Robustness of Gaussian Hedges and the Hedging of Fixed Income Derivatives

The effect of model and parameter misspecification on the effectiveness of Gaussian hedging strategies for derivative financial instrumens is analyzed, showing that Gaussian hedges in the "natural" hedging instruments are particularly robust. This is true for all models that imply Balck/Scholes - type formulas for option prices and hedging strategies. In this paper we focus on the hedging of fixed income derivatives and show how to apply these results both within the framework of Gaussian term structure models as well as the increasingly popular market models where the prices for caplets and swaptions are given by the corresponding Black formulas. By explicitly considering the behaviour of the hedging strategy under misspecification we also derive the El Karoui, Jeanblanc-Picque and Shreve (1995, 1998) and Avellaneda, Levy and Paras (1995) results that a superhedge is obtained in the Black/Scholes model if the misspecified volatility dominates the true volatility. Furthermore, we show that the robustness and superhedging result do not hold if the natural hedging instruments are unavailable. In this case, we study criteria for the optimal choice from the instruments that are available.

Linear Stochastic Models of Nonlinear Dynamical Systems

We investigate in this work the validity of linear stochastic models for nonlinear dynamical systems. We exploit as our basic tool a previously proposed Rayleigh-Ritz approximation for the effective action of nonlinear dynamical systems started from random initial conditions. The present paper discusses only the case where the PDF-Ansatz employed in the variational calculation is ``Markovian'', i.e. is determined completely by the present values of the moment-averages. In this case we show that the Rayleigh-Ritz effective action of the complete set of moment-functions that are employed in the closure has a quadratic part which is always formally an Onsager-Machlup action. Thus, subject to satisfaction of the requisite realizability conditions on the noise covariance, a linear Langevin model will exist which reproduces exactly the joint 2-time correlations of the moment-functions. We compare our method with the closely related formalism of principal oscillation patterns (POP), which, in the approach of C. Penland, is a method to derive such a linear Langevin model empirically from time-series data for the moment-functions. The predictive capability of the POP analysis, compared with the Rayleigh-Ritz result, is limited to the regime of small fluctuations around the most probable future pattern. Finally, we shall discuss a thermodynamics of statistical moments which should hold for all dynamical systems with stable invariant probability measures and which follows within the Rayleigh-Ritz formalism.Comment: 36 pages, 5 figures, seceq.sty for sequential numbering of equations by sectio

Quo Vadis Dry Reforming of Methane?—A Review on Its Chemical, Environmental, and Industrial Prospects

In recent years, the catalytic dry reforming of methane (DRM) has increasingly come into academic focus. The interesting aspect of this reaction is seemingly the conversion of CO2 and methane, two greenhouse gases, into a valuable synthesis gas (syngas) mixture with an otherwise unachievable but industrially relevant H2/CO ratio of one. In a possible scenario, the chemical conversion of CO2 and CH4 to syngas could be used in consecutive reactions to produce synthetic fuels, with combustion to harness the stored energy. Although the educts of DRM suggest a superior impact of this reaction to mitigate global warming, its potential as a chemical energy converter and greenhouse gas absorber has still to be elucidated. In this review article, we will provide insights into the industrial maturity of this reaction and critically discuss its applicability as a cornerstone in the energy transition. We derive these insights from assessing the current state of research and knowledge on DRM. We conclude that the entire industrial process of syngas production from two greenhouse gases, including heating with current technologies, releases at least 1.23 moles of CO2 per mol of CO2 converted in the catalytic reaction. Furthermore, we show that synthetic fuels derived from this reaction exhibit a negative carbon dioxide capturing efficiency which is similar to burning methane directly in the air. We also outline potential applications and introduce prospective technologies toward a net-zero CO2 strategy based on DRM

Combined XPS and TPD study of oxygen-functionalized carbon nanofibers grown on sintered metal fibers

