Option Pricing and Momentum

If managers are reluctant to fully adjust dividends to changes in earnings, stock returns and changes in the dividend yield will tend to be negatively correlated. When this is the case, stock returns will exhibit positive autocorrelation, or mo- mentum. This paper studies the pricing of options in such a situation, within a new model in which the dividend yield is an a¢ ne function of past stock returns. The model accommodates momentum in stock returns under complete markets, and, moreover, it renders preference-free formulas for European options. A momentum- inducing dividend yield implies that calls will be overpriced (underpriced) relative to puts after stock price increases (declines), a prediction in line with the findings of recent empirical research in finance, and that the Black-Scholes formula with constant dividend yield underprices out-of-the money options.Options;Momentum;Stochastic convenience yield

A Preference-Free Formula to Value Commodity Derivatives

This paper studies a new model of commodity prices in which the stochastic convenience yield is an affine function of past commodity returns. While preserving market completeness, the model exhibits price nonstationarity and mean reversion under the martingale measure, and, as a consequence, it is able to fit a slowly de- caying term structure of futures return volatilities. The model nests mean reversion in levels and geometric Brownian motion, and renders preference-free formulas for the prices of futures contracts and European options.

A cohort study of post-weaning multisystemic wasting syndrome and PCV2 in 178 pigs from birth to 14 weeks on a single farm in England

Our hypothesis was that pigs that develop post-weaning multisystemic wasting syndrome (PMWS) are detectable from an early age with signs of weight loss and other clinical and serological abnormalities. Therefore, the objective of this study was to investigate the temporally varying and fixed events linked with the clinical incidence of PMWS by comparing affected and unaffected pigs in a cohort of 178 male piglets. Piglets were enrolled at birth and examined each week. Samples of blood were collected at regular intervals. The exposures measured were porcine circovirus type 2 (PCV2) antibody titres in all 178 and PCV2 antigen in a subset of 75 piglets. We also observed piglet health and measured their weight, and a post-mortem examination was performed by an external laboratory on all pigs between 6 and 14 weeks of age that died. From the cohort, 14 (8%) pigs died from PMWS and 4% from other causes. A further 37 pigs between 6 and 14 weeks of age died from PMWS (30) and ileitis and other causes (7). PMWS was only apparent in pigs from 1 to 2 weeks before death when they wasted rapidly. There were no other characteristic clinical signs and no obvious gross clinical lesions post-mortem. There was no strong link with PCV2 antibody throughout life but PCV2 antigen level was higher from 4 to 6 weeks of age in pigs that died from PMWS compared with pigs that died from other causes