Price bias and common practice in option pricing

Generally, the semiclosed-form option pricing formula for complex financial models depends on unobservable factors such as stochastic volatility and jump intensity. A popular practice is to use an estimate of these latent factors to compute the option price. However, in many situations this plug-and-play approximation does not yield the appropriate price. This article examines this bias and quantifies its impacts. We decompose the bias into terms that are related to the bias on the unobservable factors and to the precision of their point estimators. The approximated price is found to be highly biased when only the history of the stock price is used to recover the latent states. This bias is corrected when option prices are added to the sample used to recover the states' best estimate. We also show numerically that such a bias is propagated on calibrated parameters, leading to erroneous values. The Canadian Journal of Statistics 48: 8–35; 2020 © 2019 Statistical Society of Canada     

Australia and the Global South: Knowledge and the Ambiguities of Place and Identity

Australia was settled as a colony of Britain from the 17th century, and its early history of violent occupation has gradually given way to a relatively peaceful, wealthy, multicultural society. As a post-colonial country, its people share characteristics with those of Britain, but, as a multicultural society, national identity is increasingly influenced by the cultures of many countries, from both the global North and South. In this paper, the question of Australia's placement as a country of the global North or South is explored. Considerations of geography, the economy, political regimes and national identity are the backdrop to an investigation of Australian scholarship and the attitudes of scholars to the inclusion of Australia as a country of the global South.     

Ethical Numbers: Ethics Training in U.S. Graduate Statistics Programs, 2013–2014

As important members of research teams, statisticians bear an ethical responsibility to analyze, interpret, and report data honestly and objectively. One way of reinforcing ethical responsibilities is through required courses covering a variety of ethics-related topics at the graduate level. We assessed ethics requirements for graduate-level statistics training programs in the United States for the 2013–2014 academic year using the websites of 88 universities, examining 103 biostatistics programs, and 136 statistics degree programs. We categorized programs’ ethics training requirements as required or not required. Thirty-one (35.1%) universities required an ethics course for at least some degree students. Sixty-two (25.5%) degree programs required an ethics course for at least some students. The majority (77.4%) of required courses were worth 0 or 1 credit. Of the 177 programs without an ethics requirement, 19 (10.7%) listed an ethics elective. Although a single ethics course is insufficient for instilling an ethical approach to science, degree programs that model expectations through coursework point to the value of ethics in science. More training programs should prepare statisticians to consider the ethical dimensions of their work through required coursework. Supplementary materials for this article are available online.     

Inequality Assessment by Probabilistic Development Indices

Social Indicators Research - This paper analyses the Human Development Index (HDI) time series from 2010 to 2017. An alternative index is studied, which combines the same components of the HDI by...     

Aging in the Era of Regenerative Medicine: Analysis of Aging‐Related Representations among Canadian Researchers

Explicitly aimed at understanding and controlling molecular and cellular processes at the root of senescence and biological aging, regenerative medicine aspires to artificially reproduce the biological processes that enable the body to regenerate itself. This no longer involves conserving the body's state of balance by combating disease, as in clinical medicine, but rather fighting degeneration itself. From stem cell research to gene therapy to the production of replacement tissues, regenerative medicine perfectly corresponds to the logic of biomedicalization specific to postmodern society. Based on a series of 18 interviews conducted with Canadian researchers and clinicians in the field of regenerative medicine, this article seeks to understand representations of the aging body among researchers in this field. Seen from a strictly negative angle, aging is assimilated by researchers to an inevitable catastrophe that nevertheless must be combated. More closely observing the theoretical model of regenerative biology and the types of treatments developed, it can be observed, however, that this medicine of the future does not target the elderly, but rather promises youth the ability to regenerate themselves to avoid aging.     

Robust Designs in Generalized Linear Models: A Quantile Dispersion Graphs Approach

This article studies design selection for generalized linear models (GLMs) using the quantile dispersion graphs (QDGs) approach in the presence of misspecification in the link and/or linear predictor. The uncertainty in the linear predictor is represented by a unknown function and estimated using kriging. For addressing misspecified link functions, a generalized family of link functions is used. Numerical examples are shown to illustrate the proposed methodology.     

Reducing sample size needed for cox-proportional hazards model analysis using more efficient sampling method

Abstract

In general, survival data are time-to-event data, such as time to death, time to appearance of a tumor, or time to recurrence of a disease. Models for survival data have frequently been based on the proportional hazards model, proposed by Cox. The Cox model has intensive application in the field of social, medical, behavioral and public health sciences. In this paper we propose a more efficient sampling method of recruiting subjects for survival analysis. We propose using a Moving Extreme Ranked Set Sampling (MERSS) scheme with ranking based on an easy-to-evaluate baseline auxiliary variable known to be associated with survival time. This paper demonstrates that this approach provides a more powerful testing procedure as well as a more efficient estimate of hazard ratio than that based on simple random sampling (SRS). Theoretical derivation and simulation studies are provided. The Iowa 65+ Rural study data are used to illustrate the methods developed in this paper.     

Beyond tail median and conditional tail expectation: Extreme risk estimation using tail Lp-optimization

The conditional tail expectation (CTE) is an indicator of tail behavior that takes into account both the frequency and magnitude of a tail event. However, the asymptotic normality of its empirical estimator requires that the underlying distribution possess a finite variance; this can be a strong restriction in actuarial and financial applications. A valuable alternative is the median shortfall (MS), although it only gives information about the frequency of a tail event. We construct a class of tail L^p-medians encompassing the MS and CTE. For p in (1,2), a tail L^p-median depends on both the frequency and magnitude of tail events, and its empirical estimator is, within the range of the data, asymptotically normal under a condition weaker than a finite variance. We extrapolate this estimator and another technique to extreme levels using the heavy-tailed framework. The estimators are showcased on a simulation study and on real fire insurance data.     

Sex Related Factors in the Perception of Threatening Facial Expressions

This study replicated and extended previously reported sex differences involving both viewer and target in the recognition of threatening facial expressions. Based on the assumption that the evolved cognitive mechanisms mediating anger recognition would have been designed by natural selection to operate quickly in the interests of survival, brief tachistoscopic presentation of stimulus photographs was used. Additionally, in contrast to prior published studies, the statistical methods of signal detection research were used to control for the confounding effects of non-random guessing. The main hypothesis, that anger posed by males would be more accurately perceived than anger posed by females, was supported. A secondary hypothesis, that female-posed anger would be more accurately perceived by women than by men, received partial support. Testosterone levels, measured inferentially in terms of diurnal cycles, failed to show the hypothesized positive relationship to accuracy of anger perception.