to vibrations in Mach-Zehnder atom interferometers

Atom interferometers are very sensitive to accelerations and rotations. This property, which has some very interesting applications, induces a deleterious phase noise due to the seismic noise of the laboratory and this phase noise is sufficiently large to reduce the fringe visibility in many experiments. We develop a model calculation of this phase noise in the case of Mach-Zehnder atom interferometers and we apply this model to our thermal lithium interferometer. We are able to explain the observed phase noise which has been detected through the rapid dependence of the fringe visibility with the diffraction order. We think that the dynamical model developed in the present paper should be very useful to reduce the vibration induced phase noise in atom interferometers, making many new experiments feasible

Dispersion compensation in atom interferometry by a Sagnac phase

We reanalyzed our atom interferometer measurement of the electric polarizability of lithium now accounting for the Sagnac effect due to Earth rotation. The resulting correction to the polarizability is very small but the visibility as a function of the applied phase shift is now better explained. The fact that the Sagnac and polarizability phase shifts are both proportional to $v^{-1}$, where $v$ is the atom velocity, suggests that a phase shift of the Sagnac type could be used as a counterphase to compensate the electric polarizability phase shift. This exact compensation opens the way to higher accuracy measurements of atomic polarizabilities and we discuss how this can be practically done and the final limitations of the proposed technique

Tactical allocation in commodity futures markets: Combining momentum and term structure signals

This paper examines the combined role of momentum and term structure signals for the design of profitable trading strategies in commodity futures markets. With significant annualized alphas of 10.14% and 12.66%, respectively, the momentum and term structure strategies appear profitable when implemented individually. With an abnormal return of 21.02%, our double-sort strategy that exploits both momentum and term structure signals clearly outperforms the single-sort strategies. This double-sort strategy can additionally be utilized as a portfolio diversification tool. The abnormal performance of the combined portfolios cannot be explained by a lack of liquidity, data mining or transaction costs

Is idiosyncratic volatility priced in commodity futures markets?

This article investigates the relationship between expected returns and past idiosyncratic volatility in commodity futures markets. Measuring the idiosyncratic volatility of 27 commodity futures contracts with traditional pricing models that fail to account for backwardation and contango leads to the puzzling finding that idiosyncratic volatility is significantly negatively priced cross-sectionally. However, idiosyncratic volatility is not priced when the phases of backwardation and contango are suitably factored in the pricing model. A time-series portfolio analysis similarly suggests that failing to recognize the fundamental risk associated with the inexorable phases of backwardation and contango leads to overstated profitability of the idiosyncratic volatility mimicking portfolios

Anomalous cooling of the parallel velocity in seeded beams

We have measured the parallel velocity distribution of a lithium supersonic beam produced by seeding lithium in argon. The parallel temperature for lithium is considerably lower than the calculated parallel temperature of the argon carrier gas. We have extended the theory of supersonic cooling to calculate the parallel temperature of the seeded gas, in the limit of high dilution. The theoretical result thus obtained is in good agreement with ourobservations.Comment: 01 june 200

Test of the isotopic and velocity selectivity of a lithium atom interferometer by magnetic dephasing

A magnetic field gradient applied to an atom interferometer induces a $M$-dependent phase shift which results in a series of decays and revivals of the fringe visibility. Using our lithium atom interferometer based on Bragg laser diffraction, we have measured the fringe visibility as a function of the applied gradient. We have thus tested the isotopic selectivity of the interferometer, the velocity selective character of Bragg diffraction for different diffraction orders as well as the effect of optical pumping of the incoming atoms. All these observations are qualitatively understood but a quantitative analysis requires a complete model of the interferometer

Atom interferometry measurement of the electric polarizability of lithium

Using an atom interferometer, we have measured the static electric polarizability of $^7$Li $\alpha =(24.33 \pm 0.16)\times10^{-30}$ m$^3$ $= 164.19\pm 1.08$ atomic units with a 0.66% uncertainty. Our experiment, which is similar to an experiment done on sodium in 1995 by D. Pritchard and co-workers, consists in applying an electric field on one of the two interfering beams and measuring the resulting phase-shift. With respect to D. Pritchard's experiment, we have made several improvements which are described in detail in this paper: the capacitor design is such that the electric field can be calculated analytically; the phase sensitivity of our interferometer is substantially better, near 16 mrad/$\sqrt{Hz}$; finally our interferometer is species selective it so that impurities present in our atomic beam (other alkali atoms or lithium dimers) do not perturb our measurement. The extreme sensitivity of atom interferometry is well illustrated by our experiment: our measurement amounts to measuring a slight increase $\Delta v$ of the atom velocity $v$ when it enters the electric field region and our present sensitivity is sufficient to detect a variation $\Delta v/v \approx 6 \times 10^{-13}$.Comment: 14 page

Parallel Temperatures in Supersonic Beams: Ultra Cooling of Light Atoms seeded in a Heavier Carrier Gas

We have found recently that, in a supersonic expansion of a mixture of two monoatomic gases, the parallel temperatures of the two gases can be very different. This effect is large if the seeded gas is highly diluted and if its atomic mass is considerably smaller than the one of the carrier gas. In the present paper, we present a complete derivation of our theoretical analysis of this effect. Our calculation is a natural extension of the existing theory of supersonic cooling to the case of a gas mixture, in the high dilution limit. Finally, we describe a set of temperature measurements made on a beam of lithium seeded in argon. Our experimental results are in very good agreement with the results of our calculation.Comment: 24 novembre 200