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     

Composition-consistent tournament solutions and social choice functions

This paper introduces a new axiom for choice in preference profiles and tournaments, called composition-consistency. A social choice function is composition-consistent if it is non-sensitive to the cloning of one or several outcomes. The key feature of the composition consistency property is an operation concept called multiple composition product of profiles. The paper provides a brief overview of some social choice functions studied in the literature. Concerning the tournament solutions, it is proved that the Top Cycle, the Slater and the Copeland solutions are not composition-consistent, whereas the Banks, Uncovered Set, TEQ, Minimal Covering Set are composition-consistent. Moreover, we define the composition-consistent hull of a solution as the smallest composition-consistent solution containing . The composition-consistent hulls of the Top cycle and Copeland solutions are specified, and we give some hints about the location of the hull of the Slater set. Concerning social choice functions, it is shown that Kemeny, Borda and Minimax social choice functions are not composition-consistent, whereas the Paretian one is composition-consistent. Moreover, we prove that the latter is the composition-consistent hull of the Borda and Minimax functions.     

Asymptotic behaviour of binned kernel density estimators for locally non-stationary random fields

We investigate the asymptotic behaviour of binned kernel density estimators for dependent and locally non-stationary random fields converging to stationary random fields. We focus on the study of the bias and the asymptotic normality of the estimators. A simulation experiment conducted shows that both the kernel density estimator and the binned kernel density estimator have the same behavior and both estimate accurately the true density when the number of fields increases. We apply our results to the 2002 incidence rates of tuberculosis in the departments of France.     

Urbanization impacts the taxonomic and functional structure of aquatic macroinvertebrate communities in a small Neotropical city

Due to habitat fragmentation, resource disruption and pollution, urbanization is one of the most destructive forms of anthropization affecting ecosystems worldwide. Generally, human-mediated perturbations dramatically alter species diversity in urban sites compared to the surroundings, thus influencing the functioning of the entire ecosystem. We investigated the taxonomic and functional diversity patterns of the aquatic macroinvertebrate communities in tank bromeliads by comparing those found in a small Neotropical city with those from an adjacent rural site. Changes in the quality of detrital inputs in relation to lower tree diversity and the presence of synanthropic species are likely important driving forces behind the observed structural changes in the urban site. Leaf-litter processors (i.e., shredders, scrapers) were positively affected in the urban site, while filter-feeders that process smaller particles produced by the activity of the shredders were negatively affected. Because we cannot ascertain whether the decline in filter-feeders is related to food web-mediated effects or to competitive exclusion (Aedes aegypti mosquitoes were present in urban bromeliads only), further studies are necessary to account for the effects of intra-guild competition or inter-guild facilitation.     

Low wages and high unemployment rates: The role of social interactions in hiring discrimination

The purpose of this paper is to explain why low-wage workers with identical qualifications to higher-wage workers are more exposed to unemployment. Each worker is considered to belong to a social group (defined according to his/her gender, age, and nationality). We assume that workers experience both productive interdependencies and social interactions within the firm. Also inter- and intra-group interactions determine worker productivity, and frictions on the labor market limit the hiring of the most productive workers. Consequently, externalities acting both within the firm and in the labor market can lead to a higher rate of unemployment for low-wage workers.     

Behavioral evidence for framing effects in the resolution of the doctrinal paradox

The aggregation of individual sets of judgments over interconnected propositions can yield inconsistent collective sets of judgments, even when the individual sets of judgments are themselves consistent. A doctrinal paradox occurs when majority voting on a compound proposition (such as a conjunction or disjunction) yields a different result than majority voting on each of the elements of the proposition. For example, when most individuals accept proposition X; most individuals accept proposition Y ; but only a minority of individuals accept the compound proposition ‘X and Y’. Conducting two elemental votes would lead to accept X and Y , but conducting one compound vote would lead to reject X and Y . In such a situation, do people manifest a stable preference as to which voting procedure should be applied? This research reports the results of two behavioral experiments using a within-participant design, which show that procedural preferences can be upturned by framing either positively or negatively the set of judgments to be aggregated. This shift in procedural preference leads to large swings in the final collective judgment endorsed by participants.     

Tree-structured subgroup analysis for censored survival data: Validation of computationally inexpensive model selection criteria

The performance of computationally inexpensive model selection criteria in the context of tree-structured subgroup analysis is investigated. It is shown through simulation that no single model selection criterion exhibits a uniformly superior performance over a wide range of scenarios. Therefore, a two-stage approach for model selection is proposed and shown to perform satisfactorily. Applied example of subgroup analysis is presented. Problems associated with tree-structured subgroup analysis are discussed and practical solutions are suggested.     

Identity and Disruptiveness in Boys: Longitudinal Perspectives

After more than 30 years of research on identity, the links between identity and disruptive behaviors are not clear. This study compared the identity formation of boys with stable disruptive behaviors from age 6 to age 15 (n = 16), with the identity formation of boys that were never disruptive during the same period (n = 25). All boys came from low socio-economic status families. At age 9 and 11, identity was assessed with the The Self-Perception Profile for Children (Harter, 1985). At age 15, identity was assessed with the Extended Objective Measure of Ego Identity Status (Adams, Bennion, & Huh, 1989) and two scales of the Offer Self-Image Questionnaire (Offer, Ostrov, & Howard, 1981). Differences between disruptive and non-disruptive boys were found only for behavior in childhood and identity in ideological domains at age 15. Explanations for the weakness of the link between identity and disruptiveness are discussed.