Predictable dynamics in the S&P 500 index options implied volatility surface

One key stylized fact in the empirical option pricing literature is the existence of an implied volatility surface (IVS). The usual approach consists of fitting a linear model linking the implied volatility to the time to maturity and the moneyness, for each cross section of options data. However, recent empirical evidence suggests that the parameters characterizing the IVS change over time. In this paper we study whether the resulting predictability patterns in the IVS coefficients may be exploited in practice. We propose a two-stage approach to modeling and forecasting the S&P 500 index options IVS. In the first stage we model the surface along the cross-sectional moneyness and time-to-maturity dimensions, similarly to Dumas et al. (1998). In the second-stage we model the dynamics of the cross-sectional first-stage implied volatility surface coefficients by means of vector autoregression models. We find that not only the S&P 500 implied volatility surface can be successfully modeled, but also that its movements over time are highly predictable in a statistical sense. We then examine the economic significance of this statistical predictability with mixed findings. Whereas profitable delta-hedged positions can be set up that exploit the dynamics captured by the model under moderate transaction costs and when trading rules are selective in terms of expected gains from the trades, most of this profitability disappears when we increase the level of transaction costs and trade multiple contracts off wide segments of the IVS. This suggests that predictability of the time-varying S&P 500 implied volatility surface may be not inconsistent with market efficiency.Assets (Accounting) ; Prices

Bootstrapping Pre-Averaged Realized Volatility under Market Microstructure Noise

The main contribution of this paper is to propose a bootstrap method for inference on integrated volatility based on the pre-averaging approach, where the pre-averaging is done over all possible overlapping blocks of consecutive observations. The overlapping nature of the pre-averaged returns implies that the leading martingale part in the pre-averaged returns are kn-dependent with kn growing slowly with the sample size n. This motivates the application of a blockwise bootstrap method. We show that the \blocks of blocks" bootstrap method is not valid when volatility is time-varying. The failure of the blocks of blocks bootstrap is due to the heterogeneity of the squared pre-averaged returns when volatility is stochastic. To preserve both the dependence and the heterogeneity of squared pre-averaged returns, we propose a novel procedure that combines the wild bootstrap with the blocks of blocks bootstrap. We provide a proof of the first order asymptotic validity of this method for percentile and percentile-t intervals. Our Monte Carlo simulations show that the wild blocks of blocks bootstrap improves the finite sample properties of the existing first order asymptotic theory. We use empirical work to illustrate its use in practice

Bootstrapping Pre-Averaged Realized Volatility under Market Microstructure Noise

The main contribution of this paper is to propose a bootstrap method for inference on integrated volatility based on the pre-averaging approach, where the pre-averaging is done over all possible overlapping blocks of consecutive observations. The overlapping nature of the pre-averaged returns implies that the leading martingale part in the pre-averaged returns are kn-dependent with kn growing slowly with the sample size n. This motivates the application of a blockwise bootstrap method. We show that the \blocks of blocks" bootstrap method is not valid when volatility is time-varying. The failure of the blocks of blocks bootstrap is due to the heterogeneity of the squared pre-averaged returns when volatility is stochastic. To preserve both the dependence and the heterogeneity of squared pre-averaged returns, we propose a novel procedure that combines the wild bootstrap with the blocks of blocks bootstrap. We provide a proof of the first order asymptotic validity of this method for percentile and percentile-t intervals. Our Monte Carlo simulations show that the wild blocks of blocks bootstrap improves the finite sample properties of the existing first order asymptotic theory. We use empirical work to illustrate its use in practice

Resilience in architecture: housing as a process

This work starts with a hypothesis that housing design process can be an open system, whose resilience becomes positive when it is understood as a process with multiple agents, among one of them is the architect. Current housing production presents inadequacies and flexibility problems that bring this system to an unbalanced situation, which makes it more difficult for people to modify the space they live. This work aims to identify if and how the insertion of other architectural strategies in housing production could foster its resilience. In order to reach this objective, this research uses an explanatory approach based on a literature review on the theme and case studies. Firstly, the concepts of system and resilience are explored under approaches that cover the reductionist and the systemic paradigm. After that, some discussions regarding housing and counter-hegemonic practices are presented. Finally, selected case studies are analysed from the perspective of the resilience characteristics in order to verify if they develop the concept of housing as a continuous process. The results enforce the need for shifting the emphasis of current housing schemes to a new configuration of dynamic balance and highlight the role of open and informational processes to achieve this goal

Resilience in architecture: housing as a process

This work starts with a hypothesis that housing design process can be an open system, whose resilience becomes positive when it is understood as a process with multiple agents, among one of them is the architect. Current housing production presents inadequacies and flexibility problems that bring this system to an unbalanced situation, which makes it more difficult for people to modify the space they live. This work aims to identify if and how the insertion of other architectural strategies in housing production could foster its resilience. In order to reach this objective, this research uses an explanatory approach based on a literature review on the theme and case studies. Firstly, the concepts of system and resilience are explored under approaches that cover the reductionist and the systemic paradigm. After that, some discussions regarding housing and counter-hegemonic practices are presented. Finally, selected case studies are analysed from the perspective of the resilience characteristics in order to verify if they develop the concept of housing as a continuous process. The results enforce the need for shifting the emphasis of current housing schemes to a new configuration of dynamic balance and highlight the role of open and informational processes to achieve this goal

Repercussions of a sleep medicine outreach program

Despite the high prevalence of sleep disorders, many healthcare professionals and lay people have little knowledge of Sleep Medicine. Mindful of such a reality, in 2001 the Sleep Institute of the Associação Fundo de Incentivo à Psicofarmacologia launched a campaign to increase Sleep Medicine awareness. Media features, exhibitions, inserts, and classes were used to reach 2,000,000 people and 55,000 healthcare professionals during the period from 2001 to 2004. To evaluate this program, we compared data for polysomnography referrals to the Institute in 2000 and in 2004. A total of 8805 referrals were evaluated (2000: 2164; 2004: 6641). Over the 4 years of the program, the number of beds increased by 43%; more women were referred (31 vs 37%; P < 0.001), mainly with a diagnostic hypothesis of sleep-disorder breathing (SDB). SDB was the most frequent diagnostic hypothesis in 2000 and 2004. In 2004 there were fewer referrals without a diagnostic hypothesis (27 vs 21%; P < 0.001) and for controlling surgically treated SDB (2.3 vs 1.6%; P < 0.05), and an increase in the following diagnostic hypotheses: non-invasive treatment of SDB (8.3 vs 12.3%; P < 0.001) and insomnia (3.5 vs 6.5%; P < 0.001). Insomnia diagnostic hypothesis was better correlated with SDB on referral documents in 2004 and less with a diagnostic hypothesis of limb movement disturbance. The program helped increase polysomnography referrals, particularly among women. Healthcare professionals appear to have a more developed understanding of sleep disorders.Universidade Federal de São Paulo (UNIFESP) Departamento de PsicobiologiaUniversidade Federal de São Paulo (UNIFESP) Departamento de FarmacologiaUNIFESP, Depto. de PsicobiologiaUNIFESP, Depto. de FarmacologiaSciEL