Efficiency in index options markets and trading in stock baskets

Researchers have reported mispricing in index options markets. This study further examines the efficiency of the S&P 500 index options market by testing theoretical pricing relationships implied by no-arbitrage conditions. The effect of a traded stock basket, Standard and Poor's Depository Receipts (SPDRs), on the link between index and options markets is also examined. Pricing efficiency within options markets improves, and the evidence supports the hypothesis that a stock basket enhances the connection between markets. However, when transactions costs and short sales constraints are included, very few violations of the pricing relationships are reported.Options (Finance) ; Stock - Prices

Circuit QED and sudden phase switching in a superconducting qubit array

Superconducting qubits connected in an array can form quantum many-body systems such as the quantum Ising model. By coupling the qubits to a superconducting resonator, the combined system forms a circuit QED system. Here, we study the nonlinear behavior in the many-body state of the qubit array using a semiclassical approach. We show that sudden switchings as well as a bistable regime between the ferromagnetic phase and the paramagnetic phase can be observed in the qubit array. A superconducting circuit to implement this system is presented with realistic parameters .Comment: 4 pages, 3 figures, submitted for publication

Deterministic Generation of Entangled Photons in Superconducting Resonator Arrays

We present a scheme for the deterministic generation of entangled photon pairs in a superconducting resonator array. The resonators form a Jaynes-Cummings lattice via the coupling to superconducting qubits, and the Kerr-like nonlinearity arises due to the coupling.We show that entangled photons can be generated on demand by applying spectroscopic techniques and exploiting the nonlinearity and symmetry in the resonators. The scheme is robust against small parameter spreads due to fabrication errors. Our findings can be used as a key element for quantum information processing in superconducting quantum circuits.Comment: 4 pages, 3 figure

Evidence of the Efficiency of Index Options Markets

Index options have been one of the most successful of the many innovative financial instruments introduced over the last few decades, as their high trading volume indicates. Given their prominence, the pricing efficiency of these markets is of great importance. ; Detecting inefficient pricing, or mispricing, requires comparing a theoretically efficient price with prices of options traded in financial markets. One popular approach to deriving pricing relationships is based on a principle called no-arbitrage, which simply assumes that arbitrageurs enter the market and quickly eliminate mispricing if a profit opportunity without risk exists. However, in a well-functioning economy there is no such opportunity; arbitrage is critical for ensuring market efficiency. ; The authors analyze earlier evidence that has been taken to indicate that options markets are inefficient and that casts doubt on whether options markets contribute to price discovery, hedging, and efficient capital allocation. The article presents new evidence on index option pricing, examining arbitrage strategies that do not involve trading a stock index and relationships that hold for any given value of the underlying asset. This approach avoids some of the difficulties that can arise from impediments to arbitrage. The article also examines the efficiency of the market for the popular Standard and Poor\u27s 500 index options. While the results indicate that these options are frequently mispriced, the mispricing may not indicate market inefficiency because there are limits to arbitrage

Flat bidifferential ideals and semihamiltonian PDEs

In this paper we consider a class of semihamiltonian systems characterized by the existence of a special conservation law. The density and the current of this conservation law satisfy a second order system of PDEs which has a natural interpretation in the theory of flat bifferential ideals. The class of systems we consider contains important well-known examples of semihamiltonian systems. Other examples, like genus 1 Whitham modulation equations for KdV, are related to this class by a reciprocal trasformation.Comment: 18 pages. v5: formula (36) corrected; minor change