Herd behavior in the drybulk market: An empirical analysis of the decision to invest in new and retire existing fleet capacity

We examine whether investors herd in their decision to order or scrap vessels in the drybulk market. We decompose herding into unintentional and intentional, and test for herd behavior under asymmetric effects with respect to freight market states, cycle phases, risk-return and valuation profiles, and ownership of the vessel. We detect unintentional herd behavior during down freight markets and contractions. Furthermore, we find evidence of spill-over unintentional herding effects from the newbuilding to the scrap market. Finally, asymmetric herd effects are evident between traditional and liberal philosophy towards the ownership of the vessel, and during extreme risk-return and valuation periods

Freight Derivatives Pricing for Decoupled Mean-Reverting Diffusion and Jumps

We develop an accurate valuation setup for freight options, featuring an exponential meanreverting model for the freight rate with distinct reversion scales for its jump and diffusion components. We calibrate to Baltic option prices and analyze the freight rate dynamics. More specifically, we observe that jumps dissipate faster than the diffusive deviations about the equilibrium level. We benchmark against practitioners’ model of choice, i.e., the lognormal model and variants, and find that our approach reduces the pricing error while preserving analytical tractability and computational competence. We also find that neglecting fast mean-reverting jumps leads to nontrivial option mispricings

Shipping equity risk behavior and portfolio management

This paper investigates the dynamics of stock price volatility for different vessel-type segments of the U. S, water transportation industry . We measure market exposure by a portfolio of tanker, dry bulk, container, and gas stocks to examine tail behavior and tail risk dependence. The role of mixture distributions in predicting future volatility is studied from both statistical and economic perspectives. We further test for predictability in co-movements in the tails of sectors returns . Findings indicate that large losses are strongly correlated, supporting asymmetric transmission processes for financial contagion. Finally, using a non-parametric approach, we extend the model to the multivariate case and assess the value of volatility and correlation timing in optimal portfolio selection. The results can help to improve the understanding of time-varying volatility, correlation and tail systemic risk of shipping stock markets, and consequently, have implications for risk management and asset allocation practices, as well as regulatory policies

Shipping Investor Sentiment and International Stock Return Predictability

Stock return predictability by investor sentiment has been subject to constant updating, but reaching a decisive conclusion seems rather challenging as academic research relies heavily on US data. We provide fresh evidence on stock return predictability in an international setting and show that shipping investor sentiment is a common leading indicator for financial markets. We establish out-of-sample predictability and demonstrate that investor sentiment is also economically significant in providing utility gains to a mean-variance investor. Finally, we find evidence that the predictive power of sentiment works best when negative forecasts are also taken into account

Affine-Structure Models and the Pricing of Energy Commodity Derivatives

We consider a seasonal mean-reverting model for energy commodity prices with jumps and Heston-type stochastic volatility, and three nested models for comparison. By exploiting the affine form of the log-spot models, we develop a general valuation framework for futures and discrete arithmetic Asian options. We investigate five major petroleum commodities from Europe (Brent crude oil, gasoil) and US (light sweet crude oil, gasoline, heating oil) and analyse the effects of the competing fitted spot models in futures pricing, Asian options pricing and hedging. We find evidence that price jumps and stochastic volatility are important features of the petroleum price dynamics

Freight options: Price modelling and empirical analysis

This paper discusses an extension of the traditional lognormal representation for the risk neutral spot freight rate dynamics to a diffusion model overlaid with jumps of random magnitude and arrival. Then, we develop a valuation framework for options on the average spot freight rate, which are commonly traded in the freight derivatives market. By exploiting the computational efficiency of the proposed pricing scheme, we calibrate the jump diffusion model using market quotes of options on the trip-charter route average Baltic Capesize, Panamax and Supramax Indices. We show that the jump-extended setting yields important model improvements over the basic lognormal setting

Martian Superoxide and Peroxide O2 Release (OR) Assay: A New Technology for Terrestrial and Planetary Applications

