Modelling and Forecasting Noisy Realized Volatility

Several methods have recently been proposed in the ultra high frequency financial literature to remove the effects of microstructure noise and to obtain consistent estimates of the integrated volatility (IV) as a measure of ex-post daily volatility. Even bias-corrected and consistent realized volatility (RV) estimates of IV can contain residual microstructure noise and other measurement errors. Such noise is called “realized volatility errorâ€. Since such errors are ignored, we need to take account of them in estimating and forecasting IV. This paper investigates through Monte Carlo simulations the effects of RV errors on estimating and forecasting IV with RV data. It is found that: (i) neglecting RV errors can lead to serious bias in estimators; (ii) the effects of RV errors on one-step ahead forecasts are minor when consistent estimators are used and when the number of intraday observations is large; and (iii) even the partially corrected recently proposed in the literature should be fully corrected for evaluating forecasts. This paper proposes a full correction of . An empirical example for S&P 500 data is used to demonstrate the techniques developed in the paper.forecasting;diffusion;financial econometrics;goodness-of-fit;measurement errors;model evaluation;realized volatility

Log Skeletons: A Classification Approach to Process Discovery

To test the effectiveness of process discovery algorithms, a Process Discovery Contest (PDC) has been set up. This PDC uses a classification approach to measure this effectiveness: The better the discovered model can classify whether or not a new trace conforms to the event log, the better the discovery algorithm is supposed to be. Unfortunately, even the state-of-the-art fully-automated discovery algorithms score poorly on this classification. Even the best of these algorithms, the Inductive Miner, scored only 147 correct classified traces out of 200 traces on the PDC of 2017. This paper introduces the rule-based log skeleton model, which is closely related to the Declare constraint model, together with a way to classify traces using this model. This classification using log skeletons is shown to score better on the PDC of 2017 than state-of-the-art discovery algorithms: 194 out of 200. As a result, one can argue that the fully-automated algorithm to construct (or: discover) a log skeleton from an event log outperforms existing state-of-the-art fully-automated discovery algorithms.Comment: 16 pages with 9 figures, followed by an appendix of 14 pages with 17 figure

Dark matter spikes in the vicinity of Kerr black holes

The growth of a massive black hole will steepen the cold dark matter density at the center of a galaxy into a dense spike, enhancing the prospects for indirect detection. We study the impact of black hole spin on the density profile using the exact Kerr geometry of the black whole in a fully relativistic adiabatic growth framework. We find that, despite the transfer of angular momentum from the hole to the halo, rotation increases significantly the dark matter density close to the black hole. The gravitational effects are still dominated by the black hole within its influence radius, but the larger dark matter annihilation fluxes might be relevant for indirect detection estimates.Comment: Published version plus corrected typo in Fig 1

Causal Structure and Birefringence in Nonlinear Electrodynamics

We investigate the causal structure of general nonlinear electrodynamics and determine which Lagrangians generate an effective metric conformal to Minkowski. We also proof that there is only one analytic nonlinear electrodynamics presenting no birefringence.Comment: 11 pages, no figure

Optical frequency tripling with improved suppression and sideband selection

Journal Article, Impact factor:3.749A novel optical dispersion tolerant millimetre-wave radio-over-fibre system using optical frequency tripling technique with enhanced and selectable sideband suppression is demonstrated. The implementation utilises cascaded optical modulators to achieve either an optical single sideband (OSSB) or double sideband-suppressed carrier (DSB-SC) signal with high sideband suppression. Our analysis and simulation results indicate that the achievable suppression ratio of this configuration is only limited by other system factors such as optical noise and drifting of the operational conditions. The OSSB transmission system performance is assessed experimentally by the transport of 4 WiMax channels modulating a 10 GHz optical upconverted RF carrier as well as for optical frequency doubling and tripling. The 10 GHz and tripled carrier at 30 GHz are dispersion tolerant resulting both in an average relative constellation error (RCE) of -28.7 dB after 40 km of fibre. (C)2011 Optical Society of AmericaFundação para a Ciência e Tecnologi

Estimating Prices for R&D Investment in the 2007 R&D Satellite Account

This paper is part of a series that provides the details behind the Bureau of Economic Analysis's (BEA) satellite account on research and development (R&D) activity. In the current work, the focus is on the theoretical underpinnings and empirical implementation of the R&D price index used to construct real R&D output. We examine four alternative price indexes. For each, we lay out the theoretical assumptions needed for the approach to be valid and examine how well the approach works in practice. We then compare these four alternative price indexes and explain the choice of our preferred price index.

Global Currency Hedging

Over the period 1975 to 2005, the US dollar (particularly in relation to the Canadian dollar) and the euro and Swiss franc (particularly in the second half of the period) have moved against world equity markets. Thus these currencies should be attractive to risk-minimizing global equity investors despite their low average returns. The risk-minimizing currency strategy for a global bond investor is close to a full currency hedge, with a modest long position in the US dollar. There is little evidence that risk-minimizing investors should adjust their currency positions in response to movements in interest differentials.