Option pricing under model and parameter uncertainty using predictive densities

The theoretical price of a financial option is given by the expectation of its discounted expiry time payoff. The computation of this expectation depends on the density of the value of the underlying instrument at expiry time. This density depends on both the parametric model assumed for the behaviour of the underlying, and the values of parameters within the model, such as volatility. However neither the model, nor the parameter values are known. Common practice when pricing options is to assume a specific model, such as geometric Brownian Motion, and to use point estimates of the model parameters, thereby precisely defining a density function.We explicitly acknowledge the uncertainty of model and parameters by constructing the predictive density of the underlying as an average of model predictive densities, weighted by each model's posterior probability. A model's predictive density is constructed by integrating its transition density function by the posterior distribution of its parameters. This is an extension to Bayesian model averaging. Sampling importance-resampling and Monte Carlo algorithms implement the computation. The advantage of this method is that rather than falsely assuming the model and parameter values are known, inherent ignorance is acknowledged and dealt with in a mathematically logical manner, which utilises all information from past and current observations to generate and update option prices. Moreover point estimates for parameters are unnecessary. We use this method to price a European Call option on a share index.     

Through a Glass,Darkly: The Dynamics of Fan‐Celebrity Encounters

Mass media influence interaction in important ways: fans of serial television use mass media to incorporate the fictional and the extraordinary into their real, ordinary, everyday lives. Using ethnographic and interview data, this article examines the activities through which certain fans seek face‐to‐face encounters with the celebrities they admire and how this intersection of the ordinary with the extraordinary creates problems of interpretation that fans attempt to solve. Fans make and take advantage of opportunities for prestaged encounters at official public appearances by their favorite actors. Some fans may also encounter their favorite celebrities by chance in the course of their daily rounds in “celebrity sightings,” or unstaged encounters. Certain fans, however, actively pursue actors, deliberately seeking them out and creating fan‐staged encounters. These efforts produce a distinctive interactional tension in which pursuing fans recognize the similarities between their behavior and that of “celebrity stalkers” and attempt to differentiate themselves from the stalkers celebrities fear. This article analyzes these interactions as a step toward a theory of fan‐celebrity interaction.     

Property Size and Land Cover Change in the Brazilian Amazon

This paper considers the size of a farmer’s property as a key variable influencing land cover and land cover change in rural areas of developing countries. Data from 126 rural familial properties in the region around the city of Santarém, Pará, in the Brazilian Amazon, indicate that property size is important for understanding the trajectories of land cover change. Past research has focused on the distinction between small family farms and large capitalized farms, arguing that family farmers have a higher deforestation intensity, or on estimating the strength of the effect of property size relative to economic or demographic factors. This paper shows that larger familial properties are able both to retain a larger area in forest and to have long enough cycles of use and fallow to allow previously used land to become forested again. Based on these analyses and discussion, we argue that land use and land cover research must consider property size as an organizing principle in order to better comprehend the reciprocal relationship between population and environment in frontier areas of the Brazilian Amazon and other rural landscapes.     

Legal and policy implications of the flexible employment relationship

V. Conclusion The flexible employment relationship encompassing as it does so many different kinds of arrangements — temporary, leased, homeworking, telecommuting, jobsharing, and consulting workers — is not a good candidate for the kinds of across-the-board regulatory proposals that are presently popular. Although the negatives of involuntary contingent employment receive considerable attention (relatively lower wages, the absence of access to benefit plans), the advantages (mutual flexibility and the opportunity to transmit/receive training and experience) do not. Proposals to raise the relative cost of employing contingent workers need to address each of the following three concerns: First, the mix of “employees” and independent contractors some of whom voluntarily fill the ranks of contingent workers; second, the absence of any meaningful job protections or legal claims to nonmandated benefits by mostcore workers; and, finally, the possibility that in some cases contingent workers’ wages operate asde facto sub-minimum training wage. More empirical work is needed in order to evaluate each of these issues. In the meantime, a case has yet to be made for altering the existing regulatory framework facing employers of flexible workers. I am indebted to Joseph Salama for research assistance and to Michael Harper, Keith N. Hylton, Stephen Marks, and Larry Yackle for helpful comments.     

On the Tukey depth of an atomic measure

This paper gives a relation between the convex Tukey trimmed region (see [J.C. Massé, R. Theodorescu, Halfplane trimming for bivariate distributions, J. Multivariate Anal. 48(2) (1994) 188–202]) of an atomic measure and the support of the measure. It is shown that an atomic measure is concentrated on the extreme points of its Tukey trimmed region. A property concerning the extreme points which have 0 mass is given. As a corollary, we give a new method of proof of the Koshevoy characterization result.     

Sexual Behavior in China: Trends and Comparisons

Dramatic political, economic, and social changes in China over the past several decades have been accompanied by much discussion in popular media and among academics of a fundamental transformation in Chinese sexual behavior. Several studies have examined current Chinese sexual behavior but have been limited to particular provinces or cities and have been based on non‐random samples. The potential threat of a generalized HIV epidemic in China highlights the dearth of population‐based information on current patterns of sexual behavior that could help design better intervention strategies and prevent misguided ones. This article uses data from the first national probability survey of adult sexual behavior in China completed during 1999–2000, along with a historical and literature review, to address three key questions: 1) Has there been a revolution in sexual behavior in China? 2) Is China unique compared to other countries in these transformations? 3) What are the implications of these findings for China's risk of a generalized HIV epidemic?     

Public Accounts: Defending Contested Practices

Little attention has been paid to how actors account for controversial institutional conduct or contested practices. Relying on a content analysis of letters to the editor, I explore how actors operating in the Habermasian “public sphere” justify the contested practice of linking Native American symbols with sports teams, and suggest that in their rejection of challengers to their definitions of the situation, authors create public accounts. Consisting primarily of justifications rather than excuses, these accounts are of four types: “denial of injury,” “assertion of benefit,” “claim of authority,” and “rejection of challenge.” For those who wish to conduct comparative analyses of contested practices, these concepts may prove useful.     

Cryptosporidium and Dairy Cattle in the Catskill/Delaware Watershed: A Quantitative Risk Assessment

We carried out a study to estimate the public health risk posed by dairy cattle located in New York City's Catskill/Delaware watershed, as measured by daily C. parvum-like oocyst loading. A Monte Carlo simulation model that takes into account the nature of the dairy cattle population within the target area, age-specific incidence/prevalence rates, as well as differential fecal production and oocyst-shedding intensity rates was used to address the objectives. Additionally, the model was designed to distinguish between zoonotic and nonzoonotic species/genotypes of Cryptosporidium. Total estimated daily C. parvum-like oocyst shedding across all age/production categories was estimated at 4.15 x 10(10). The zoonotic C. parvum comprised 93.5% of this load. It was estimated that preweaned calves produce 99.5% of the total daily C. parvum ocyst burden. The recently described nonzoonotic C. bovis was estimated to have a daily load of 2.2 x 10(9) oocysts across all age/production strata. C. parvum deer-like genotype was estimated to have a total daily load of 1.3 x 10(9) oocysts. The results of this study support earlier assertions that strategies aimed at reducing the cryptosporidial risk posed by dairy cattle to public health will be most efficacious if aimed at preweaned calves.