Modelling commodity value at risk with Psi Sigma neural networks using open–high–low–close data

The motivation for this paper is to investigate the use of a promising class of neural network models, Psi Sigma (PSI), when applied to the task of forecasting the one-day ahead value at risk (VaR) of the oil Brent and gold bullion series using open–high–low–close data. In order to benchmark our results, we also consider VaR forecasts from two different neural network designs, the multilayer perceptron and the recurrent neural network, a genetic programming algorithm, an extreme value theory model along with some traditional techniques such as an ARMA-Glosten, Jagannathan, and Runkle (1,1) model and the RiskMetrics volatility. The forecasting performance of all models for computing the VaR of the Brent oil and the gold bullion is examined over the period September 2001–August 2010 using the last year and half of data for out-of-sample testing. The evaluation of our models is done by using a series of backtesting algorithms such as the Christoffersen tests, the violation ratio and our proposed loss function that considers not only the number of violations but also their magnitude. Our results show that the PSI outperforms all other models in forecasting the VaR of gold and oil at both the 5% and 1% confidence levels, providing an accurate number of independent violations with small magnitude

Derivative products and innovation in Islamic finance

Purpose – The purpose of this paper is to highlight the possibility of structuring an Islamic option which includes an element of risk sharing as opposed to risk transfer. Design/methodology/approach – The approach adopted in this research involved a combination of a wa’ad (promise) and murabaha (cost plus sale) and examining if they could form a risk-sharing Islamic option. The payoffs were assumed to be dependent on bi-period outcomes. Findings – The paper attempted to create a hybrid risk-sharing option by combining elements of both wa’ad (promise) and murabaha (cost plus sale). The results yielded are dependent on the eventual direction of the market (in-the-money, at-the-money and out-the-money). While the results are not definitive, they do provide arguments for the adoption of a risk-sharing, as opposed to a risk-transfer, methodology when it comes to structuring risk management instruments. Research limitations/implications – One of the major limitations of this research is the inability to assess the Shariah compliance of the proposed instrument. Shariah compliance is determined by a Shariah Supervisory Board, and every effort has been made to ensure that Shariah financial principles are adhered to in the creation of this structure. Practical implications – The structure provides some interest arguments in the creation of risk management tools under a Shariah financial framework. The structure illustrates the benefits of having a risk-sharing mode over the conventional risk-transfer stances of most risk management tools. Originality/value – The paper offers a new way of structuring a risk management tool in Islamic finance. It explores the highly debated area of derivatives in Islamic finance and proposes a new way of creating a risk management tool that involves some elements of risk sharing

The impact of pollution on stellar evolution models

An approach is introduced for incorporating the concept of stellar pollution into stellar evolution models. The approach involves enhancing the metal content of the surface layers of stellar models. In addition, the surface layers of stars in the mass range of 0.5-2.0 Solar masses are mixed to an artificial depth motivated by observations of lithium abundance. The behavior of polluted stellar evolution models is explored assuming the pollution occurs after the star has left the fully convective pre main sequence phase. Stellar models polluted with a few Earth masses of iron are significantly hotter than stars of the same mass with an equivalent bulk metallicity. Polluted stellar evolution models can successfully reproduce the metal-rich, parent star tau Bootis and suggest a slightly lower mass than standard evolution models. Finally, the possibility that stars in the Hyades open cluster have accreted an average of 0.5 Earth masses of iron is explored. The results indicate that it is not possible to rule out stellar pollution on this scale from the scatter of Hyades stars on a color-magnitude diagram. The small amount of scatter in the observational data set does rule out pollution on the order of 1.5 Earth masses of iron. Pollution effects at the low level of 0.5 Earth masses of iron do not produce substantial changes in a star's evolution.Comment: 14 pages, 3 figures, AASTeX, to appear in the 10/10/03 issue of Ap

C, S, Zn and Cu abundances in planet-harbouring stars

We present a detailed and uniform study of C, S, Zn and Cu abundances in a large set of planet host stars, as well as in a homogeneous comparison sample of solar-type dwarfs with no known planetary-mass companions. Carbon abundances were derived by {EW} measurement of two C I optical lines, while spectral syntheses were performed for S, Zn and Cu. We investigated possible differences in the behaviours of the volatiles C, S and Zn and in the refractory Cu in targets with and without known planets in order to check possible anomalies due to the presence of planets. We found that the abundance distributions in stars with exoplanets are the high [Fe/H] extensions of the trends traced by the comparison sample. All volatile elements we studied show [X/Fe] trends decreasing with [Fe/H] in the metallicity range -0.8<[Fe/H]<0.5, with significantly negative slopes of -0.39+-0.04 and -0.35+-0.04 for C and S, respectively. A comparison of our abundances with those available in the literature shows good agreement in most cases.Comment: 28 pages, 13 figures, accepted for publication in A&

To be or not to be an auctioneer: Some thoughts on the legal nature of online eBay auctions and the protection of consumers

This paper discusses the legal classification of online “eBay” auctions. The discussion has key implications on the scope of consumer protection law as sale by auctions are, for example, excluded from the scope of the Consumer Protection (Distance Selling) Regulations 2000. The paper uncovers that online “eBay” auctions cannot always be considered as traditional auctions and that eBay, as an intermediary, is not to be considered as an auctioneer. This creates difficulties associated with a distributive application of consumer protection laws such as the Consumer Protection (Distance Selling) Regulations 2000. Another set of difficulties is associated with a lenient legal regime applicable to the liability of eBay under the Electronic Commerce (EC Directive) Regulations 2002 . The paper concludes that there is an urgent need to clarify the legal classification of online auctions and to rethink the liability of online auction sites to better protect consumers

Blogging in the physics classroom: A research-based approach to shaping students' attitudes towards physics

Even though there has been a tremendous amount of research done in how to help students learn physics, students are still coming away missing a crucial piece of the puzzle: why bother with physics? Students learn fundamental laws and how to calculate, but come out of a general physics course without a deep understanding of how physics has transformed the world around them. In other words, they get the "how" but not the "why". Studies have shown that students leave introductory physics courses almost universally with decreased expectations and with a more negative attitude. This paper will detail an experiment to address this problem: a course weblog or "blog" which discusses real-world applications of physics and engages students in discussion and thinking outside of class. Specifically, students' attitudes towards the value of physics and its applicability to the real-world were probed using a 26-question Likert scale survey over the course of four semesters in an introductory physics course at a comprehensive Jesuit university. We found that students who did not participate in the blog study generally exhibited a deterioration in attitude towards physics as seen previously. However, students who read, commented, and were involved with the blog maintained their initially positive attitudes towards physics. Student response to the blog was overwhelmingly positive, with students claiming that the blog made the things we studied in the classroom come alive for them and seem much more relevant.Comment: 20 pages, 6 figure