On Term Structure Models of Commodity Futures Prices and the Kaldor-Working Hypothesis

Both prices and the volatility of storable agricultural commodity futures contracts have been rising since 2005 and particularly since 2007. This paper aims to answer two principal questions: (i) How has the behavior of these futures prices over time and across maturities changed with the rise of biofuels and their demand-side pres- sure on corn and related crops?, and (ii) Is there now stronger or weaker evidence of the Kaldor-Working convenience yield-storage hypothesis, whereby futures price backwardation can be explained by the high value of remaining inventory stocks when these are near stockouts? The empirical application is to Chicago Board of Trade corn, wheat and soybeans futures. To make use of all available futures data rather than only the nearby, this paper adopts a recently developed affine term structure model approach and conducts estimation in state-space form using the Kalman filter. A novel aspect of the research is that it allows an arbitrary number N of state vari- ables, where more variables provide further precision and curvature but at a higher computational cost. It is found that a three-state variable model containing both ran- dom walk and mean reversion components provides the most parsimonious fit during 1988-2004, but that a simple one-state variable model is optimal for the period 2005- 2007. The main implication is that futures prices since 2005 behave much more like a \random walk" than before. Also, the model allows us to estimate the term struc- ture of volatility and it is found that distant maturity futures should be expected to be much more volatile than historically normal. Two practical but only tentative implications are: (a) hedgers should use significantly lower hedge ratios than before, and (b) for traders, the classic Black-Scholes option pricing solution should perform better now than it has historically. Lastly, the paper finds partial empirical support for the convenience yield relationship with relative inventory stocks, especially for soybeans and wheat.Agricultural Finance, C52, C53, G12, G13, Q13, Q14,

The Confidence Limits of a Geometric Brownian Motion

This paper investigates whether the assumption of Brownian motion often used to describe commodity price movements is satisfied. Using historical data from 17 commodity futures contracts specific tests of fractional and ordinary Brownian motion are conducted. The analyses are conducted under the null hypothesis of ordinary Brownian motion against the alternative of persistent or ergodic fractional Brownian motion. Tests for fractional Brownian motion are based on a variance ratio test. However, standard errors based on Monte Carlo simulations are quite high, meaning that the acceptance region for the null hypothesis is large. The results indicate that for the most part, the null hypothesis of ordinary Brownian motion cannot be rejected for 14 of 17 series. The three series that did not satisfy the tests were rejected because they violated the stationarity property of the random walk hypothesis.Marketing,

Spurious Long Memory in Commodity Futures: Implications for Agribusiness Option Pricing

Long memory, and more precisely fractionally integration, has been put forward as an explanation for the persistence of shocks in a number of economic time series data as well as to reconcile misleading findings of unit roots in data that should be stationary. Recent evidence suggests that long memory characterizes not commodity futures prices but rather price volatility (generally defined as $L_p$ norms of price logreturns). One implication of long memory in volatility is the mispricing of options written on commodity futures, the consequence of which is that fractional Brownian motion should replace geometric Brownian motion as the building block for option pricing solutions. This paper asks whether findings of long memory in volatility might be spurious and caused either by fragile and inaccurate estimation methods and standard errors, by correlated short memory dynamics, or by alternative data generating processes proven to generate the illusion of long memory. We find that for nine out of eleven agricultural commodities for which futures contracts are traded, long memory is spurious but is not caused by the effect of short memory. Alternative explanations are addressed and implications for option pricing are highlighted.Q13, Q14, Marketing, C52, C53, G12, G13,

Type I and Type II Errors in the Unit Root Determination of a Fractional Brownian Motion

Economists who deal with time-series data usually take the unit root test as the ‘prerequisite’ test for a Brownian motion. It is typical for any researchers to apply a battery of well-known unit root tests to their models to confirm stationarity in the model specification. Nonetheless, often times, we see a conclusion that fail to reject the null in favor of the existence of unit root even though the model specification is such that the lag coefficients of an AR(q) process do not sum up to unity. In this study, we show that having the sum of the lag coefficients equals to unity is indeed a necessary and sufficient condition for the existence of a unit root. Hence, the aforementioned incident will lead to a type II error in the unit root determination. On the other hands, type I error results when we reject the null that there exists a unit root when in fact the null is true. The fractional Brownian motion (fBm) process which has stationary but not necessarily independent increments is used to convey the findings of this study. We use Hurst exponent as a gauge for persistency in the data and show that a fBm process is a legitimate stochastic process with unit root even though it exhibits a degree of persistency in time.Unit root, Hurst exponent, Fractional Brownian Motion, Financial Economics, Risk and Uncertainty,

Spatial Control of Photoemitted Electron Beams using a Micro-Lens-Array Transverse-Shaping Technique

A common issue encountered in photoemission electron sources used in electron accelerators is the transverse inhomogeneity of the laser distribution resulting from the laser-amplification process and often use of frequency up conversion in nonlinear crystals. A inhomogeneous laser distribution on the photocathode produces charged beams with lower beam quality. In this paper, we explore the possible use of microlens arrays (fly-eye light condensers) to dramatically improve the transverse uniformity of the drive laser pulse on UV photocathodes. We also demonstrate the use of such microlens arrays to generate transversely-modulated electron beams and present a possible application to diagnose the properties of a magnetized beam.Comment: arXiv admin note: text overlap with arXiv:1609.0166

Evolutionary dynamics in the dispersal of sign languages

The evolution of spoken languages has been studied since the mid-nineteenth century using traditional historical comparative methods and, more recently, computational phylogenetic methods. By contrast, evolutionary processes resulting in the diversity of contemporary sign languages (SLs) have received much less attention, and scholars have been largely unsuccessful in grouping SLs into monophyletic language families using traditional methods. To date, no published studies have attempted to use language data to infer relationships among SLs on a large scale. Here, we report the results of a phylogenetic analysis of 40 contemporary and 36 historical SL manual alphabets coded for morphological similarity. Our results support grouping SLs in the sample into six main European lineages, with three larger groups of Austrian, British and French origin, as well as three smaller groups centring around Russian, Spanish and Swedish. The British and Swedish lineages support current knowledge of relationships among SLs based on extra-linguistic historical sources. With respect to other lineages, our results diverge from current hypotheses by indicating (i) independent evolution of Austrian, French and Spanish from Spanish sources; (ii) an internal Danish subgroup within the Austrian lineage; and (iii) evolution of Russian from Austrian sources

Water calcium concentration modifies whole-body calcium uptake in sea bream larvae during short-term adaptation to altered salinities

Whole-body calcium uptake was studied in gilthead sea bream larvae (9–83·mg) in response to changing environmental salinity and [Ca2+]. Calcium uptake increased with increased fish size and salinity. Fish exposed to calcium-enriched, diluted seawater showed increased calcium uptake compared with fish in diluted seawater alone. Calcium uptake was unchanged in Na+- enriched, diluted seawater. Overall, [Ca2+], and not salinity/osmolarity per se, appears to be the main factor contributing to calcium uptake. By contrast, drinking was reduced by a decrease in salinity/osmolarity but was little affected by external [Ca2+]. Calculations of the maximum contribution from drinking-associated calcium uptake showed that it became almost insignificant (less than 10%) through a strong decrease in drinking rate at low salinities (0–8‰). Diluted seawater enriched in calcium to the concentration present in full-strength seawater (i.e. constant calcium, decreasing salinity) restored intestinal calcium uptake to normal. Extra-intestinal calcium uptake also benefited from calcium addition but to a lesser extent