This study presents an assay for the detection and quantification of soil metal superoxides and peroxides in regolith and soil. The O2 release (OR) assay is based on the enzymatic conversion of the hydrolysis products of metal oxides to O2, and their quantification by an O2 electrode based on the stoichiometry of the involved reactions: The intermediate product O2 from the hydrolysis of metal superoxides is converted by cytochrome c to O2, and also by superoxide dismutase (SOD) to 1/2 mol O2 and 1/2 mol H2O2, which is then converted by catalase (CAT) to 1/2 mol O2. The product H2O2 from the hydrolysis of metal peroxides and hydroperoxides is converted to 1/2 mol O2 by CAT. The assay-method was validated in a sealed sample chamber using a liquid-phase Clark-type O2 electrode with known concentrations of O2 and H2O2, and with commercial metal superoxide and peroxide mixed with Mars analogue Mojave and Atacama Desert soils. Carbonates and perchlorates, both present on Mars, do not interfere with the assay. The assay lower limit of detection, using luminescence quenching/optical sensing O2-electrodes, is 1 nmol O2 cm(exp. -3) or better. The activity of the assay enzymes SOD and cytochrome c was unaffected up to 6 Gy exposure by gamma-radiation, while CAT retained 100% and 40% of its activity at 3 and 6 Gy, respectively, demonstrating the suitability of these enzymes for planetary missions, e.g., in Mars or Europa

Jumps and stochastic volatility in crude oil prices and advances in average option pricing

Crude oil derivatives form an important part of the global derivatives market. In this paper, we focus on Asian options which are favoured by risk managers being effective and cost-saving hedging instruments. The paper has both empirical and theoretical contributions: we conduct an empirical analysis of the crude oil price dynamics and develop an accurate pricing setup for arithmetic Asian options with discrete and continuous monitoring featuring stochastic volatility and discontinuous underlying asset price movements. Our theoretical contribution is applicable to various commodities exhibiting similar stylized properties. We here estimate the stochastic volatility model with price jumps as well as the nested model with omitted jumps to NYMEX WTI futures vanilla options. We find that price jumps and stochastic volatility are necessary to fit options. Despite the averaging effect, we show that Asian options remain sensitive to jump risk and that ignoring the discontinuities can lead to substantial mispricings

Essays on the US Public Equity and High Yield Bond Markets as a Source of Finance for Shipping Companies

