Essays in asset pricing

My dissertation consists of three chapters, each of which focuses on a different area of research in asset pricing. The first chapter's focal point is the measurement of the premium for jump risks in index option markets. The second chapter is devoted to non- parametric measurement of pricing kernel dispersion. The third chapter contributes to the literature on latent state variable recovery in option pricing models. In the first chapter, "Big risk", I show how to replicate a large family of high-frequency measures of realised return variation using dynamically rebalanced option portfolios. With this technology investors can generate optimal hedging payoffs for realised variance and several measures of realised jump variation in incomplete option markets. These trading strategies induce excess payoffs that are direct compensation for second- and higher order risk exposure in the market for (index) options. Sample averages of these excess payoffs are natural estimates of risk premia associated with second- and higher order risk exposures. In an application to the market for short-maturity European options on the S&P500 index, I obtain new important evidence about the pricing of variance and jump risk. I find that the variance risk premium is positive during daytime, when the hedging frequency is high enough, and negative during night-time. Similarly, for an investor taking long variance positions, daytime profits are grater in absolute value than night-time losses. Compensation for big risk is mostly available overnight. The premium for jump skewness risk is positive, while the premium for jump quarticity is negative (contrary to variance, also during the trading day). The risk premium for big risk is concentrated in states with large recent big risk realisations. In the second chapter, "Arbitrage free dispersion", co-authored with Andras Sali and Fabio Trojani, we develop a theory of arbitrage-free dispersion (AFD) which allows for direct insights into the dependence structure of the pricing kernel and stock returns, and which characterizes the testable restrictions of asset pricing models. Arbitrage-free dispersion arises as a consequence of Jensen's inequality and the convexity of the cumulant generating function of the pricing kernel and returns. It implies a wide family of model-free dispersion constraints, which extend the existing literature on dispersion and co-dispersion bounds. The new techniques are applicable within a unifying approach in multivariate and multiperiod settings. In an empirical application, we find that the dispersion of stationary and martingale pricing kernel components in a benchmark long-run risk model yields a counterfactual dependence of short- vs. long- maturity bond returns and is insufficient for pricing optimal portfolios of market equity and short-term bonds. In the third chapter, "State recovery from option data through variation swap rates in the presence of unspanned skewness", I show that a certain class of variance and skew swaps can be thought of as sufficient statistics of the implied volatility surface in the context of uncovering the conditional dynamics of second and third moments of index returns. I interpret the slope of the Cumulant Generating Function of index returns in the context of tradable swap contracts, which nest the standard variance swap, and share its fundamental linear pricing property in the class of Affine Jump Diffusion models. Equipped with variance- and skew-pricing contracts, I investigate the performance of a range of state variable filtering setups in the context of the stylized facts uncovered by the recent empirical option pricing literature, which underlines the importance of decoupling the drivers of stochastic volatility from those of stochastic (jump) skewness. The linear pricing structure of the contracts allows for an exact evaluation of the impact of state variables on the observed prices. This simple pricing structure allows me to design improved low-dimensional state-space filtering setups for estimating AJD models. In a simulated setting, I show that in the presence of unspanned skewness, a simple filtering setup which includes only prices of skew and variance swaps offers significant improvements over a high-dimensional filter which treats all observed option prices as observable inputs

Modelling of pH dynamics in brain cells after stroke

The identification of salvageable brain tissue is a major challenge at stroke presentation. Standard techniques used in this context, such as the perfusion–diffusion mismatch, remain controversial. There is thus a need for new methods to help guide treatment. The potential role of pH imaging in this context is currently being investigated. Intracellular pH varies as a function of local perfusion, intracellular energy stores and time. Low pH triggers the production of free radicals and affects the calcium balance of the cells, which may lead to apoptosis and cell death. Thus, the characterization of pH dynamics may have predictive value for cell death after stroke, particularly when combined with novel imaging techniques. Therefore, we have extended an existing model of brain cellular metabolism to simulate the pH response of cells to ischaemia. Simulation results for conditions of reduced cerebral blood flow show good agreement for the evolution of intracellular pH with previously reported measurements and encourage the development of quantitative pH imaging to validate the predictive value of pH

Online mjerenje glatkoće površine drva

The latest progress in the field of optics and microelectronics resulted in the development of new generation vision systems capable of scanning surface topography with very high sampling frequencies. The blue color of illuminating light as well as novel systems for controlling ultra-thin laser line thickness allows the measurement of the porous surface of wood with a triangulation method. Three alternative sensors were tested here in order to verify their suitability for the determination of surface topography in the industrial environment. The scanning head was installed at the exit zone of the four-side profiling moulder and was set to scrutinize the wood surface shape line-by-line, immediately after profiling. The sensor was also tested for automatic detection of surface defects appearing on the elements after sanding, wetting and painting with various finishing products. The set of pilot test results is presented, together with an original algorithm for real-time surface defects detection.Najnoviji napredak u području optike i mikroelektronike rezultirao je novom generacijom skenera koji mogu skenirati topografiju površine vrlo visokom frekvencijom uzorkovanja. Svjetlost plave boje, kao i novi sustav za kontrolu vrlo tanke laserske zrake omogućuju mjerenje porozne površine drva metodom triangulacije. Testirana su tri alternativna senzora kako bi se potvrdila njihova prikladnost za određivanje topografije površine u industrijskim uvjetima. Glava za skeniranje postavljena je na izlazu četverostranoga profilnoga glodala kako bi se odmah nakon profiliranja pomno linijski skenirala površina drva. Senzor je također testiran za automatsko otkrivanje površinskih grešaka na elementima nakon brušenja, vlaženja i premazivanja različitim premaznim materijalima. Predstavljen je set rezultata pilot-ispitivanja, zajedno s originalnim algoritmom za otkrivanje površinskih grešaka u realnom vremenu

Tannic Acid Modified Silver Nanoparticles Show Antiviral Activity in Herpes Simplex Virus Type 2 Infection

The interaction between silver nanoparticles and herpesviruses is attracting great interest due to their antiviral activity and possibility to use as microbicides for oral and anogenital herpes. In this work, we demonstrate that tannic acid modified silver nanoparticles sized 13 nm, 33 nm and 46 nm are capable of reducing HSV-2 infectivity both in vitro and in vivo. The antiviral activity of tannic acid modified silver nanoparticles was size-related, required direct interaction and blocked virus attachment, penetration and further spread. All tested tannic acid modified silver nanoparticles reduced both infection and inflammatory reaction in the mouse model of HSV-2 infection when used at infection or for a post-infection treatment. Smaller-sized nanoparticles induced production of cytokines and chemokines important for anti-viral response. The corresponding control buffers with tannic acid showed inferior antiviral effects in vitro and were ineffective in blocking in vivo infection. Our results show that tannic acid modified silver nanoparticles are good candidates for microbicides used in treatment of herpesvirus infections.This work was supported by the Polish National Science Centre grant No. 2011/03/B/NZ6/04878 (for MK) and Centre for Preclinical Research and Technology (CePT) Project No. POIG.02.02.00-14-024/08-0 (for MG and MD). The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscrip