Searching for the Kuhnian moment : the Black-Scholes-Merton formula and the evolution of modern finance theory

The Black-Scholes-Merton formula has been put to widespread use by options traders because it provides a means of calculating the theoretically 'correct' price of stock options. Traders can therefore see whether the market price of stock options undervalues or overvalues them compared with their hypothetical Black-Scholes-Merton price, before choosing to buy or sell options accordingly. As a consequence of this close relationship between options pricing theory and options pricing practice, a strong performativity loop was activated, whereby market prices quickly converged on the hypothetical Black-Scholes-Merton prices following the dissemination of the formula. The theory has therefore had significant real-world effects, but how should we characterize the initial instinct to derive the theory from a philosophy of science perspective? The two books under review suggest that a Kuhnian reading of the advancement of scientific knowledge might well be the most appropriate. But, on closer inspection, it becomes clear that the publication of the Black-Scholes-Merton formula should not be seen as a Kuhnian moment with paradigm-shaping attributes. It is shown that, at most, the formula acts as an important exemplar which, via its use in the training of options pricing theorists and options pricing practitioners, reinforces the entrenchment of finance theory within the orthodox economics worldview

Shore-level size gradients in Tegula funebralis (A. Adams) : seasonal changes influenced by interaction of predator preference and prey behavior

Aspects of the Pisaster-Tegula interaction are re-examined. Reproductive portions of T. funebrallis populations are shown to be immune to seastar predation through a combination of predator preference for larger snails and a withdrawal behavior that favors the escape of smaller snails after capture by a seastar . Experimental addition of p. ochraaceus in winter causes changes in the intertidal distribution of T. funebralis similar to those observed during the summer increase in seastar numbers. It is suggested that these results supplant the hypothesis that lowered prereproductive mortality influences formation and maintenance of vertical size gradients in the lower intertidal

A comparison of the efficacy of liquidity, momentum, size and book-to-market value factors in equity pricing on a heterogeneous sample: evidence from Asia

This paper compares the size and book-to-market value factors of Fama and French (1993) alongside Momentum of Jagadeesh and Titman (1993) with two Liu (2006) liquidity factors formed from 1 year rebalancing and 1 month rebalancing respectively. A heterogeneous and comprehensive sample of the top blue chip stocks of all national Asian equity markets with further differentiation undertaken between sub samples formed for Japan only and Asia excluding Japan for period January 2000 to August 2014. Our empirical results suggest that multifactor time invariant pricing models based on augmented capital asset pricing model (CAPM) framework are ineffective in explaining the cross section of stock returns in the presence of significant inter and intra-market segmentation. However an alternative model specification based on a time varying parameter specification and using same sets of factors yields significant enhancements in explaining cross section of stock returns across universe. We find that momentum factor largely lacks significance while a time varying two factor model, based on CAPM plus liquidity factor, is optimal. The liquidity factor being that of Liu (2006) and annually rebalanced. Our findings are important for investment managers seeking appropriate factors and modelling techniques to hedge against risks as well as firm’s financial managers seeking to reduce costs of equity capital

Multiphase, non-spherical gas accretion onto a black hole

(Abridged) We investigate non-spherical behavior of gas accreting onto a central supermassive black hole performing simulations using the SPH code GADGET-3 including radiative cooling and heating by the central X-ray source. As found in earlier 1D studies, our 3D simulations show that the accretion mode depends on the X-ray luminosity (L_X) for a fixed density at infinity and accretion efficiency. In the low L_X limit, gas accretes in a stable, spherically symmetric fashion. In the high L_X limit, the inner gas is significantly heated up and expands, reducing the central mass inflow rate. The expanding gas can turn into a strong enough outflow capable of expelling most of the gas at larger radii. For some intermediate L_X, the accretion flow becomes unstable developing prominent non-spherical features, the key reason for which is thermal instability (TI) as shown by our analyses. Small perturbations of the initially spherically symmetric accretion flow that is heated by the intermediate L_X quickly grow to form cold and dense clumps surrounded by overheated low density regions. The cold clumps continue their inward motion forming filamentary structures; while the hot infalling gas slows down because of buoyancy and can even start outflowing through the channels in between the filaments. We found that the ratio between the mass inflow rates of the cold and hot gas is a dynamical quantity depending on several factors: time, spatial location, and L_X; and ranges between 0 and 4. We briefly discuss astrophysical implications of such TI-driven fragmentation of accreting gas on the formation of clouds in narrow and broad line regions of AGN, the formation of stars, and the observed variability of the AGN luminiosity.Comment: 25 pages, 13 figures. Version accepted for publication in MNRAS. Uploaded version contains low-resolution color figures. Complete paper with high-resolution figures can be found at: http://adlibitum.oats.inaf.it/barai/AllPages/Images-Movies/BHaccr_MultiPhase.pd

Scaling study of the pion electroproduction cross sections and the pion form factor

The $^{1}$H($e,e^\prime \pi^+$)n cross section was measured for a range of four-momentum transfer up to $Q^2$=3.91 GeV$^2$ at values of the invariant mass, $W$, above the resonance region. The $Q^2$-dependence of the longitudinal component is consistent with the $Q^2$-scaling prediction for hard exclusive processes. This suggests that perturbative QCD concepts are applicable at rather low values of $Q^2$. Pion form factor results, while consistent with the $Q^2$-scaling prediction, are inconsistent in magnitude with perturbative QCD calculations. The extraction of Generalized Parton Distributions from hard exclusive processes assumes the dominance of the longitudinal term. However, transverse contributions to the cross section are still significant at $Q^2$=3.91 GeV$^2$.Comment: 6 pages, 3 figure

