The Performance of Multi-Factor Term Structure Models for Pricing and Hedging Caps and Swaptions

In this paper we empirically compare different term structure models when it comes to the pricing and hedging of caps and swaptions.We analyze the influence of the number of factors on the pricing and hedging results, and investigate which type of data -interest rate data or derivative price data- should be used to estimate the model parameters to obtain the best pricing and hedging results. We use data on interest rates, and cap and swaption prices from 1995 to 1999.We find that models with two or three factors imply better out-of-sample predictions of cap and swaption prices than one-factor models.Also, estimation on the basis of derivative prices leads to more accurate out-of-sample prediction of cap and swaption prices than estimation on the basis of interest rate data.The empirical results on the hedging of caps and swaptions show that, if the number of hedge instruments is equal to the number of factors, the multi-factor models outperform one-factor models in hedging caps and swaptions. However, if one uses a large set of hedge instruments, one-factor models perform as well as multi-factor models.term structure of interest rates;option pricing;hedging;derivatives

Common Factors in International Bond Returns

In this paper we estimate and interpret the factors that jointly determine bond returns of different maturities in the US, Germany and Japan.We analyze both currency-hedged and unhedged bond returns.For currency-hedged bond returns, we find that five factors explain 96.5% of the variation of bond returns.These factors can be associated with changes in the level and steepness of the term structures in (some of) these countries.In particular, it turns out that changes in the level of the term structures are correlated across countries, while changes in the steepness of the term structures are country-specific.The five-factor model also provides a good fit of the expected returns of bond returns in all countries.We find similar results for bond returns that are not hedged for currency risk.Finally, we show how the model can be used to calculate the Value at Risk for international bond portfolios and to price cross-currency interest rate derivatives, and compare the results with simpler models.bonds;return on investment;term structure of interest rates

On 1-convexity and nucleolus of co-insurance games

The situation, in which an enormous risk is insured by a number of insurance companies, is modeled through a cooperative TU game, the so-called co-insurance game, first introduced in Fragnelli and Marina (2004). In this paper we show that a co-insurance game possesses several interesting properties that allow to study the nonemptiness and the structure of the core and to construct an efficient algorithm for computing the nucleolus

Semiproportional Values for TU Games.

The goal of the paper is to introduce a family of values for transferable utility cooperative games that are proportional for two- person games and as well satisfying some combinatorial structure com- posed by contributions of complementary coalitions or, to less extent, marginal contributions by players.cooperative TU game; value; proportional sharing; probabilistic model

Photodefinition of channel waveguide in electro-optic polymer

Polymers with optically active nonlinear chromophores have been shown to have a promising future in low cost and high speed electro–optic device applications. However, a main question of concern is the photochemical stability of the chromophores for long term application. The chromophore TCVDPA with a benzene bridge between a tricyanovinyl acceptor and an amino donor has been reported to have high photochemical stability combined with high electro-optic activity. In the current work direct waveguide definition of the host polymer SU-8, a negative photoresist, containing this chromophore by masked UV exposure followed by development, has been demonstrated. This was possible by utilizing the chromophore low absorption window in the UV region that allows crosslinking of the host polymer by exposing to UV light followed by thermal curing

Experimental and numerical study of SiON microresonators with air and polymer cladding

A systematic experimental and numerical study of the device performance of waveguide-coupled SiON microresonators with air and polymer cladding is presented. Values of device parameters like propagation losses of the microresonator modes, the off-resonance insertion losses, and the straight waveguide to microresonator coupling are determined by applying a detailed fitting procedure to the experimental results and compared to results of detailed numerical simulations. By comparing the propagation losses of the fundamental TE polarized microresonator mode obtained by fitting to the measured spectra to the also experimentally determined propagation losses in the adjacent straight waveguide and the materials losses, it is possible to identify the loss mechanisms in the microresonator. By comparing experimental results for microresonators with air and polymethylmethacrylate cladding and a detailed numerical study, the influence of the cladding index on the bend losses is evaluated. It is demonstrated that the presence of an upper cladding can, under the right conditions, actually be beneficial for loss reduction

Distribution and conservation status of two endemic Tasmanian crustaceans, Allanaspides hickmani and Allanaspides helonomus (Syncarida: anaspididae)

Extant representatives of the ancient crustacean family Anaspididae (Syncarida) are restricted to the island state of Tasmania, Australia. The most recently described species, Allanaspides helonomus Swain, Wilson, Hickman & Ong, 1970 and A. hickmani Swain, Wilson & Ong, 1971, were described from buttongrass moorland in southwestern Tasmania. Large areas of their habitat were subsequently inundated for hydroelectric power generation. We surveyed the extant distributions of A. hickmani and A. helonomus, assessed potential threats to the species, and reviewed their conservation status against state, national and international criteria. A. hickmani is restricted to a single catchment and occurs in a very small number (<10) of highly fragmented subpopulations on the margins of two hydroelectric impoundments. A. helonomus has a substantially larger range and Area of Occupancy spanning three separate catchments, and is now known to also occur in the Lake Pedder hydro-electric impoundment. Both species are listed as vulnerable on the IUCN Red List. This listing appears warranted for A. hickmani based on its restricted Area of Occupancy and the small number of extant subpopulations. However, A. helonomus no longer appears to fulfil the IUCN criterion for vulnerable. Neither species appears to be eligible for listing as vulnerable under the Australian Environment Protection and Biodiversity Conservation Act 1999 and the Tasmanian Threatened Species Protection Act 1995. The current listing of A. hickmani as rare under the Tasmanian Threatened Species Protection Act 1995 appears warranted as extant subpopulations may be at risk of extinction. The level of risk for A. helonomus is considerably lower than is the case for A. hickmani, and A. helonomus may not be eligible for listing as rare. The potential impacts of climate change on buttongrass moorland may present the most serious long-term threat to the two Allanaspides species

From aggregation to interpretation:how assessors judge complex data in a competency-based portfolio

While portfolios are increasingly used to assess competence, the validity of such portfolio-based assessments has hitherto remained unconfirmed. The purpose of the present research is therefore to further our understanding of how assessors form judgments when interpreting the complex data included in a competency-based portfolio. Eighteen assessors appraised one of three competency-based mock portfolios while thinking aloud, before taking part in semi-structured interviews. A thematic analysis of the think-aloud protocols and interviews revealed that assessors reached judgments through a 3-phase cyclical cognitive process of acquiring, organizing, and integrating evidence. Upon conclusion of the first cycle, assessors reviewed the remaining portfolio evidence to look for confirming or disconfirming evidence. Assessors were inclined to stick to their initial judgments even when confronted with seemingly disconfirming evidence. Although assessors reached similar final (pass-fail) judgments of students' professional competence, they differed in their information-processing approaches and the reasoning behind their judgments. Differences sprung from assessors' divergent assessment beliefs, performance theories, and inferences about the student. Assessment beliefs refer to assessors' opinions about what kind of evidence gives the most valuable and trustworthy information about the student's competence, whereas assessors' performance theories concern their conceptualizations of what constitutes professional competence and competent performance. Even when using the same pieces of information, assessors furthermore differed with respect to inferences about the student as a person as well as a (future) professional. Our findings support the notion that assessors' reasoning in judgment and decision-making varies and is guided by their mental models of performance assessment, potentially impacting feedback and the credibility of decisions. Our findings also lend further credence to the assertion that portfolios should be judged by multiple assessors who should, moreover, thoroughly substantiate their judgments. Finally, it is suggested that portfolios be designed in such a way that they facilitate the selection of and navigation through the portfolio evidence