Pricing stock options under stochastic volatility and interest rates with efficient method of moments estimation

While the stochastic volatility (SV) generalization has been shown to improve the explanatory power over the Black-Scholes model, empirical implications of SV models on option pricing have not yet been adequately tested. The purpose of this paper is to first estimate a multivariate SV model using the efficient method of moments (EMM) technique from observations of underlying state variables and then investigate the respective effect of stochastic interest rates, systematic volatility and idiosyncratic volatility on option prices. We compute option prices using reprojected underlying historical volatilities and implied stochastic volatility risk to gauge each model’s performance through direct comparison with observed market option prices. Our major empirical findings are summarized as follows. First, while theory predicts that the short-term interest rates are strongly related to the systematic volatility of the consumption process, our estimation results suggest that the short-term interest rate fails to be a good proxy of the systematic volatility factor; Second, while allowing for stochastic volatility can reduce the pricing errors and allowing for asymmetric volatility or leverage effect does help to explain the skewness of the volatility smile, allowing for stochastic interest rates has minimal impact on option prices in our case; Third, similar to Melino and Turnbull (1990), our empirical findings strongly suggest the existence of a non-zero risk premium for stochastic volatility of stock returns. Based on implied volatility risk, the SV models can largely reduce the option pricing errors, suggesting the importance of incorporating the information in the options market in pricing options; Finally, both the model diagnostics and option pricing errors in our study suggest that the Gaussian SV model is not sufficient in modeling short-term kurtosis of asset returns, a SV model with fatter-tailed noise or jump component may have better explanatory power.

Long non-coding RNAs as novel components in the TP53 pathway

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Thermo-mechanical analysis of flexible and stretchable systems

This paper presents a summary of the modeling and technology developed for flexible and stretchable electronics. The integration of ultra thin dies at package level, with thickness in the range of 20 to 30 μ m, into flexible and/or stretchable materials are demonstrated as well as the design and reliability test of stretchable metal interconnections at board level are analyzed by both experiments and finite element modeling. These technologies can achieve mechanically bendable and stretchable subsystems. The base substrate used for the fabrication of flexible circuits is a uniform polyimide layer, while silicones materials are preferred for the stretchable circuits. The method developed for chip embedding and interconnections is named Ultra Thin Chip Package (UTCP). Extensions of this technology can be achieved by stacking and embedding thin dies in polyimide, providing large benefits in electrical performance and still allowing some mechanical flexibility. These flexible circuits can be converted into stretchable circuits by replacing the relatively rigid polyimide by a soft and elastic silicone material. We have shown through finite element modeling and experimental validation that an appropriate thermo mechanical design is necessary to achieve mechanically reliable circuits and thermally optimized packages

Washington meets Wall Street: a closer examination of the presidential cycle puzzle

We show that average excess returns during the last two years of the presidential cycle are significantly higher than during the first two years: 9.8 percent over the period 1948 – 2008. This pattern in returns cannot be explained by business-cycle variables capturing time-varying risk premia, differences in risk levels, or by consumer and investor sentiment. In this paper, we formally test the presidential election cycle (PEC) hypothesis as the alternative explanation found in the literature for explaining the presidential cycle anomaly. PEC states that incumbent parties and presidents have an incentive to manipulate the economy (via budget expansions and taxes) to remain in power. We formulate eight empirically testable propositions relating to the fiscal, monetary, tax, unexpected inflation and political implications of the PEC hypothesis. We do not find statistically significant evidence confirming the PEC hypothesis as a plausible explanation for the presidential cycle effect. The existence of the presidential cycle effect in U.S. financial markets thus remains a puzzle that cannot be easily explained by politicians employing their economic influence to remain in power. JEL Classification: E32; G14; P16 Keywords: Political Economy, Market Efficiency, Anomalies, Calendar Effect

Comparison between patient-reported and physician-estimated pain and disability in hand and wrist disorders

Background Pain and disability are important components of the assessment of hand problems, but it is unknown how physician estimates compare to patient self-reports. Objective To analyse differences between patient-reported and physician-estimated pain and disability in patients with hand or wrist disorders and to analyse factors influencing these differences. Methods Observational study of patients with hand or wrist disorders seen during multidisciplinary outpatient consultations. Patients, rehabilitation medicine (RM) consultants, RM trainees and plastic surgeons completed visual analogue scales (VASs) to rate the level of self-reported (patients) or estimated (physicians) pain and disability. Multilevel analyses were performed to evaluate differences in VAS-pain and VAS-disability scores between patients and physicians and to evaluate the influences of diagnosis, physician experience and medical specialty. Results Complete data were obtained for 250 patients. Levels of pain and disability estimated by physicians were lower compared to patient self-reports. Ratings differed among medical specialties. Pain was underestimated to a greater extent by plastic surgeons compared to RM consultants. Disability was underestimated to a greater extent by RM consultants compared to plastic surgeons. Estimates of pain and disability did not differ between consultants and trainees in RM. Type of diagnosis did not influence the degree of underestimation of pain and disability. Conclusions Physicians underestimate pain and disability compared to self-reports in patients with hand or wrist disorders. Ratings differ among medical specialties: plastic surgeons underestimate pain more, while RM consultants underestimate disability more. Physician experience and diagnosis do not influence the degree of underestimation of pain and disability

