Option pricing using EGARCH models

Various empirical studies have shown that the time-varying volatility of asset returns can be described by GARCH (generalised autoregressive conditional heteroskedasticity) models. The corresponding GARCH option pricing model of Duan (1995) is capable of depicting the smile-effect which often can be found in option prices. In some derivative markets, however, the slope of the smile is not symmetrical. In this paper an option pricing model in the context of the EGARCH (Exponential GARCH) process will be developed. Extensive numerical analyses suggest that the EGARCH option pricing model is able to explain the different slopes of the smile curve. --

Delta-neutral volatility trading with intra-day prices: an application to options on the DAX

This paper evaluates the profitability of applying four different volatility forecasting models to the trading of straddles on the German stock market index DAX. Special care has been taken to use simultaneous intra-day prices and realistic transaction costs. Furthermore, straddle positions were evaluated on a daily basis to preserve delta neutrality. The four models applied in this paper are: historical volatility, two ARCH models, and an autoregressive model for the volatility index. VDAX. The ARCH models perform best in generating profits for market makers. Forecasts based on historical volatility also produce statistically and economically significant profits over the two-year simulation period of 1993 and 1994. In general, a filter1rule with a small filter of0.5 per cent produces the best results for both the ARCH models and historical volatility. However, the VDAX-AR model generates much lower and usually insignificant profits, and for some filter rules this model even has cumulative losses for market makers. For non-market-makers and non-members of exchange, however, larger transaction\costs imply that no significant profits can be gained with any model of volatility forecasts. --

Works Councils, Wages, and Job Satisfaction

We investigate the effects of works councils on employees’ wages and job satisfaction in general and for subgroups with respect to sex and occupational status. Making use of a German representative sample of employees, we find that employees, who move to a firm with a works council, report increases in job satisfaction, but do not receive particular wage increases. Especially the job satisfaction of female employees is affected by a change in works council status. However, we do not find support for the hypothesis that the introduction of a works council itself increases wages or job satisfaction for the employees staying at the firm.wages, job satisfaction, works councils

Master Spaces for stable pairs

We construct master spaces for oriented torsion free sheaves coupled with morphisms into a fixed reference sheaf. These spaces are projective varieties endowed with a natural \C^*-action. The fixed point set of this action contains the moduli space of semistable oriented torsion free sheaves and the quot scheme associated with the given data. In the case of curves with trivial reference sheaf, our master spaces compactify the moduli spaces constructed by Bertram, Daskalopoulos and Wentworth. In the 2-dimensional case with trivial rank 1 reference sheaf, master spaces provide algebraic analoga of compactified moduli spaces of twisted quaternionic monopoles.Comment: 26 pages. New introduction and applications LaTeX2

Improving the pricing of options: a neural network approach

In this paper we apply statistical inference techniques to build neural network models which are able to explain the prices of call options written on the German stock index DAX. By testing for the explanatory power of several input variables serving as network inputs, some insight into the pricing process of the option market is obtained. The results indicate that statistical specification strategies lead to parsimonious networks which have a superior out-of-sample performance when compared to the Black/Scholes model. We further validate our results by providing plausible hedge parameters. --Option Pricing,Neural Networks,Statistical Inference,Model Selection

Sobre la discusión de los anglicismos en el portugués: estándar y uso descritos desde la base del lenguaje de la informática y de Internet

