On the relevance of modeling volatility for pricing purposes

This paper presents a two-factor (Vasicek-CIR) model of the term structure of interest rates and develops its pricing and empirical properties. We assume that default free discount bond prices are determined by the time to maturity and two factors, the long-term interest rate and the spread. Assuming a certain process for both factors, a general bond pricing equation is derived and a closed-form expression for bond prices is obtained. Empirical evidence of the model's performance in comparisson with a double Vasicek model is presented. The main conclusion is that the modeling of the volatility in the long- term rate process can help (in a large amount) to fit the observed data can improve - in a reasonable quantity - the prediction of the future movements in the medium- and long-term interest rates. However, for shorter maturities, it is shown that the pricing errors are, basically, negligible and it is not so clear which is the best model to be used.Term structure of interest rates, bond pricing equation, two-factor models, Ornstein-Uhlenbeck process, CIR process

Beyond Stemming and Lemmatization: Ultra-stemming to Improve Automatic Text Summarization

In Automatic Text Summarization, preprocessing is an important phase to reduce the space of textual representation. Classically, stemming and lemmatization have been widely used for normalizing words. However, even using normalization on large texts, the curse of dimensionality can disturb the performance of summarizers. This paper describes a new method for normalization of words to further reduce the space of representation. We propose to reduce each word to its initial letters, as a form of Ultra-stemming. The results show that Ultra-stemming not only preserve the content of summaries produced by this representation, but often the performances of the systems can be dramatically improved. Summaries on trilingual corpora were evaluated automatically with Fresa. Results confirm an increase in the performance, regardless of summarizer system used.Comment: 22 pages, 12 figures, 9 table

Tourist attractions as a moderating element in explanatory models for loyalty development

Many studies have analysed the impact of destination image on tourist satisfaction and loyalty, including different mediating variables, both affective and cognitive. This article will attempt to determine whether the representative model of visitors' future behaviour (satisfaction and loyalty) – viewed in terms of destination image, quality, value, disconfirmation, and emotions – follows a common, universal pattern or whether that behaviour actually differs when the model is applied to destinations offering different attractions.The paper below analyses disparate emotional behaviour in relation to destinations mentioned in the literature, when value does not play a mediating role between perception of quality and satisfaction with coastal destinations. This study concludes that there is a common pattern for purely urban cultural destinations while a different pattern exists for urban cultural destinations that include beaches among their attractions.Múltiples estudios han analizado el impacto de la imagen de los destinos en la satisfacción y lealtad de los turistas, incluyendo diversas variables mediadoras tanto afectivas como cognitivas. Este artículo intentará determinar si el modelo de comportamiento futuro del visitante (satisfacción y lealtad), analizado en términos de imagen del destino, calidad, valor, disconfirmación y emociones, sigue un modelo común y universal, o si por el contrario difiere entre destinos que ofrecen diferente tipo de atracciones al visitante.El trabajo contrasta la existencia de un comportamiento dispar de las emociones en relación con lo expuesto en la literatura, al tiempo que se señala que el valor no juega un rol mediador entre la calidad y la satisfacción para los destinos costeros. Como conclusión se extrae que hay un modelo de comportamiento común entre destinos puramente urbanos, mientras que existe otro diferente para destinos culturales urbanos que cuentan con playa entre sus atractivos turísticos

On the robustness of least-squares Monte Carlo (LSM) for pricing American derivatives

This paper analyses the robustness of Least-Squares Monte Carlo, a technique recently proposed by Longstaff and Schwartz (2001) for pricing American options. This method is based on least-squares regressions in which the explanatory variables are certain polynomial functions. We analyze the impact of different basis functions on option prices. Numerical results for American put options provide evidence that a) this approach is very robust to the choice of different alternative polynomials and b) few basis functions are required. However, these conclusions are not reached when analyzing more complex derivatives.Least-Squares Monte Carlo, option pricing, American options

Australian Asian options

We study European options on the ratio of the stock price to its average and viceversa. Some of these options are traded in the Australian Stock Exchange since 1992, thus we call them Australian Asian options. For geometric averages, we obtain closed-form expressions for option prices. For arithmetic means, we use dierent approximations that produce very similar results.Asian options, arithmetic average, geometric average, edgeworth expansion, lognormal distribution, gamma distribution