This thesis attempts to identify important factors that may affect the pricing and the probability of default of high yield bonds offered by shipping companies; and factors that may influence the pricing and the probability of underpricing of shipping US initial public offerings (IPOs). The analysis is carried out through five chapters and each chapter covers a topic on its own so that it can be read independently of previous and subsequent chapters. Chapter 1 provides an overview of the shipping US public equity market for the period 1987-2010. It also considers the reasons for a shipping company to go public; the advantages and disadvantages of such a decision; and the role of underwriters in the IPO process. Finally, it provides a literature review on shipping equity capital markets. Chapter 2 presents an overview of the shipping US high yield bond market for the period 1992-2010; it discusses the seniority of shipping high yield bonds, and, the advantages and disadvantages for shipping companies that decide to issue high yield bonds. Next, the credit ratings, the yield premia and the probability of default for shipping high yield bonds are examined. Finally, it provides a synopsis of the restructuring options that shipping companies have in case of default. Chapter 3 investigates the factors that may explain the dynamics of yield premia on seasoned shipping high yield bonds. The analysis utilises 40 seasoned high yield bonds offered by 32 shipping companies for the period April 1998 - December 2002; and it employs a set of microeconomic, macroeconomic and, industry related factors. The methodology used is the fixed effects panel data regression model and the results of the study suggest that the dynamics of yield premia of seasoned shipping high yield bonds can be explained by: the credit rating; the term-to-maturity; the changes in earnings in the shipping market, as well as the changes in the yields on the 10-year US Treasury bonds and the Merrill Lynch single-B index. This chapter contributes to the existing ship finance literature in the following ways: first, it attempts to model the changes of yield premia on shipping high yield bonds in the secondary market, which is of interest to investors and traders since information on changes in yield premia can be used for investment and asset allocation purposes. Second, it distinguishes between high yield bond issues offered by listed and unlisted companies, as well as, defaulted and non-defaulted bond issues in order to examine whether there is any difference in the impact of the explanatory variables on the determination of yield premia. Third, the analysis employs a set of macroeconomic and industry related factors that have not been previously used in the ship finance literature. Finally, the results may have implications for shipping companies in the following ways: yield premia are indications of the possible cost level in order to enter the shipping high yield bond market and may affect the company's image; hence, shipping companies may be interested in the yield premia as they can affect their financing decision for future/further issuance of high yield bonds or their possible stepping to the equity capital market. Chapter 4 uses a binary logit model to predict the probability of default for high yield bonds issued by shipping companies for the period 1992-2004. The results suggest that two liquidity ratios, the gearing ratio, the amount raised over total assets ratio, and an industry specific variable are the best estimates for predicting default at the time of issuance. In - and out - of sample bootstrap tests further indicate the predictive ability and robustness of the model. This chapter contributes to the existing ship finance literature as for the first time the probability of default of shipping high yield bonds is predicted by employing a binary logit model. Investors may benefit from this research since, by employing easily accessible and quantifiable factors they can identify at the time of issuance a) which factors to look at when making investment decisions; b) issues that may have a high likelihood to default. At the same time, shipowners who offer high yield bonds can also identify and focus on the factors that are important in predicting the probability of default for their bond issues. Chapter 5 examines the extent that public information, available prior to the US initial public offering of shipping companies, is only partially incorporated in the final offer price set by the underwriters. The sample includes 51 shipping US initial public offerings for the period 1987-2008, and a set of prospecti and market specific characteristics is employed. The Ordinary-Least-Squared Regression results show that 20-53 percent of the variation in first day returns is explained by employing public available information known prior to the offer date; therefore, it can be argued that final offer prices of shipping US IPOs are only partially adjusted to broadly accessible information. Additionally, the probability of underpricing is examined and the logit model correctly predicts 90 percent of the entire sample, with in and out-of-sample bootstrap tests further supporting the robustness of the model. This chapter contributes to the existing ship finance literature by testing the hypotheses of partial adjustment (Benveniste and Spindt, 1989) and winner's curse (Rock, 1986) theories as an explanation for shipping US IPOs' initial day returns. Moreover, it uses variables that have not been previously employed in shipping IPOs studies and the probability of underpricing a shipping IPO is examined for the first time. Finally, the results of the study show that by employing readily available information known prior to the shipping IPO date, investors can identify the factors that affect the initial day returns and also predict the probability of underpricing a shipping IPO. Chapters I and 2 are parts of chapters 20 and 21 in the book "The Blackwell Companion to Maritime Economics" (Grammenos and Papapostolou, forthcoming (a), forthcoming (b)). Chapter 3 has been published in Transportation Research Part E: Logistics and Transportation Review (Grammenos, Alizadeh, and Papapostolou, 2007) and an earlier version was presented at the International Association of Maritime Economists (lAME) conference in Izmir, Turkey in 2004. Chapter 4 has been published in Transportation Research Part E: Logistics and Transportation Review (Grammenos, Nomikos, and Papapostolou, 2008) and an earlier version was presented at the International Association of Maritime Economists (lAME) conference in Limassol, Cyprus in 2005. Finally, chapter 5 has been submitted to Transportation Research Part E: Logistics and Transportation Review and it is under review

A Synthetic Coiled-Coil Interactome Provides Heterospecific Modules for Molecular Engineering

The versatile coiled-coil protein motif is widely used to induce and control macromolecular interactions in biology and materials science. Yet the types of interaction patterns that can be constructed using known coiled coils are limited. Here we greatly expand the coiled-coil toolkit by measuring the complete pairwise interactions of 48 synthetic coiled coils and 7 human bZIP coiled coils using peptide microarrays. The resulting 55-member protein “interactome” includes 27 pairs of interacting peptides that preferentially heteroassociate. The 27 pairs can be used in combinations to assemble sets of 3 to 6 proteins that compose networks of varying topologies. Of special interest are heterospecific peptide pairs that participate in mutually orthogonal interactions. Such pairs provide the opportunity to dimerize two separate molecular systems without undesired crosstalk. Solution and structural characterization of two such sets of orthogonal heterodimers provide details of their interaction geometries. The orthogonal pair, along with the many other network motifs discovered in our screen, provide new capabilities for synthetic biology and other applications.National Institutes of Health (U.S.) (NIH Award GM067681)National Institutes of Health (U.S.) (NCRR Award RR-15301