Study of the A(e,e'π+\pi^+) Reaction on 1^1H, 2^2H, 12^{12}C, 27^{27}Al, 63^{63}Cu and 197^{197}Au

Cross sections for the p($e,e'\pi^{+}$)n process on $^1$H, $^2$H, $^{12}$C, $^{27}$Al, $^{63}$Cu and $^{197}$Au targets were measured at the Thomas Jefferson National Accelerator Facility (Jefferson Lab) in order to extract the nuclear transparencies. Data were taken for four-momentum transfers ranging from $Q^2$=1.1 to 4.8 GeV$^2$ for a fixed center of mass energy of $W$=2.14 GeV. The ratio of $\sigma_L$ and $\sigma_T$ was extracted from the measured cross sections for $^1$H, $^2$H, $^{12}$C and $^{63}$Cu targets at $Q^2$ = 2.15 and 4.0 GeV$^2$ allowing for additional studies of the reaction mechanism. The experimental setup and the analysis of the data are described in detail including systematic studies needed to obtain the results. The results for the nuclear transparency and the differential cross sections as a function of the pion momentum at the different values of $Q^2$ are presented. Global features of the data are discussed and the data are compared with the results of model calculations for the p($e,e'\pi^{+}$)n reaction from nuclear targets.Comment: 28 pages, 19 figures, submited to PR

Scaling of the F_2 structure function in nuclei and quark distributions at x>1

We present new data on electron scattering from a range of nuclei taken in Hall C at Jefferson Lab. For heavy nuclei, we observe a rapid falloff in the cross section for $x>1$, which is sensitive to short range contributions to the nuclear wave-function, and in deep inelastic scattering corresponds to probing extremely high momentum quarks. This result agrees with higher energy muon scattering measurements, but is in sharp contrast to neutrino scattering measurements which suggested a dramatic enhancement in the distribution of the `super-fast' quarks probed at x>1. The falloff at x>1 is noticeably stronger in ^2H and ^3He, but nearly identical for all heavier nuclei.Comment: 5 pages, 4 figures, to be submitted to physical revie

Measurement of Nuclear Transparency for the A(e,e' pi^+) Reaction

We have measured the nuclear transparency of the A(e,e' pi^+) process in ^{2}H,^{12}C, ^{27}Al, ^{63}Cu and ^{197}Au targets. These measurements were performed at the Jefferson Laboratory over a four momentum transfer squared range Q^2 = 1.1 - 4.7 (GeV/c)^2. The nuclear transparency was extracted as the super-ratio of $(\sigma_A/\sigma_H)$ from data to a model of pion-electroproduction from nuclei without pi-N final state interactions. The Q^2 and atomic number dependence of the nuclear transparency both show deviations from traditional nuclear physics expectations, and are consistent with calculations that include the quantum chromodynamical phenomenon of color transparency.Comment: 5 pages, 3 figs Changes to figure 2 and 3 (error band updated and theory curves updated

Safety and immunogenicity of therapeutic DNA vaccination in individuals treated with antiretroviral therapy during acute/early HIV-1 infection

Background: An effective therapeutic vaccine that could augment immune control of HIV-1 replication may abrogate or delay the need for antiretroviral therapy. AIDS Clinical Trials Group (ACTG) A5187 was a phase I/II, randomized, placebo-controlled, double-blinded trial to evaluate the safety and immunogenicity of an HIV-1 DNA vaccine (VRC-HVDNA 009-00-VP) in subjects treated with antiretroviral therapy during acute/early HIV-1 infection. (clinicaltrials.gov NCT00125099) Methods: Twenty healthy HIV-1 infected subjects who were treated with antiretroviral therapy during acute/early HIV-1 infection and had HIV-1 RNA<50 copies/mL were randomized to receive either vaccine or placebo. The objectives of this study were to evaluate the safety and immunogenicity of the vaccine. Following vaccination, subjects interrupted antiretroviral treatment, and set-point HIV-1 viral loads and CD4 T cell counts were determined 17–23 weeks after treatment discontinuation. Results: Twenty subjects received all scheduled vaccinations and discontinued antiretroviral therapy at week 30. No subject met a primary safety endpoint. No evidence of differences in immunogenicity were detected in subjects receiving vaccine versus placebo. There were also no significant differences in set-point HIV-1 viral loads or CD4 T cell counts following treatment discontinuation. Median set-point HIV-1 viral loads after treatment discontinuation in vaccine and placebo recipients were 3.5 and 3.7 log[sub]10 HIV-1 RNA copies/mL, respectively. Conclusions: The HIV-1 DNA vaccine (VRC-HIVDNA 009-00-VP) was safe but poorly immunogenic in subjects treated with antiretroviral therapy during acute/early HIV-1 infection. Viral set-points were similar between vaccine and placebo recipients following treatment interruption. However, median viral load set-points in both groups were lower than in historical controls, suggesting a possible role for antiretroviral therapy in persons with acute or early HIV-1 infection and supporting the safety of discontinuing treatment in this group. Trial Registration: Clinicaltrials.gov NCT0012509