Call and put implied volatilities and the derivation of option implied trees

Standard methodologies for the derivation of implied trees from option prices are based on the validity of the put-call parity. Muzzioli and Torricelli (2002) propose a methodology which accounts for PCP violations. Based on this latter approach the present paper advances in two main directions. First we propose a different methodology in order to imply the interval of artificial probabilities at each node of the tree. Secondly, we perform an empirical validation of the implied tree obtained, both in the sample and out of sample, by using DAX index options data set covering the period from January 4, 1999 to December 28, 2000. Numerical results are compared with one of the most used standard methodologies, i.e. Derman and Kani’s. The results suggest that the estimation proposed, by taking into account the informational content of both call and put prices, highly improves both the in-the-sample fitting and the out-of-sample performance.Binomial Method; Put-Call Parity; Choquet Pricing; Interval Tree.

The no arbitrage condition in option implied trees: evidence from the Italian index options market

A major issue in the construction of implied trees is the no arbitrage property preservation. Within the literature on deterministic smile-consistent trees using forward induction, two major contributions are: Derman and Kani (1994) and Barle and Cakici (1998). The former proposes a methodology to override the nodes that violate the no arbitrage condition. The latter extends the Derman and Kani’s algorithm, in order to increase its stability in the presence of high interest rates. The aim of the present paper is to modify the Derman and Kani’s methodology in order to improve the fit of the implied tree to option prices. The proposed methodology is compared with Barle and Cakici both in the sample and out of sample with Italian index options data. Overall findings support a better performance of the modified Derman and Kani’s methodology.Binomial tree; implied volatility; calibration.

Feeding behaviour of larval European sea bass (Dicentrarchus labrax L.) in relation to temperature and prey density

The feeding behaviour of larval European sea bass (Dicentrarchus labrax, L.) was analysed in relation to temperature and prey density under controlled laboratory conditions with the aim to assess the ability of larval fish to change the feeding tactic as a response to environmental changes. Larvae were acclimated for 20 days at three different temperatures (19, 22 and 26°C), and their feeding behaviour was then video-recorded in experimental trials, at two prey densities, consisting of swarms of 400/l and 1440/l Artemia nauplii. Results showed that there was a significant effect of the interaction between temperature and prey density on the proportion of swimming activity that was reduced at the high temperature-high prey density combination. This suggested a switching in the larval feeding behaviour from an active to an ambush tactic, when the temperature reached 26°C and the prey density was 1440 /l Artemia nauplii. These results are consistent with the current literature on fish larval behaviour in showing that the foraging tactic can be modulated by the interaction of different abiotic and biotic factors characterising the rearing environment

Indebtedness, macroeconomic conditions and banks’ loan losses: evidence from Italy

The Basel II capital accord has fostered the debate over the financial stability of the aggregate banking sector. There is a large empirical literature focused on the effects of macroeconomic disturbances on the banking system. Specifically, loan losses are an important factor for the banking stability and a stream of research in this field aims to identify explanatory variables for this critical indicator. This paper focuses on Italian banks data over the period 1990-2007 and investigates the relationship between the ratio of non-performing loans to total loans, the business cycle and firms’ indebtedness so as to test the impact of both real and financial fragility on banks’ default losses. We use a regression model with an interaction term representing the joint effect of real and financial fragility, which to our knowledge has never been applied before to Italian default data. The results show that the impact of financial fragility on default losses is enhanced by adverse economic conditions

Optical Absorption and Scattering Phenomena in 'Jubileum' Plums in Relation to Their Colour Properties

Absorption and scattering of laser light pulse passing through the fruit determine among others, the optical properties of the product. Efforts have been made in the recent past to utilize innovative techniques such as time-resolved reflectance spectroscopy (TRS) to study the quality aspects of different fruit such as nectarines. These optical properties have been well related to firmness, sugars, acids and other quality attributes. TRS measurements were performed on ‘Jubileum’ plums at two different wavelengths: 670 nm and 758 nm. The fruit were harvested in Norway and brought to Italy under protected conditions. After sorting the fruit by size, TRS measurements were made and the fruit were randomized for different examinations of quality aspects. It was observed that the absorption coefficient (µa) increased for both wavelengths as ripening progressed towards the melting stage of the fruit. The µa values at 670 nm were higher than those at 758 nm. The higher rate in the µa was distinguishable from the third day onwards as the fruit ripened. Similarly, it was interesting to note that the internal colour measured after destructing the fruit related well with the TRS absorption coefficient (µa), i.e., a decrease in the CIE L* (towards darker region) and b* (towards blue) value along with an increase in a* (towards red) from third day of storag

Saving with a social impact: Evidence from trento province

In this paper, we investigate the determinants of investing, focusing on its potential social impact. In particular, we consider whether there is room for expanding impact investing through social savings. The increasing trend in the demand for social finance makes the topic of unique interest, particularly when data on preferences for social saving can be collected at the individual level. We investigate the determinants and drivers of saving with a social goal running a survey conducted in Trentino-Alto Adige in which respondents are asked to allocate their portfolio to possible social investments. In line with the evidence collected in the Netherlands by Riedl and Smeets (2014), our results show a strong preference for a lower return, with the condition that the return is invested in a community programme, and little interest in the monetary return of the investment. Respondents are either inclined to put their entire portfolio into saving for the community or not to invest at all. This result suggests that there is a consistent demand, only partially accommodated by the supply, for financial products investing in the community, rather than for a monetary return

Development of a high-sensitivity torsion balance to investigate the thermal Casimir force

We report development of a high-sensitivity torsion balance to measure the thermal Casimir force. Special emphasis is placed on experimental investigations of a possible surface electric force originating from surface patch potentials that have been recently noticed by several experimental groups. By gaining a proper understanding of the actual contribution of the surface electric force in real materials, we aim to undertake precision force measurements to resolve the Casimir force at finite temperature in real metals, as well as in other semiconducting materials, such as graphene.Comment: Proceedings of the 10th International Conference "Quantum Field Theory Under the Influence of External Conditions"; 11 pages and 4 figure