A novel composite material consisting of carbon nanofibers (CNF) grown on sintered metal fibers (SMF) filters was modified by H2O2 or plasma-generated O3. Coupling TPD and XPS techniques in the same UHV apparatus allowed the direct correlation between the nature of the created O-functional groups and their evolution as CO and CO2 upon heating. The two oxidative treatments yielded different distributions of O-containing groups. The relative contribution of oxidized carbon was very low in the C1s region, so the functional groups were better analyzed in the O1s region. The quantification of the released oxygen by integration of the TPD CO, CO2 and H2O spectra, compared with the intensity loss of the XPS O1s spectra showed a good agreement. In order to fit the data adequately, the set of O1s spectra was decomposed in at least four peaks for the differently activated samples. Finally, it was shown that functional groups formed by H2O2-treatment (mostly non-phenolic OH groups) are thermally more stable than the ones formed by O3-treatment. The latter treatment increases the concentration of carboxylic functionalities, which decomposes at temperatures < 800 K; O3-activated CNF therefore should show a more pronounced acidic behavior

In Situ Identification and Time-Resolved Observation of the Interfacial State and Reactive Intermediates on a Cobalt Oxide Nanocatalyst for the Oxygen Evolution Reaction

Cobalt oxide (assigned as CoOx) is an efficient oxygen evolution reaction (OER) nanocatalyst, which has been extensively studied as a replacement to noble metal-based catalysts. The recent observations and understandings for the interfacial state, adsorbed intermediate products, and rate-determining steps (RDS) on CoOx, however, have remained elusive because of the dynamic transformation of different Co ions and the transient nature of the intermediates formed during the OER process. In this work, we propose that under the chosen experimental conditions, the redox process between Co(III) and Co(IV) species does not follow a proton-coupled electron transfer mechanism that is thought to be common prior to the OER, but it involves a proton-decoupled electron transfer, clarified by isotope labeling experiments and in situ electrostatic modulation. The interfacial state of CoOx is negatively charged prior to the formation of Co(IV)═O species. The theoretical concentration of the resulting Co(IV)═O species is approximately 0.1229 × 1019 cm–2. The Co(IV)═O species are demonstrated to directly regulate the OER performance. Moreover, we experimentally monitor the dynamic evolution behaviors of Co(IV)═O, Co(O)O–, OOH*, and O2–* intermediates during the OER with in situ time-resolved infrared spectroscopy, and the following elementary step OOH* + OH– → OO–* + H2O is likely to be the unexpected RDS in the OER process

In situ surface coverage analysis of RuO₂-catalysed HCl oxidation reveals the entropic origin of compensation in heterogeneous catalysis

In heterogeneous catalysis, rates with Arrhenius-like temperature dependence are ubiquitous. Compensation phenomena, which arise from the linear correlation between the apparent activation energy and the logarithm of the apparent pre-exponential factor, are also common. Here, we study the origin of compensation and find a similar dependence on the rate-limiting surface coverage term for each Arrhenius parameter. This result is derived from an experimental determination of the surface coverage of oxygen and chlorine species using temporal analysis of products and prompt gamma activation analysis during HCl oxidation to Cl2 on a RuO2 catalyst. It is also substantiated by theory. We find that compensation phenomena appear when the effect on the apparent activation energy caused by changes in surface coverage is balanced out by the entropic configuration contributions of the surface. This result sets a new paradigm in understanding the interplay of compensation effects with the kinetics of heterogeneously catalysed processes

Kinks Dynamics in One-Dimensional Coupled Map Lattices

We examine the problem of the dynamics of interfaces in a one-dimensional space-time discrete dynamical system. Two different regimes are studied : the non-propagating and the propagating one. In the first case, after proving the existence of such solutions, we show how they can be described using Taylor expansions. The second situation deals with the assumption of a travelling wave to follow the kink propagation. Then a comparison with the corresponding continuous model is proposed. We find that these methods are useful in simple dynamical situations but their application to complex dynamical behaviour is not yet understood.Comment: 17pages, LaTex,3 fig available on cpt.univ-mrs.fr directory pub/preprints/94/dynamical-systems/94-P.307