Implicit Bayesian Inference Using Option Prices.

A Bayesian approach to option pricing is presented, in which posterior inference about the underlying returns process is conducted implicitly, via observed option prices. A range of models which allow for conditional leptokurtosis, skewness and time-varying volatility in returns, are considered, with posterior parameter distributions and model probabilities backed out from the option prices. Fit, predictive and hedging densities associated with the different models are produced. Models are ranked according to several criteria, including their ability to fit observed option prices, predict future option prices and minimize hedging errors. In addition to model-specific results, averaged predictive and hedging densities are produced, the weights used in the averaging process being the posterior model probabilities. The method is applied to option price data on the S&P500 stock index. Whilst the results provide some support for the Black-Scholes model, no one model dominates according to all criteria considered.Bayesian Implicit Inference; Option Pricing Errors; Option Price Prediction; Hedging Errors; Nonnormal Returns Models; GARCH; Bayesian Model averaging.

Parametric Pricing of Higher Order Moments in S&P500 Options.

A general parametric framework is developed for pricing S&P500 options. Skewness and leptokurtosis in stock returns as well as time-varying volatility are priced. The parametric pricing model nests the Black-Scholes model and can explain volatility smiles and skews in stock options. The data consist of S&P500 options traded on select days in April, 1995, a total sample of over 500,000 observations. A number of performance criteria are used to evaluate the alternative models. The empirical results show that pricing higher order moments yield improvements in the pricing of options over the Black-Scholes model as well as other models.Option Pricing; Volatility Smiles and Skews; Generalized Student t; Skewness; Kurtosis; Time-Varying Volatility.

Pricing Currency Options in Tranquil Markets: Modelling Volatility Frowns

Volatility smiles arise in currency option markets when empirical exchange rate returns distributions exhibit leptokurtosis. This feature of empirical distributions is symptomatic of turbulent periods when exchange rate movements are in excess of movements based on the assumption of normality. In contrast, during periods of tranquility, movements in exchange rates are relatively small, resulting in unconditional empirical returns distributions with thinner tails than the normal distribution. Pricing currency options during tranquil periods on the assumption of normal returns yields implied volatility frowns, with over-pricing at both deep-in and deep-out-of-the-money contracts and under-pricing for at-the-money contracts. This paper shows how a parametric class of thin-tailed distributions based on the generalized Student t family of distributions can price currency options during periods of tranquility.Option pricing; volatility frowns; thin-tails; generalized Student t.

Evaluation of two lyophilized molecular assays to rapidly detect foot-and-mouth disease virus directly from clinical samples in field settings

Accurate, timely diagnosis is essential for the control, monitoring and eradication of foot‐and‐mouth disease (FMD). Clinical samples from suspect cases are normally tested at reference laboratories. However, transport of samples to these centralized facilities can be a lengthy process that can impose delays on critical decision making. These concerns have motivated work to evaluate simple‐to‐use technologies, including molecular‐based diagnostic platforms, that can be deployed closer to suspect cases of FMD. In this context, FMD virus (FMDV)‐specific reverse transcription loop‐mediated isothermal amplification (RT‐LAMP) and real‐time RT‐PCR (rRT‐PCR) assays, compatible with simple sample preparation methods and in situ visualization, have been developed which share equivalent analytical sensitivity with laboratory‐based rRT‐PCR. However, the lack of robust ‘ready‐to‐use kits’ that utilize stabilized reagents limits the deployment of these tests into field settings. To address this gap, this study describes the performance of lyophilized rRT‐PCR and RT‐LAMP assays to detect FMDV. Both of these assays are compatible with the use of fluorescence to monitor amplification in real‐time, and for the RT‐LAMP assays end point detection could also be achieved using molecular lateral flow devices. Lyophilization of reagents did not adversely affect the performance of the assays. Importantly, when these assays were deployed into challenging laboratory and field settings within East Africa they proved to be reliable in their ability to detect FMDV in a range of clinical samples from acutely infected as well as convalescent cattle. These data support the use of highly sensitive molecular assays into field settings for simple and rapid detection of FMDV

Parametric Pricing of Higher Order Moments in S&p500 Options

A general parametric framework is developed for pricing S&P500 options. Skewness and leptokurtosis in stock returns as well as time-varying volatility are priced. The parametric pricing model nests the Black-Scholes model and can explain volatility smiles and skews in stock options. The data consist of S&P500 options traded on select days in April, 1995, a total sample of over 500,000 observations. A number of performance criteria are used to evaluate the alternative models. The empirical results show that pricing higher order moments yield improvements in the pricing of options over the Black-Scholes model as well as other models

USP2-45 Is a Circadian Clock Output Effector Regulating Calcium Absorption at the Post-Translational Level.

