Essays on American Options

This thesis deals with the pricing of American equity options exposed to correlated interest rate and equity risks. The first article, American options on high dividend securities: a numerical investigation by F. Rotondi, investigates the Monte Carlo-based algorithm proposed by Longstaff and Schwartz (2001) to price American options. I show how this algorithm might deliver biased results when valuing American options that start out of the money, especially if the dividend yield of the underlying is high. I propose two workarounds to correct for this bias and I numerically show their strength. The second article, American options and stochastic interest rates by A. Battauz and F. Rotondi introduces a novel lattice-based approach to evaluate American option within the Vasicek model, namely a market model with mean-reverting stochastic interest rates. Interestingly, interest rates are not assumed to be necessarily positive and non standard optimal exercise policy of American call and put options arise when interest rates are just mildly negative. The third article, Barrier options under correlated equity and interest rate risks by F. Rotondi deals with derivatives with barrier features within a market model with both equity and interest rate risk. Exploiting latticebased algorithm, I price European and American knock-in and knock-out contracts with both a discrete and a continuous monitoring. Then, I calibrate the model to current European data and I document how models that assume either a constant interest rate, or strictly positive stochastic interest rates or uncorrelated interest rates deliver sizeable pricing errors

Valuation of general GMWB annuities in a low interest rate environment

Variable annuities with Guaranteed Minimum Withdrawal Benefits (GMWB) entitle the policy holder to periodic withdrawals together with a terminal payoff linked to the performance of an equity fund. In this paper, we consider the valuation of a general class of GMWB annuities, allowing for step-up, bonus and surrender features, taking also into account mortality risk and death benefits. When dynamic withdrawals are allowed, the valuation of GMWB annuities leads to a stochastic optimal control problem, which we address here by dynamic programming techniques. Adopting a Hull-White interest rate model, correlated with the equity fund, we propose an efficient tree-based algorithm. We perform a thorough analysis of the determinants of the market value of GMWB annuities and of the optimal withdrawal strategies. In particular, we study the impact of a low/negative interest rate environment. Our findings indicate that low/negative rates profoundly affect the optimal withdrawal behaviour and, in combination with step-up and bonus features, increase significantly the fair values of GMWB annuities, which can only be compensated by large management fees

Mobile Money and School Participation: Evidence from Africa

AbstractThis paper shows that mobile money technology—an electronic wallet service that allows users to deposit, transfer, and receive money using their mobile phones—is positively correlated with increased school participation of children in school age. By using data from 4 African countries, we argue that, by reducing transaction costs, and by making it easier and less expensive to receive remittances, mobile money reduces the need for coping strategies that are detrimental to child development, such as withdrawing children from school and sending them to work. We find that mobile money increases the chances of children attending school. This finding is robust to different empirical models. In a nutshell, our results show that 1 million children could start attending school in low-income countries if mobile money was available to all

Mobile phones, digital inequality, and fertility: Longitudinal evidence from Malawi

We focus on the relationship between mobile phone ownership and childbearing in south- ern Malawi, showing that mobile phone acquisition is associated with reductions in ideal family size and lower overall parity among phone-owning women compared to their phone-less counterparts

A hidden Markov model for statistical arbitrage in international crude oil futures markets

In this work, we study statistical arbitrage strategies in international crude oil futures markets. We analyse strategies that extend classical pairs trading strategies, considering the two benchmark crude oil futures (Brent and WTI) together with the newly introduced Shanghai crude oil futures. We document that the time series of these three futures prices are cointegrated and we model the resulting cointegration spread by a mean-reverting regime-switching process modulated by a hidden Markov chain. By relying on our stochastic model and applying online filter-based parameter estimators, we implement and test a number of statistical arbitrage strategies. Our analysis reveals that statistical arbitrage strategies involving the Shanghai crude oil futures are profitable even under conservative levels of transaction costs and over different time periods. On the contrary, statistical arbitrage strategies involving the three traditional crude oil futures (Brent, WTI, Dubai) do not yield profitable investment opportunities. Our findings suggest that the Shanghai futures, which has already become the benchmark for the Chinese domestic crude oil market, can be a valuable asset for international investors

Benzo[b]tiophen-3-ol derivatives as effective inhibitors of human monoamine oxidase: design, synthesis, and biological activity

A series of benzo[b]thiophen-3-ols were synthesised and investigated as potential human monoamine oxidase (hMAO) inhibitors in vitro as well as ex vivo in rat cortex synaptosomes by means of evaluation of 3,4-dihydroxyphenylacetic acid/dopamine (DOPAC/DA) ratio and lactate dehydrogenase (LDH) activity. Most of these compounds possessed high selectivity for the MAO-B isoform and a discrete antioxidant and chelating potential. Molecular docking studies of all the compounds underscored potential binding site interactions suitable for MAO inhibition activity, and suggested structural requirements to further improve the activity of this scaffold by chemical modification of the aryl substituents. Starting from this heterocyclic nucleus, novel lead compounds for the treatment of neurodegenerative disease could be developed

765 Is acute response to calcium sensitizers drugs predictive of response to cardiac contractility modulation in NYHA IV patients?