The following article reports on the rapid spread of technical language and the flood of Anglicisms in Modern Portuguese associated with it. It is shown that, as far as the now fast developing technical language of computing and internet is concerned, purist arguments dictate the recommended forms in style manuals with little effect on language use. In Portugal, the institutions that seek to safeguard the language have been given clear instructions on how to standardize the technical terminology of both fields. In the course of this procedure, it was shown that the meaning of the English form remains unchanged and that the terms proposed make only a modest contribution to the formation of Portuguese technical vocabularies. Similarly, the influence of French, which already has normative terminology in these fields, is still negligible. Language use on the world wide web is even clearer, because international terminology determines the language of technical texts. Europeanization and globalization contribute to the SOBRE LA DISCUSIÓN DE LOS ANGLICISMOS EN EL PORTUGUÉS 29 compilation of a vocabulary that is based essentially on Greek and Latin morphemes used internationally in the technolects of several languages.El artículo documenta la fuerte expansión de los lenguajes técnicos y la invasión de anglicismos en el portugués moderno asociada a ella. En él el autor muestra que en los lenguajes técnicos de la informática y de internet, que actualmente se encuentran en estado de desarrollo, son los argumentos puristas los que determinan el discurso normativo en los manuales de estilo, sin poder alcanzar cambio alguno en el uso de la lengua. En Portugal instituciones que se ocupan del cuidado de la lengua recibieron claras indicaciones para estandarizar la terminología de ambos lenguajes técnicos. En el proceso se mostró que el significado de la lengua distribuidora inglesa permanece inquebrantable y que los términos propuestos no son capaces de aportar más que una modesta contribución a la constitución de los lenguajes técnicos portugueses; asimismo la influencia del francés, ya normativizado en este campo, continúa siendo insignificante. La realidad del uso lingüístico en la world wide web continúa hablando una lengua aún más clara, ya que aquí fija el uso en los textos técnicos la terminología internacional. La europeización y la globalización contribuyen a la formación de una terminología que se basa esencialmente en los morfemas griegos y latinos usados internacionalmente en los tecnolectos de varios idiomas

Sobre la discusión de los anglicismos en el portugués: estándar y uso descritos desde la base del lenguaje de la informática y de Internet

El artículo documenta la fuerte expansión de los lenguajes técnicos y la invasión de anglicismos en el portugués moderno asociada a ella. En él el autor muestra que en los lenguajes técnicos de la informática y de internet, que actualmente se encuentran en estado de desarrollo, son los argumentos puristas los que determinan el discurso normativo en los manuales de estilo, sin poder alcanzar cambio alguno en el uso de la lengua. En Portugal instituciones que se ocupan del cuidado de la lengua recibieron claras indicaciones para estandarizar la terminología de ambos lenguajes técnicos. En el proceso se mostró que el significado de la lengua distribuidora inglesa permanece inquebrantable y que los términos propuestos no son capaces de aportar más que una modesta contribución a la constitución de los lenguajes técnicos portugueses; asimismo la influencia del francés, ya normativizado en este campo, continúa siendo insignificante. La realidad del uso lingüístico en la world wide web continúa hablando una lengua aún más clara, ya que aquí fija el uso en los textos técnicos la terminología internacional. La europeización y la globalización contribuyen a la formación de una terminología que se basa esencialmente en los morfemas griegos y latinos usados internacionalmente en los tecnolectos de varios idiomas.The following article reports on the rapid spread of technical language and the flood of Anglicisms in Modern Portuguese associated with it. It is shown that, as far as the now fast developing technical language of computing and internet is concerned, purist arguments dictate the recommended forms in style manuals with little effect on language use. In Portugal, the institutions that seek to safeguard the language have been given clear instructions on how to standardize the technical terminology of both fields. In the course of this procedure, it was shown that the meaning of the English form remains unchanged and that the terms proposed make only a modest contribution to the formation of Portuguese technical vocabularies. Similarly, the influence of French, which already has normative terminology in these fields, is still negligible. Language use on the world wide web is even clearer, because international terminology determines the language of technical texts. Europeanization and globalization contribute to the SOBRE LA DISCUSIÓN DE LOS ANGLICISMOS EN EL PORTUGUÉS 29 compilation of a vocabulary that is based essentially on Greek and Latin morphemes used internationally in the technolects of several languages

Derivazione o composizione? Sull'origine della parola marangon(e) "falegname"

