The Estimation of Risk Premium Implicit in Oil Prices

Futures prices can be seen as a sum of the expected value of the underlying asset price with a risk premium. In order to disentangle those two components of the futures prices, one can try to model the relationship between spot and futures prices, in order to obtain a closed expression for the risk premium, or to use information from spot and option prices to estimate risk aversion functions. Given the high volatility of the ratios between futures and spot prices, we opted for the latter, estimating risk-neutral and subjective probability density functions, respectively from option and spot prices observed. Looking at the prices of Brent and West Texas Intermediate Light/Sweet Crude Oil options, evidence obtained suggests that the risk premium is typically very low for levels near the futures prices.

Modeling the life and death of competing languages from a physical and mathematical perspective

Recent contributions address the problem of language coexistence as that of two species competing to aggregate speakers, thus focusing on the dynamics of linguistic traits across populations. They draw inspiration from physics and biology and share some underlying ideas -- e. g. the search for minimal schemes to explain complex situations or the notion that languages are extant entities in a societal context and, accordingly, that objective, mathematical laws emerge driving the aforementioned dynamics. Different proposals pay attention to distinct aspects of such systems: Some of them emphasize the distribution of the population in geographical space, others research exhaustively the role of bilinguals in idealized situations (e. g. isolated populations), and yet others rely extremely on equations taken unchanged from physics or biology and whose parameters bear actual geometrical meaning. Despite the sources of these models -- so unrelated to linguistics -- sound results begin to surface that establish conditions and make testable predictions regarding language survival within populations of speakers, with a decisive role reserved to bilingualism. Here we review the most recent works and their interesting outcomes stressing their physical theoretical basis, and discuss the relevance and meaning of the abstract mathematical findings for real-life situations.Comment: 22 pages, 4 figures. Fifth chapter of the book Bilingualism and Minority Languages in Europe: Current trends and developments by F. Lauchlan, M. C. Parafita Couto, ed

National Productive Structure and Innovative Dynamics: Finding the (Endogenous) Path to Convergence

We extend the model presented in Barro and Sala-i-Martin (1997) by allowing for two types of economies - more developed and in transition to European Union integration - to both imitate and innovate varieties of intermediate goods. Besides depending on research and development expenditures, we also allow for the stochastic nature of innovation by making it also dependent on a random component. We do this by Monte Carlo simulation, using a Box-Muller process, and solve a three differential equation model by using numerical methods. Two situations are presented: a leading economy with greater institutions and more labour than the transition economy versus a situation where an institutional advance is given to the transition economy.stochastic innovation; transition economies; growth; technology; diffusion; convergence

A two-factor model of the German term structure of interest rates

In this paper we show that a two-factor constant volatility model provides an adequate description of the dynamics and shape of the German term structure of interest rates from 1972 up to 1998. The model also provides reasonable estimates of the volatility and term premium curves. Following the conjecture that the two factors driving the German term structure of interest rates represent the H[-DQWH real interest rate and the expected inflation rate, the identification of one factor with expected inflation is discussed. Our estimates are obtained using a Kalman filter and a maximum likelihood procedure including in the measurement equation both the yields and their volatilities JEL Classification: E43, G12affine model, expectations hypothesis, pricing kernels, term premiums

Importance of interlinguistic similarity and stable bilingualism when two languages compete

In order to analyze the dynamics of two languages in competition, one approach is to fit historical data on their numbers of speakers with a mathematical model in which the parameters are interpreted as the similarity between those languages and their relative status. Within this approach, we show here, on the basis of a detailed analysis and extensive calculations, the outcomes that can emerge for given values of these parameters. Contrary to previous results, it is possible that in the long term both languages coexist and survive. This happens only when there is a stable bilingual group, and this is possible only if the competing languages are sufficiently similar, in which case its occurrence is favoured by both similarity and status symmetry.Comment: to appear in New Journal of Physic