Abstract A 53-years old man presented to our institution with a diagnosis of decompensated heart failure NYHA Class IV. He had a history of ischaemic heart disease with severe biventricular dysfunction, diabetes, hypertension, dyslipidaemia, advanced chronic kidney disease, previous explanation of dual-chamber implantable electronic device (ICD) due to endocarditis and subsequent implantation of subcutaneous ICD in primary prevention. Home therapy included uptitrated angiotensin-converting enzyme inhibitor, β-blocker, loop-diuretic, spironolactone, acetylsalicylic acid, and oral hypoglycemics. Clinical examination showed signs and symptoms of systemic and pulmonary congestion with pleural effusion and ascites. Echocardiography revealed diffuse left ventricular (LV) hypokinesis with an ejection fraction (EF) of 25%, severe right ventricular dysfunction and increased filling pressures. He was treated with high dose of i.v. diuretics with mild improvement of dyspnoea. However, haemodynamic stability was labile with worsening of symptoms as soon as mild down-titration of iv diuretics was attempted. Levosimendan, a calcium-sensitizer inodilator, indicated for short-term treatment of acutely decompensated severe chronic heart failure (HF), was administered with good clinical response. Thus, we thought that the patient could have benefited from contractility modulation therapy (CCM) which acts on intramyocardial calcium handling. CCM is a novel therapeutic option for patients with classes III–IV HF with EF ≥ 25% to ≤ 45% and narrow QRS complex that acts on intramyocardial calcium-handling. CCM proved effective in alleviating symptoms, improving exercise tolerance and quality of life, and reducing hospitalization rates in HF. It improves myocardial contractility, reverses the foetal myocyte gene program associated with HF and facilitates cardiac reverse remodelling. Therefore, an Optimizer Smart System (Impulse Dynamics) was implanted. Two pacing electrodes were placed on the interventricular septum in apical and mid-septal position, respectively. The leads were connected to a pulse-generator in a right pectoral pocket. In the following days, we observed a progressive improvement in clinical status, with gradual resolution of peripheral oedema, dyspnoea and fatigue and significant weight loss. Six-month echocardiography showed a stable value of EF and significant improvement in stroke volume (35.2 ml from 24.8 ml at baseline). The patient did not undergo further hospitalization for decompensated HF and was in stable ambulatory NYHA Class IV. We believe CCM is an option in patients with advanced HF in which avoiding recurrent hospitalizations, with their overt increase mortality, is often a challenging therapeutic goal. 765 Figur

Ireland

This report is part of the project The Factbook on the Illicit Trade in Tobacco Products.It focuses on Ireland, where the illicit trade in tobacco products has been an important concern since 2007\u20132008. According to unofficial estimates, 29.7% of total tobacco consumption was illicit in 2012, when Ireland ranked 3rd (after Latvia and Lithuania) among 22 European countries for illicit tobacco penetration (Euromonitor International 2013a). To tackle the ITTP, the Revenue Commissioners have launched the Revenue\u2019s Strategy on Combating the Illicit Tobacco Trade (2011\u20132013), the aim of which is to deter people from buying illicit trade products and to reduce their availability. Given the close geographical (shared land border), social, economic and cultural connections, the report also focuses, where appropriate, on Northern Ireland, a part of the United Kingdom

Spain

This report is part of the project The Factbook on the Illicit Trade in Tobacco Products (hereafter ITTP). It focuses on Spain, where the illicit trade in tobacco products is an emerging issue, particularly in certain regions. After tax increases in 2009-2010, Spain became a destination market of illicit tobacco and the ITTP penetration peaked at 8.8% in 2013. Nevertheless, the ITTP level is lower than the European average. In the past, ITTP penetration had decreased from 6% to almost 1% between 1998 and 2010, due to the successful enforcement actions against contraband. Spain used to be a transit country

Italy

This report is part of the project The Factbook on the Illicit Trade in Tobacco Products. It focuses on Italy, where the illicit trade in tobacco seems to have grown in recent years. This fact, combined with the geographical location of the country and the consolidated presence of organised crime, makes Italy an interesting country to explore in terms of ITTP flows in the Mediterranean basin and towards North European countries