Risk Minimizing Option Pricing for a Class of Exotic Options in a Markov-Modulated Market

We address risk minimizing option pricing in a regime switching market where the floating interest rate depends on a finite state Markov process. The growth rate and the volatility of the stock also depend on the Markov process. Using the minimal martingale measure, we show that the locally risk minimizing prices for certain exotic options satisfy a system of Black-Scholes partial differential equations with appropriate boundary conditions. We find the corresponding hedging strategies and the residual risk. We develop suitable numerical methods to compute option prices.

Proposed role of w chromosome inactivation and the absence of dosage compensation in avian sex determination

Three features of avian sex chromosomes - female heterogamety (ZZ male, ZW female), the apparently inactive state of the W chromosome, and dose-dependent expression of Z-linked genes - are examined in regard to their possible relation to sex determination. It is proposed that the W chromosome is facultatively heterochromatic and that the Z and W chromosomes carry one or more homologous sex-determination genes. The absence of dosage compensation in ZZ embryos, and W inactivation in ZW embryos, would then bring about a 2n(ZZ)-n(ZW) inequality in the effective copy number of such genes. The absence of dosage compensation of Z-linked genes in ZZ embryos is viewed as a means by which two copies of Z-W homologous sex determination genes are kept active to meet the requirements of testis determination. W inactivation may promote ovarian development by reducing the effective copy number of these genes from 2n to n. If there is a W-specific gene for femaleness, spread of heterochromatization to this gene in cells forming the right gonadal primordium may explain the latter's normally undifferentiated state; reversal of heterochromatization may similarly explain the development of the right gonad into a testis following left ovariectomy.

Risk-sensitive optimal control for Markov decision processes with monotone cost

The existence of an optimal feedback law is established for the risk-sensitive optimal control problem with denumerable state space. The main assumptions imposed are irreducibility and a near monotonicity condition on the one-step cost function. A solution can be found constructively using either value iteration or policy iteration under suitable conditions on initial feedback law.

Control technique for non-linear and unbalance compensation of an integrated magnetics-based three-phase series-shunt-compensated uninterruptible power supply

Handling unbalanced and non-linear loads in a three-phase AC power supply has always been a difficult issue. This has been addressed in the literature by either using fast controllers in the fundamental rotating reference frame or using separate controllers in reference frames specific to the harmonics. In the former case, the controller needs to be fast and in the latter case, besides the need for many controllers, negative-sequence components need to be extracted from the measured signal. This study proposes a control scheme for harmonic and unbalance compensation of a three-phase uninterruptible power supply wherein the problems mentioned above are addressed. The control takes place in the fundamental positive-sequence reference frame using only a set of feedback and feed-forward compensators. The harmonic components are extracted by a process of frame transformations and used as feed-forward compensation terms in the positive-sequence fundamental reference frame. This study uses a method wherein the measured signal itself is used for fundamental negative-sequence compensation. As the feed-forward compensator handles the high-bandwidth components, the feedback compensator can be a simple low-bandwidth one. This control algorithm is explained and validated experimentally.

Control technique for non-linear and unbalance compensation of an integrated magnetics-based three-phase series-shunt-compensated uninterruptible power supply

Handling unbalanced and non-linear loads in a three-phase AC power supply has always been a difficult issue. This has been addressed in the literature by either using fast controllers in the fundamental rotating reference frame or using separate controllers in reference frames specific to the harmonics. In the former case, the controller needs to be fast and in the latter case, besides the need for many controllers, negative-sequence components need to be extracted from the measured signal. This study proposes a control scheme for harmonic and unbalance compensation of a three-phase uninterruptible power supply wherein the problems mentioned above are addressed. The control takes place in the fundamental positive-sequence reference frame using only a set of feedback and feed-forward compensators. The harmonic components are extracted by a process of frame transformations and used as feed-forward compensation terms in the positive-sequence fundamental reference frame. This study uses a method wherein the measured signal itself is used for fundamental negative-sequence compensation. As the feed-forward compensator handles the high-bandwidth components, the feedback compensator can be a simple low-bandwidth one. This control algorithm is explained and validated experimentally.