The mammalian circadian clock influences most aspects of physiology and behavior through the transcriptional control of a wide variety of genes, mostly in a tissue-specific manner. About 20 clock-controlled genes (CCGs) oscillate in virtually all mammalian tissues and are generally considered as core clock components. One of them is Ubiquitin-Specific Protease 2 (Usp2), whose status remains controversial, as it may be a cogwheel regulating the stability or activity of core cogwheels or an output effector. We report here that Usp2 is a clock output effector related to bodily Ca2+ homeostasis, a feature that is conserved across evolution. Drosophila with a whole-body knockdown of the orthologue of Usp2, CG14619 (dUsp2-kd), predominantly die during pupation but are rescued by dietary Ca2+ supplementation. Usp2-KO mice show hyperabsorption of dietary Ca2+ in small intestine, likely due to strong overexpression of the membrane scaffold protein NHERF4, a regulator of the Ca2+ channel TRPV6 mediating dietary Ca2+ uptake. In this tissue, USP2-45 is found in membrane fractions and negatively regulates NHERF4 protein abundance in a rhythmic manner at the protein level. In clock mutant animals (Cry1/Cry2-dKO), rhythmic USP2-45 expression is lost, as well as the one of NHERF4, confirming the inverse relationship between USP2-45 and NHERF4 protein levels. Finally, USP2-45 interacts in vitro with NHERF4 and endogenous Clathrin Heavy Chain. Taken together these data prompt us to define USP2-45 as the first clock output effector acting at the post-translational level at cell membranes and possibly regulating membrane permeability of Ca2+

Unlike particle correlations and the strange quark matter distillation process

We present a new technique for observing the strange quark matter distillation process based on unlike particle correlations. A simulation is presented based on the scenario of a two-phase thermodynamical evolution model.Comment: 15 pages, 2 figures, 1 tabl

Exact Calculation of the Vortex-Antivortex Interaction Energy in the Anisotropic 3D XY-model

We have developed an exact method to calculate the vortex-antivortex interaction energy in the anisotropic 3D-XY model. For this calculation, dual transformation which is already known for the 2D XY-model was extended. We found an explicit form of this interaction energy as a function of the anisotropic ratio and the separation $r$ between the vortex and antivortex located on the same layer. The form of interaction energy is $\ln r$ at the small $r$ limi t but is proportional to $r$ at the opposite limit. This form of interaction energ y is consistent with the upper bound calculation using the variational method by Cataudella and Minnhagen.Comment: REVTeX 12 pages, In print for publication in Phys. Rev.

Exclusive Radiative B-Decays in the Light-Cone QCD Sum Rule Approach

We carry out a detailed study of exclusive radiative rare $B$-decays in the framework of the QCD sum rules on the light cone, which combines the traditional QCD sum rule technique with the description of final state vector mesons in terms of the light-cone wave functions of increasing twist. The decays considered are: $B_{u,d} \to K^* +\gamma, B_{u,d}\to \rho+\gamma, B_d\to \omega+\gamma$ and the corresponding decays of the $B_s$ mesons, $B_s\to \phi+\gamma$ and $B_s\to K^*+\gamma$. Based on our estimate of the transition form factor F_1^{B \to K^*\pg}(0) =0.32\pm0.05, we find for the branching ratio $BR(B \to K^* + \gamma) = (4.8\pm 1.5)\times 10^{-5}$, which is in agreement with the observed value measured by the CLEO collaboration. We present detailed estimates for the ratios of the radiative decay form factors, which are then used to predict the rates for the exclusive radiative B-decays listed above. This in principle allows the extraction of the CKM matrix element $|V_{td}|$ from the penguin-dominated CKM-suppressed radiative decays when they are measured. We give a detailed discussion of the dependence of the form factors on the $b$-quark mass and on the momentum transfer, as well as their interrelation with the CKM-suppressed semileptonic decay form factors in $B\to \rho+\ell+\nu$, which we also calculate in our approach.Comment: 32 pages, 10 uuencoded figures, LaTeX, preprint CERN-TH 7118/9

Flavour SU(3) Symmetry in Charmless B Decays

QCD sum rules are used to estimate the flavour SU(3)-symmetry violation in two-body B decays to pions and kaons. In the factorizable amplitudes the SU(3)-violation manifests itself in the ratio of the decay constants f_K/f_pi and in the differences between the B->K, B_s->K and B->pi form factors. These effects are calculated from the QCD two-point and light-cone sum rules, respectively, in terms of the strange quark mass and the ratio of the strange and nonstrange quark-condensate densities. Importantly, QCD sum rules predict that SU(3) breaking in the heavy-to-light form factors can be substantial and does not vanish in the heavy-quark mass limit. Furthermore, we investigate the strange-quark mass dependence of nonfactorizable effects in the B->K pi decay amplitudes. Taking into account these effects we estimate the accuracy of several SU(3)-symmetry relations between charmless B-decay amplitudes.Comment: Two references added, version to be published in Phys.Rev.D, 21 pages, 12 postscript figure