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     

The Chinese-speaking Muslims (Dungans) of Central Asia: A Case of Multiple Identities in a Changing Context

Chinese-speaking Muslims, called Dungans in Central Asia and Huizu in China, were forced to migrate to present-day Kazakhstan, Kyrgyzstan and Uzbekistan at the end of the nineteenth century. They reconstructed their identity through interrelations with local populations and the soviet categorisation of nationality. But after 1991, their status has being gradually destabilised owing to the changes in economic, social and political rules as well as citizenship regulations in these countries. They have to readapt to the new situation created by the independence of the three former Soviet Republics, which has challenged their unity.     

Analyse biographique du travail féminin

Cet article montre comment l'application d'une méthode d'analyse biographique d'interaction à un domaine où l'interaction paraît évidente — activité féminine et fécondite — ouvre des perspectives nouvelles. En effet, les limites qui apparaissent lors de cette analyse conduisent les auteurs à conclure que ce n'est pas en raffinant les méthodes mais plutôt la collecte que l'on parviendra à progresser dans ce domaine. Le problème des interactions de l'activité et de la fécondité semble mal posé avant même le recours à la méthode. Cela justifie la nécessité de saisir le travail féminin comme concept unifié ne dissociant pas la sphère domestique et la sphère rémunérée. Cela conduit les auteurs à dégager quelques principes de collecte mieux adaptés aux préoccupations récentes dans ce domaine: des données biographiques sur le travail féminin. L'interaction collectée à sa source se prêterait alors à une analyse biographique plus révélatrice que celle qui confronte deux processus sans en évaluer les modalités changeantes.This article demonstrates how life event history analysis applied to the interaction between fertility and female economic activity can lead to new perspectives in the analysis of this complicated relationship. The authors identify limits to the analysis of the interaction given the anticipatory nature of behaviour. They conclude that progress in this field requires not the refinement of methods but rather a fundamental change in the approach to the data collected. If fertility and employment are considered separately, a problem is created even before the methods of analysis are applied. They recommend a conception of women's work as a whole, a conception that does not dissociate domestic and paid work. The authors go on to identify ways of improving the relevance of data collection to contemporary issues in the life history analysis of women's work. They argue that data on the interaction, collected at its source, would yield a more revealing life history than that which sees domestic work and paid work as separate spheres, and fails to take account of changes in their relationship.     

Optimal scaling of Metropolis algorithms: Heading toward general target distributions

The authors provide an overview of optimal scaling results for the Metropolis algorithm with Gaussian proposal distribution. They address in more depth the case of high‐dimensional target distributions formed of independent, but not identically distributed components. They attempt to give an intuitive explanation as to why the well‐known optimal acceptance rate of 0.234 is not always suitable. They show how to find the asymptotically optimal acceptance rate when needed, and they explain why it is sometimes necessary to turn to inhomogeneous proposal distributions. Their results are illustrated with a simple example.     

Approximations of rational criteria under complete ignorance and the independence axiom

Rational decision making under complete ignorance, a limit case of uncertainty, is defined. Through a concept of approximation, a meaning is given to a criterion almost possessing a property. Rational criteria depend almost on the sole bounds of the outcome range of each decision, they are almost continuous, they can almost possess a transitive indifference relation; however, under Savage's Independence Axiom, this last property restricts possible criteria to those which can be approximated, at least partly, by either the Maximin or the Maximax criterion.     

The 2003 Heat Wave in France: Dangerous Climate Change Here and Now

In an analysis of the French episode of heat wave in 2003, this article highlights how heat wave dangers result from the intricate association of natural and social factors. Unusually high temperatures, as well as socioeconomic vulnerability, along with social attenuation of hazards, in a general context where the anthropogenic contribution to climate change is becoming more plausible, led to an excess of 14,947 deaths in France, between August 4 and 18, 2003. The greatest increase in mortality was due to causes directly attributable to heat: dehydration, hyperthermia, heat stroke. In addition to age and gender, combinatorial factors included preexisting disease, medication, urban residence, isolation, poverty, and, probably, air pollution. Although diversely impacted or reported, many parts of Europe suffered human and other losses, such as farming and forestry through drought and fires. Summer 2003 was the hottest in Europe since 1500, very likely due in part to anthropogenic climate change. The French experience confirms research establishing that heat waves are a major mortal risk, number one among so-called natural hazards in postindustrial societies. Yet France had no policy in place, as if dangerous climate were restricted to a distant or uncertain future of climate change, or to preindustrial countries. We analyze the heat wave's profile as a strongly attenuated risk in the French context, as well as the causes and the effects of its sudden shift into amplification. Research and preparedness needs are highlighted.     

ECONOMIC DETERMINANTS OF THE TIMING OF PREFERENTIAL TRADE AGREEMENT FORMATIONS AND ENLARGEMENTS

Preferential trade agreements (PTAs) have proliferated over the past 60 years. While a small number of recent studies have examined empirically the economic determinants of the likelihood of a pair of countries having a PTA, this study explains empirically the timing of all PTA formations and enlargements from 1950 through 2006 using duration analysis. Our main and novel goal is to predict (in‐ and out‐of‐sample) a substantive share of these 1,560 PTA events using a parsimonious model with mainly economic variables, taking selection dynamics into account. Our analysis reveals that we can predict correctly in‐sample the actual year of entry into force for 26% of the 1,560 bilateral PTA formations/enlargements in the period 1950–2006 among 10,518 pairings of 146 countries using only a few economic and political variables. Moreover, we can predict correctly in‐sample 57% of these PTA events within a 10‐year window leading up to the event using this model. The model also performs well out‐of‐sample for the near term (82%), but not if the out‐of‐sample period is very long. We conclude with an evaluation of the model's ability to predict the timing of the North American Free Trade Agreement, the European Union's formation and enlargements, and the model's ten most likely post‐2006 PTA events. (JEL F14, F15)     

Beyond Contact? Policy approaches to work with families of looked after children in four European countries

In England, placement within the looked after system is not viewed as a desirable long‐term solution for most children, and policy has prioritised continued contact with parents, and swift return home, wherever possible. This review examines policy approaches to work with families of looked after children in England and in three other European countries: Denmark, France and the Netherlands, aiming to identify areas for shared learning in relation to this challenging area of policy and practice. The research highlights relationships between care populations and policy understandings of the purpose of work with families, including understandings of children's and/or parents’ rights.     

What Drives Citizen Participation in Political Gatherings in Modern South Africa? A Quantitative Analysis of Self-Reported Behaviour

Social Indicators Research - Community and public gatherings are an important component of political participation in sub-Saharan Africa. Formal and informal community meetings and rallies are...