Musculoskeletal complaints in individuals with finger or partial hand amputations in the Netherlands:A cross-sectional study

PURPOSE: To compare the prevalence of musculoskeletal complaints (MSCs) in individuals with finger or partial hand amputations (FPHAs) with a control group and to explore the effect and predictors of MSCs in individuals with FPHAs. METHOD: A questionnaire-based cross-sectional study was conducted. The primary outcome measures were: prevalence of MSCs, health status, pain-related disability, physical work demands, work productivity, and hand function. RESULTS: The response rate was 61%. A comparable proportion of individuals with FPHAs (n = 99) and controls (n = 102) reported MSCs in the preceding 4 weeks (33% vs. 28%, respectively) or in the preceding year (37% vs. 33%, respectively). Individuals with FPHAs with MSCs experienced more pain than controls with MSCs. Regular occurrence of stump sensations and self-reported limited range of motion (ROM) of the wrist of the affected limb were predictors for MSCs in individuals with FPHAs. CONCLUSIONS: The prevalence of MSCs was comparable in individuals with FPHAs and controls. However, clinicians should pay special attention to the risk of developing MSCs in patients with stump sensations and limited ROM of the wrist of the affected limb. Future research should focus on the role of wrist movements and compensatory movements in the development of MSCs in individuals with FPHAs

Stump sensibility in children with upper limb reduction deficiency

Objectives: To compare stump sensibility in children with upper limb reduction deficiency with sensibility of the unaffected arm and hand. In addition, to evaluate the associations between stump sensibility, stump length and activity level.Design: Cross-sectional study.Subjects: Children and young adults aged 6-25 years with upper limb reduction deficiency.Methods: Threshold of touch was measured with Semmes-Weinstein monofilaments, stereognosis was measured with the Shape-Texture Identification test and kinaesthesia and activity level was measured with the Child Amputee Prosthetics Project Functional Status Inventory and the Prosthetic Upper Extremity Functional Index.Results: A total of 31 children with upper limb reduction deficiency (mean age 15 years, 3 prosthesis wearers) were investigated. The threshold of touch of the stump circumference was lower (indicating higher sensibility) than of the unaffected arm (p=0.006), hand (p=0.004) and stump end-point (p=Conclusion: Threshold of touch, stereognosis and kinaesthesia of the affected sides were excellent. Threshold of touch of the stump circumference was lower (indicating higher sensibility) than of the unaffected arm and hand. High stump sensibility may clarify good functioning in the children without prostheses and contribute to prosthesis rejection.</p

Effect of dentin matrix components on the mineralization of human mesenchymal stromal cells

In teeth with an injured pulp, dentin matrix orchestrates hard tissue repair through the release of dentin extracellular matrix components (dEMCs). dEMCs regulate the differentiation of resident mesenchymal stromal cells (MSCs), thereby affecting mineral deposition. In this study, we show that low-concentration solubilized dEMCs in osteogenic cultures of human umbilical cord mesenchymal stromal cells (UC-MSCs) and dental pulp stromal cells (DPSCs) enhanced mineral deposition, while adipose stromal cells (ASCs) were barely affected. Interestingly, UC-MSCs displayed significantly greater hydroxyapatite formation compared with DPSCs. UC-MSCs and DPSCs showed a dose-dependent viability and proliferation, whereas proliferation of ASCs remained unaffected. Qualitative analysis of the dEMC-supplemented osteogenic cultures through scanning electron microscopy demonstrated differences in the architecture of the deposited mineralized structures. Large-sized mineral accretions on a poorly organized collagen network were the prominent feature of UC-MSC cultures, while mineral nodules interspersed throughout a collagen mesh were observed in the respective DPSC cultures. The ability of dEMCs to induce mineralization varies between different human MSC types in terms of total mineral formation and architecture. Mineral formation by UC-MSCs exposed to low-concentration dEMCs proved to be the most efficient and therefore could be considered a promising combination for mineralized tissue engineering. Impact Statement This research has been conducted with the aim to contribute to the development of treatment modalities for the reconstruction of lost/damaged mineralized tissues. Currently, determining the most appropriate stromal cell population and signaling cues stands at the core of developing effective treatments. We provide new insights into the effect of innate inductive cues found in human dentin matrix components, on the osteogenic differentiation of various human stromal cell types. The effects of dentin extracellular matrix components on umbilical cord mesenchymal stromal cells have not been investigated before. The findings of this study could underpin translational research based on the development of techniques for mineralized tissue engineering and will be of great interest for the readership of Tissue Engineering Part A