The Variance Gamma Scaled Self-Decomposable Process in Actuarial Modelling

A scaled self-decomposable stochastic process put forward by Carr, Geman, Madan and Yor (2007) is used to model long term equity returns and options prices. This parsimonious model is compared to a number of other one-dimensional continuous time stochastic processes (models) that are commonly used in finance and the actuarial sciences. The comparisons are conducted along three dimensions: the models ability to fit monthly time series data on a number of different equity indices; the models ability to fit the tails of the times series and the models ability to calibrate to index option prices across strike price and maturities. The last criteria is becoming increasingly important given the popularity of capital gauranteed products that contain long term imbedded options that can be (at least partially) hedged by purchasing short term index options and rolling them over or purchasing longer term index options. Thus we test if the models can reproduce a typical implied volatility surface seen in the market.Variance gamma, regime switching lognormal, long term equity returns.

List decoding of repeated codes

Assuming that we have a soft-decision list decoding algorithm of a linear code, a new hard-decision list decoding algorithm of its repeated code is proposed in this article. Although repeated codes are not used for encoding data, due to their parameters, we show that they have a good performance with this algorithm. We compare, by computer simulations, our algorithm for the repeated code of a Reed-Solomon code against a decoding algorithm of a Reed-Solomon code. Finally, we estimate the decoding capability of the algorithm for Reed-Solomon codes and show that performance is somewhat better than our estimates