The Term Structure of Interest-Rate Future Prices

We derive general properties of two-factor models of the term structure of interest rates and, in particular, the process for futures prices and rates. Then, as a special case, we derive a no-arbitrage model of the term structure in which any two futures rates act as factors. The term structure shifts and tilts as the factor rates vary. The cross-sectional properties of the model derive from the solution of a two-dimensional autoregressive process for the short-term rate, which exhibits both mean reversion and a lagged persistence parameter. We show that the correlation of the futures rates is restricted by the no-arbitrage conditions of the model. In addition, we investigate the determinants of the volatility of the futures rates of various maturities. These are shown to be related to the volatilities of the short rate, the volatility of the second factor, the degree of mean reversion and the persistence of the second factor shock. We obtain specific results for futures rates in the case where the logarithm of the short-term rate [e.g., the London Inter-Bank Offer Rate (Libor)] follows a two-dimensional process. Our results lead to empirical hypotheses that are testable using data from the liquid market for Eurocurrency interest rate futures contracts

Incremental Risk Vulnerability

We present a necessary and sufficient condition on an agent’s utility function for a simple mean preserving spread in an independent background risk to increase the agent’s risk aversion (incremental risk vulnerability). Gollier and Pratt (1996) have shown that declining and convex risk aversion as well as standard risk aversion are sufficient for risk vulnerability. We show that these conditions are also sufficient for incremental risk vulnerability. In addition, we present sufficient conditions for a restricted set of stochastic increases in an independent background risk to increase risk aversion.

Novel magnetic properties of graphene: Presence of both ferromagnetic and antiferromagnetic features and other aspects

Investigations of the magnetic properties of graphenes prepared by different methods reveal that dominant ferromagnetic interactions coexist along with antiferromagnetic interactions in all the samples. Thus, all the graphene samples exhibit room-temperature magnetic hysteresis. The magnetic properties depend on the number of layers and the sample area, small values of both favoring larger magnetization. Molecular charge-transfer affects the magnetic properties of graphene, interaction with a donor molecule such as tetrathiafulvalene having greater effect than an electron-withdrawing molecule such as tetracyanoethyleneComment: 16 pges, 5 figure

The Valuation of American-style Swaptions in a Two-factor Spot-Futures Model1

We build a no-arbitrage model of the term structure of interest rates using two stochastic factors, the short-term interest rate and the premium of the futures rate over the short-term interest rate. The model provides and extension of the lognormal interest rate model of Black and Karasinski (1991) to two factors, both of which can exhibit mean-reversion. The method is computationally efficient for several reasons. First, the model is based on Libor futures prices, enabling us to satisfy the no-arbitrage condition without resorting to iterative methods. Second, we modify and implement the binomial approximation methodology of Nelson and Ramaswamy (1990) and Ho, Stapleton and Subrahmanyam (1995) to compute a multiperiod tree of rates with the no-arbitrage property. The method uses a recombining two-dimensional binomial lattice of interest rates that minimizes the number of states and term structures over time. In addition to these computational advantages, a key feature of the model is that it is consistent with the observed term structure of futures rates as well as the term structure of volatilities implied by the prices of interest rate caps and floors. These prices are shown to be highly sensitive to the existence of the second factor and its volatility characteristics

Quenching of fluorescence of aromatic molecules by graphene due to electron transfer

Investigations on the fluorescence quenching of graphene have been carried out with two organic donor molecules, pyrene butanaoic acid succinimidyl ester (PyBS, I) and oligo(p-phenylenevinylene) methyl ester (OPV-ester, II). Absorption and photoluminescence spectra of I and II recorded in mixture with increasing the concentrations of graphene showed no change in the former, but remarkable quenching of fluorescence. The property of graphene to quench fluorescence of these aromatic molecules is shown to be associated with photo-induced electron transfer, on the basis of fluorescence decay and time-resolved transient absorption spectroscopic measurements.Comment: 18 pages, 6 figure

Femtosecond carrier dynamics and saturable absorption in graphene suspensions

Nonlinear optical properties and carrier relaxation dynamics in graphene, suspended in three different solvents, are investigated using femtosecond (80 fs pulses) Z-scan and degenerate pumpprobe spectroscopy at 790 nm. The results demonstrate saturable absorption property of graphene with a nonlinear absorption coefficient, $beta$, of ~2 to 9x10^-8 cm/W. Two distinct time scales associated with the relaxation of photoexcited carriers, a fast one in the range of 130-330 fs (related to carrier-carrier scattering) followed by a slower one in 3.5-4.9 ps range (associated with carrier-phonon scattering) are observed.Comment: 3 pages, 2 figures, 2 table

Nonlinear bending-torsional vibration and stability of rotating, pretwisted, preconed blades including Coriolis effects

The coupled bending-bending-torsional equations of dynamic motion of rotating, linearly pretwisted blades are derived including large precone, second degree geometric nonlinearities and Coriolis effects. The equations are solved by the Galerkin method and a linear perturbation technique. Accuracy of the present method is verified by comparisons of predicted frequencies and steady state deflections with those from MSC/NASTRAN and from experiments. Parametric results are generated to establish where inclusion of only the second degree geometric nonlinearities is adequate. The nonlinear terms causing torsional divergence in thin blades are identified. The effects of Coriolis terms and several other structurally nonlinear terms are studied, and their relative importance is examined

When are Options Overpriced? The Black-Scholes Model and Alternative Characterisations of the Pricing Kernel.

An important determinant of option prices is the elasticity of the pricing kernel used to price all claims in the economy. In this paper, we first show that for a given forward price of the underlying asset, option prices are higher when the elasticity of the pricing kernel is declining than when it is constant. We then investigate the implications of the elasticity of the pricing kernel for the stochastic process followed by the underlying asset. Given that the underlying information process follows a geometric Brownian motion, we demonstrate that constant elasticity of the pricing kernel is equivalent to a Brownian Motion for the forward price of the underlying asset, so that the Black-Scholes formula correctly prices options on the asset. In contrast, declining elasticity implies that the forward price process is no longer a Brownian motion: it has higher volatility and exhibits autocorrelation. In this case, the Black-Scholes formula underprices all options.

Standard Risk Aversion and the Demand for Risky Assets in the Presence of Background Risk

We consider the demand for state contingent claims in the presence of a zero-mean, nonhedgeable background risk. An agent is defined to be generalized risk averse if he/she reacts to an increase in background risk by choosing a demand function for contingent claims with a smaller slope. We show that the conditions for standard risk aversion: positive, declining absolute risk aversion and prudence are necessary and sufficient for generalized risk aversion. We also derive anecessary and suÆcient condition for the agent's derived risk aversion to increase with a simple increase in background risk.

When are Options Overpriced? The Black-Scholes Model and Alternative Characterisations of the Pricing Kernel.

An important determinant of option prices is the elasticity of the pricing kernel used to price all claims in the economy. In this paper, we first show that for a given forward price of the underlying asset, option prices are higher when the elasticity of the pricing kernel is declining than when it is constant. We then investigate the implications of the elasticity of the pricing kernel for the stochastic process followed by the underlying asset. Given that the underlying information process follows a geometric Brownian motion, we demonstrate that constant elasticity of the pricing kernel is equivalent to a Brownian Motion for the forward price of the underlying asset, so that the Black- Scholes formula correctly prices options on the asset. In contrast, declining elasticity implies that the forward price process is no longer a Brownian motion: it has higher volatility and exhibits autocorrelation. In this case, the Black-Scholes formula underprices all options.