Estimating long-term volatility parameters for market-consistent models

Contemporary actuarial and accounting practices (APN 110 in the South African context) require the use of market-consistent models for the valuation of embedded investment derivatives. These models have to be calibrated with accurate and up-to-date market data. Arguably, the most important variable in the valuation of embedded equity derivatives is implied volatility. However, accurate long-term volatility estimation is difficult because of a general lack of tradable, liquid medium- and long-term derivative instruments, be they exchange-traded or over the counter. In South Africa, given the relatively short-term nature of the local derivatives market, this is of particular concern. This paper attempts to address this concern by: — providing a comprehensive, critical evaluation of the long-term volatility models most commonly used in practice, encompassing simple historical volatility estimation and econometric, deterministic and stochastic volatility models; and — introducing several fairly recent nonparametric alternative methods for estimating long-term volatility, namely break-even volatility and canonical option valuation. The authors apply these various models and methodologies to South African market data, thus providing practical, long-term volatility estimates under each modelling framework whilst accounting for real-world difficulties and constraints. In so doing, they identify those models and methodologies they consider to be most suited to long-term volatility estimation and propose best estimation practices within each identified area. Thus, while application is restricted to the South African market, the general discussion, as well as the suggestion of best practice, in each of the evaluated modelling areas remains relevant for all long-term volatility estimation

How many independent bets are there?

The benefits of portfolio diversification is a central tenet implicit to modern financial theory and practice. Linked to diversification is the notion of breadth. Breadth is correctly thought of as the number of in- dependent bets available to an investor. Conventionally applications us- ing breadth frequently assume only the number of separate bets. There may be a large discrepancy between these two interpretations. We uti- lize a simple singular-value decomposition (SVD) and the Keiser-Gutman stopping criterion to select the integer-valued effective dimensionality of the correlation matrix of returns. In an emerging market such as South African we document an estimated breadth that is considerably lower than anticipated. This lack of diversification may be because of market concentration, exposure to the global commodity cycle and local currency volatility. We discuss some practical extensions to a more statistically correct interpretation of market breadth, and its theoretical implications for both global and domestic investors.Comment: Less technical rewrite. 12 Pages, 6 Figures (.eps

Gastric variceal bleeding caused by an intrahepatic arterioportal fistula that formed after liver biopsy: a case report and review of the literature

An intrahepatic arterioportal fistula is a rare cause of portal hypertension and variceal bleeding. We report on a patient with an intrahepatic arterioportal fistula following liver biopsy who was successfully treated by hepatectomy after unsuccessful arterial embolization. We also review the literature on symptomatic intrahepatic arterioportal fistulas after liver biopsy. A 48-year-old male with bleeding gastric varices and hepatitis B virus-associated liver cirrhosis was transferred to our hospital; this patient previously underwent percutaneous liver biopsies 3 and 6 years ago. Abdominal examination revealed a bruit over the liver, tenderness in the right upper quadrant, and splenomegaly. Ultrasonographic examination, computed tomography, and angiography confirmed an arterioportal fistula between the right hepatic artery and the right portal vein with portal hypertension. After admission, the patient suffered a large hematemesis and developed shock. He was treated with emergency transarterial embolization using microcoils. Since some collateral vessels bypassed the obstructive coils and still fed the fistulous area, embolization was performed again. Despite the second embolization, the collateral vessels could not be completely controlled. Radical treatment involving resection of his right hepatic lobe was performed. For nearly 6 years postoperatively, this patient has had no further episodes of variceal bleeding

Understanding stories of professional formation during early childhood education and care practice placements

Narrative inquiry as a methodological approach enables us to examine how people represent their experiences and selves through storytelling (Chase, S. E. 2005. ‘Narrative Inquiry: Multiple Lenses, Approaches, Voices.’ In The Sage Handbook of Qualitative Research, edited by N. Denzin and Y. Lincoln, 651–679. London: Sage). To understand these constructions, other kinds of knowledge are required. Theories of social life, for example, help to interpret areas which narrative inquiry is good at revealing about human experiences such as the animation of temporality, sociality and place (Clandinin, J., V. Caine, A. Estefan, J. Huber, M. S. Murphy, and P. Steeves. 2015. ‘Places of Practice: Learning to Think Narratively.’ Narrative Works 5 (1). Accessed November 30, 2017. https://journals.lib.unb.ca/index.php/NW/issue/view/1799). Drawing on interviews with practice educators and final-year undergraduate early childhood education and care (ECEC) students in North-West Ireland, this paper considers how narrative inquiry and education theories work together to illuminate key learning experiences of ECEC undergraduate students during 12-week practice placements. In this paper I attempt to show how two education theories – ‘Threshold Concepts’ and ‘Communities of Practice’ – shed light on the nature of these key learning experiences. The paper suggests that narrative inquiry offers an emancipatory research approach by uncovering human and reflective elements of learning journeys made by ECEC students during their practice placements

Free ranking vs. rank-choosing: New insights on the conjunction fallacy

It has been consistently shown that when asked to rank options, people often make fallacious judgements. Furthermore, such fallacies can be sensitive to presentation mode. In the first study, we explored a novel type of ranking presentation, namely, choosing between two rank orders of options. To enable a direct comparison of fallacy rates between free ranking and the new presentation mode, we calculated the frequencies of the two presented rank orders in a free ranking condition. Our analysis shows that people choose the non-fallacious rank order significantly more when asked to choose between two rank orders as compared to freely ranking the possible options. In a second study, we explored whether an agent presenting the rankings to choose from has an effect. To alleviate social biases we used videos of social robots as the presenting agents. We show that rank orders presented by social agents significantly reduce the fallacy rates, compared to rank orders presented without an agent. We discuss the results in view of social decision making theories, wherein a ranking presentation by a social agent is comparable to a consultation with another person regarding free ranking. Our results suggest that fallacious decision making can be mitigated by a social agent presenting rankings to choose from

Social robot advisors: effects of robot judgmental fallacies and context

The role of social robots as advisors for decision-making is investigated. We examined how a robot advisor with logical reasoning and one with cognitive fallacies affected participants’ decision-making in different contexts. The participants were asked to make multiple decisions while receiving advice from both robots during the decision-making process. Participants had to choose which robot they agreed with and, at the end of the scenario, rank the possible options presented to them. After the interaction, participants were asked to assign jobs to the robots, e.g. jury or bartender. Based on the ‘like-me’ hypothesis and previous research of social mitigation of fallacious judgmental decisions, we have compared participants’ agreement with the two robots for each scenario to random choice using t-tests, as well as analysed the dynamical nature of the interaction, e.g. whether participants changed their choices based on the robots’ verbal opinion using Pearson correlations. Our results show that the robots had an effect on the participants’ responses, regardless of the robots’ fallaciousness, wherein participants changed their decisions based on the robot they agreed with more. Moreover, the context, presented as two different scenarios, also had an effect on the preferred robots, wherein an art auction scenario resulted in significantly increased agreement with the fallacious robot, whereas a detective scenario did not. Finally, an exploratory analysis showed that personality traits, e.g. agreeableness and neuroticism, and attitudes towards robots had an impact on which robot was assigned to these jobs. Taken together, the results presented here show that social robots’ effects on participants’ decision-making involve complex interactions between the context, the cognitive fallacies of the robot and the attitudes and personalities of the participants and should not be considered a single psychological construct