La explicación etimológica tradicional de marangone falegname, un venecianismo del italiano, parte del latín MERGERE sumergirse. Según ya quedó explicado por el autor (Festschrift Kuen 1979), esta interpretación no puede sostenerse; hay que buscar la explicación histórica en el latín MARRA hacha, el instrumento más importante de los carpinteros. Con la interpretación etimológica de marangone carpentiere navale como composición del latín MARRA + rancare (variante asimilada del verbo runcare zappiare, sarchiare) se reconoce implícitamente la base etimológica MARR- hacha, pero esta hipótesis postula un compuesto en lugar de un derivado; esta tesis parece bastante artificial, dado que disocia a la familia del verbo italiano runcare y dada la falta absoluta de procesos analógicos. Y tiene aún otro inconveniente: no llega a etimologizar el homófono (y homógrafo) marangone cormorán, pelícano. El autor reduce las dos palabras marangone1 carpentiere navale y marangone2 cormorán a una raíz común: latín MARRA azada, hacha que se transforma en it. marangone de acuerdo con la evolucion fonética hereditaria y sufijación popular. Apoya esta explicación también el paralelismo semántico que existe entre griego pe/lekuj hacha → griego pelekanÒj pelícano, latín SECURIS hacha → securifera planta con hojas en forma de hacha y la isosemía griego pe/lekuj → peleki)uoj une forme de hache (nom dune plante); hay que renunciar a esta explicación que supone una formación por composición ya que queda poco convincente al nivel meramente formal.The traditional etymological explanation of Italian marangone falegname (carpenter), a Venetianism, takes Latin MERGERE to immerse, dive as its root. As the author has pointed out (Festschrift Kuen 1979), this explanation is untenable. The origin must be traced back to Latin MARRA axe, hatchet, the most important tool of carpenters. The etymological interpretation of marangone naval carpenter as a compound of Latin MARRA + RANCARE (an assimilated variant of RUNCARE to weed) recognizes the root MARR- axe. However, this hypothesis postulates a compound instead of a derivative, which seems an artificial conjecture because it dissociates the word from RUNCARE despite the lack of evidence of any parallel processes. Moreover, this assumption has yet another setback: it does not provide an etymological explanation for the homophone (and homograph) marangone pelican, cormorant. The author traces marangone1 naval carpenter and marangone2 cormorant to a common root: Latin MARRA axe, hatchet, which through normal phonetic development and the addition of a suffix becomes Italian marangone. This suggestion is supported by the semantic evolution of Greek pe/lekuj axe → pelekanÒj pelican and by the parallel evolution of Latin SECURIS axe → securigera plant with axe-shaped leaves and the similar meaning found in Greek pe/lekuj→peleki)uoj axe shape (name of plant). Hence, the assumption of a compound must be abandoned because it is unconvincing from mere formal evidence

The impact of labour market integration on fertility decisions: a comparison of Germany and the UK

"The aim of this paper is to investigate the hypothesis of a causal effect of individual labour-market-security and -integration on fertility by looking at the timing of first birth decisions after leaving the educational system. The analysis focuses on two major research questions: First, how is the timing of first parenthood related to previous labour market performance? Second, can we identify differences in first birth risks depending on individual labour market performance? In other words, to what extent do successfully integrated individuals differ with respect to their fertility decisions from those who are poorly integrated (as indicated by discontinuous or precarious employment patterns)? Integral to the analysis is a cross-national comparison of the relevance of institutional settings and their impact on family formation. In this context the editor focuses on the continental conservative German system and the liberal welfare state of the UK. He conceptualizes the initial transition to parenthood as the result of a rational as well as biographical planning process. The empirical investigation of the length of time up to first birth is based on an event history analysis, applying a piecewise constant exponential model to data from the SOEP and the BHPS. Results show the well known patterns of a still widely traditional division of labour between men and women on one hand side and extensive antagonisms of occupational and familial role. The cross-national comparison underlines the picture that this situation is especially virulent in Germany. In the case of German men with weak labour market integration he finds clear evidence of reduced probabilities of first birth - which is most likely due to limited breadwinner qualities. A reduced first birth risk also comes to the fore for women in Germany and the UK who show levels of extensive labour market integration (as indicated by a high amount of doing overtime work, e.g.). Yet an incomplete labour market integration of German women (as indicated by part time employment) also goes hand in hand with a reduced first birth risk. Among British women the editor cannot identify any clear fertility effects, related to initial labour market integration. This may be due to the fact that instable patterns of labour market entry are much more common in the UK and thus do not invoke any unsettling effect on fertility decisions." (author's abstract