Evaluation of the HARDMAN comparability methodology for manpower, personnel and training

The methodology evaluation and recommendation are part of an effort to improve Hardware versus Manpower (HARDMAN) methodology for projecting manpower, personnel, and training (MPT) to support new acquisition. Several different validity tests are employed to evaluate the methodology. The methodology conforms fairly well with both the MPT user needs and other accepted manpower modeling techniques. Audits of three completed HARDMAN applications reveal only a small number of potential problem areas compared to the total number of issues investigated. The reliability study results conform well with the problem areas uncovered through the audits. The results of the accuracy studies suggest that the manpower life-cycle cost component is only marginally sensitive to changes in other related cost variables. Even with some minor problems, the methodology seem sound and has good near term utility to the Army. Recommendations are provided to firm up the problem areas revealed through the evaluation

Asset pricing puzzles: Evidence from options markets

This paper proposes and implements a consumption-based pricing kernel (stochastic discount factor) testing methodology that focuses on the covariance between the pricing kernel and asset squared excess returns. This covariance has an intuitive economic interpretation as a risk-neutral variance risk-premium, i.e. the difference between the risk-neutral return variance and the objective return variance. In the same way that an asset riskpremium puzzle is due to a failure of the pricing kernel to adequately covary with asset excess returns, a riskneutral variance puzzle is due to a failure of the pricing kernel to adequately covary with asset squared excess returns. This paper tests a consumption-based pricing kernel specification that is compatible with habit formation, consumption durability, and constant relative risk-aversion over a range of plausible preference parameter values. The difference between consumption-based and semi-parametric option-based estimates of unconditional risk-neutral S&P500 return variance is used as a pricing kernel specification test statistic. Evidence is found of a risk-neutral S&P500 return variance puzzle if constant relative risk-aversion is assumed. The puzzle is resolved when the pricing kernel is allowed to exhibit habit formation. The acceptable habit pricing kernels exhibit higher habit levels, higher utility function concavity, and lower rates of timepreference than estimates in related papers. When the full history of consumption data is used, the preference parameter estimates are more similar to those of related papers

Implied volatility functions: a reprise

Dumas, Fleming, Whaley (DFW, 1998) find that option models based on deterministic volatility functions (DVF) perform poorly because the estimated volatility function is unstable over time. DFW provide evidence that the DVF changes significantly on a weekly basis. This paper proposes a new class of dynamic implied volatility function models (DIVF). This class of models separates a time-invariant implied volatility function from the stochastic state variables that drive changes in the individual implied volatilities. The dynamics of the state variables are modeled explicitly. This framework facilitates consistent pricing and hedging with time-variation in the implied volatility function (IVF). In tests conducted using the full history of S&P500 futures option prices, the DIVF model is found to substantially improve pricing performance compared to static implied volatility function models and benchmark pricing models such as Black and Scholes (1973)

Nonparametric pricing of multivariate contingent claims

In this paper, I derive and implement a nonparametric, arbitrage-free technique for multivariate contingent claim (MVCC) pricing. Using results from the method of copulas, I show that the multivariate risk-neutral density can be written as a product of marginal risk-neutral densities and a risk-neutral dependence function. I then develop a pricing technique using nonparametrically estimated marginal risk-neutral densities (based on options data) and a nonparametric dependence function (based on historical return data). By using nonparametric estimation, I avoid the pricing biases that result from incorrect parametric assumptions such as lognormality. I apply this technique to estimate the joint risk-neutral density of euro-dollar and yen-dollar returns. I compare the nonparametric risk-neutral density with density based on a lognormal dependence function and nonparametric marginals. The nonparametric euro-yen risk-neutral density has greater volatility, skewness, and kurtosis than the density based on a lognormal dependence function. In a comparison of pricing accuracy for euro-yen futures options, I find that the nonparametric model is superior to the lognormal model

Empirical tests of interest rate model pricing kernels

This paper estimates and tests consumption-based pricing kernels used in common equilibrium interest rate term structure models. In contrast to previous papers that use return orthogonality conditions, estimation in this paper is accomplished using moment conditions from a consumption-based option pricing equation and market prices of interest rate options. This methodology is more sensitive to preference misspecification over states associated with large changes in consumption than previous techniques. In addition, this methodology provides a large set of natural moment conditions to use in estimation and testing compared to an arbitrary choice of return orthogonality conditions (e.g. instruments selected) used in GMM estimation. Eurodollar futures option prices and an estimated joint model of quarterly aggregate consumption and three month Eurodollar rates suggest are used to estimate and test pricing kernels based on logarithmic, power, and exponential utility functions. Using the market prices of interest rate options, evidence is found which is consistent with the equity premium puzzle; very high levels of risk aversion are needed to justify the observed premium associated with an investment position positively correlated with aggregate consumption. In addition, evidence is found which is consistent with the riskfree rate puzzle: at high levels of risk-aversion for power or exponential utility, negative rates of time preference are needed to fit the observed low riskless interest rates. These results suggest that typical term structure models are misspecified in terms of assumed preferences. This may have deleterious effects on model estimates of the interest rate term structure estimates and interest rate option prices

The Arecibo Dual-Beam Survey: Arecibo and VLA Observations

The Arecibo Dual-Beam Survey is a "blind" 21 cm search for galaxies covering \~430 deg^2 of sky. We present the data from the detection survey as well as from the follow-up observations to confirm detections and improve positions and flux measurements. We find 265 galaxies, many of which are extremely low surface brightness. Some of these previously uncataloged galaxies lie within the zone of avoidance where they are obscured by the gas and dust in our Galaxy. 81 of these sources are not previously cataloged optically and there are 11 galaxies that have no associated optical counterpart or are only tentatively associated with faint wisps of nebulosity on the Digitized Sky Survey images. We discuss the properties of the survey and in particular we make direct determinations of the completeness and reliability of the sample. The behavior of the completeness and its dependencies is essential for determining the HI mass function. We leave the discussion of the mass function for a later paper, but do note that we find many low surface brightness galaxies and 7 sources with M_HI < 10^8 Msolar.Comment: 23 pages, 20 figures, accepted ApJS. For tables 2 and 3 only the first page has been included. ASCII tables are provided separatel

Fiddlers, dancing, art and utility : what isn’t traditional?

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