Control technique for non-linear and unbalance compensation of an integrated magnetics-based three-phase series-shunt-compensated uninterruptible power supply

Handling unbalanced and non-linear loads in a three-phase AC power supply has always been a difficult issue. This has been addressed in the literature by either using fast controllers in the fundamental rotating reference frame or using separate controllers in reference frames specific to the harmonics. In the former case, the controller needs to be fast and in the lattercase, besides the need for many controllers, negative-sequence components need to be extracted from the measured signal.This study proposes a control scheme for harmonic and unbalance compensation of a three-phase uninterruptible power supply wherein the problems mentioned above are addressed. The control takes place in the fundamental positive-sequence reference frame using only a set of feedback and feed-forward compensators. The harmonic components are extracted by process of frame transformations and used as feed-forward compensation terms in the positive-sequence fundamental reference frame. This study uses a method wherein the measured signal itself is used for fundamental negative-sequence compensation. As the feed-forward compensator handles the high-bandwidth components, the feedback compensator can be a simple low-bandwidth one. This control algorithm is explained and validated experimentally.

Climate change induced risk in water quality control problems

A modeling framework is presented in this paper, integrating hydrologic scenarios projected from a General Circulation Model (GCM) with a water quality simulation model to quantify the future expected risk. Statistical downscaling with a Canonical Correlation Analysis (CCA) is carried out to develop the future scenarios of hydro-climate variables starting with simulations provided by a GCM. A Multiple Logistic Regression (MLR) is used to quantify the risk of Low Water Quality (LWQ) corresponding to a threshold quality level, by considering the streamflow and water temperature as explanatory variables. An Imprecise Fuzzy Waste Load Allocation Model (IFWLAM) presented in an earlier study is then used to develop adaptive policies to address the projected water quality risks. Application of the proposed methodology is demonstrated with the case study of Tunga-Bhadra river in India. The results showed that the projected changes in the hydro-climate variables tend to diminish DO levels, thus increasing the future risk levels of LWQ. (C) 2012 Elsevier B.V. All rights reserved.

Zero-Sum Risk-Sensitive Stochastic Differential Games

We study zero-sum risk-sensitive stochastic differential games on the infinite horizon with discounted and ergodic payoff criteria. Under certain assumptions, we establish the existence of values and saddle-point equilibria. We obtain our results by studying the corresponding Hamilton-Jacobi-Isaacs equations. Finally, we show that the value of the ergodic payoff criterion is a constant multiple of the maximal eigenvalue of the generators of the associated nonlinear semigroups.

A risk-estimation-based formulation for speech enhancement and its relation to Wiener filtering

The goal of speech enhancement algorithms is to provide an estimate of clean speech starting from noisy observations. The often-employed cost function is the mean square error (MSE). However, the MSE can never be computed in practice. Therefore, it becomes necessary to find practical alternatives to the MSE. In image denoising problems, the cost function (also referred to as risk) is often replaced by an unbiased estimator. Motivated by this approach, we reformulate the problem of speech enhancement from the perspective of risk minimization. Some recent contributions in risk estimation have employed Stein's unbiased risk estimator (SURE) together with a parametric denoising function, which is a linear expansion of threshold/bases (LET). We show that the first-order case of SURE-LET results in a Wiener-filter type solution if the denoising function is made frequency-dependent. We also provide enhancement results obtained with both techniques and characterize the improvement by means of local as well as global SNR calculations.

Optimal parameter selection for bilateral filters using Poisson unbiased risk estimate

Bilateral filters perform edge-preserving smoothing and are widely used for image denoising. The denoising performance is sensitive to the choice of the bilateral filter parameters. We propose an optimal parameter selection for bilateral filtering of images corrupted with Poisson noise. We employ the Poisson's Unbiased Risk Estimate (PURE), which is an unbiased estimate of the Mean Squared Error (MSE). It does not require a priori knowledge of the ground truth and is useful in practical scenarios where there is no access to the original image. Experimental results show that quality of denoising obtained with PURE-optimal bilateral filters is almost indistinguishable with that of the Oracle-MSE-optimal bilateral filters.

Noise tolerance under risk minimization

In this paper, we explore noise-tolerant learning of classifiers. We formulate the problem as follows. We assume that there is an unobservable training set that is noise free. The actual training set given to the learning algorithm is obtained from this ideal data set by corrupting the class label of each example. The probability that the class label of an example is corrupted is a function of the feature vector of the example. This would account for most kinds of noisy data one encounters in practice. We say that a learning method is noise tolerant if the classifiers learnt with noise-free data and with noisy data, both have the same classification accuracy on the noise-free data. In this paper, we analyze the noise-tolerance properties of risk minimization (under different loss functions). We show that risk minimization under 0-1 loss function has impressive noise-tolerance properties and that under squared error loss is tolerant only to uniform noise; risk minimization under other loss functions is not noise tolerant. We conclude this paper with some discussion on the implications of these theoretical results.

Fourteen gene GBM prognostic signature identifies association of immune response pathway and mesenchymal subtype with high risk group

Background: Recent research on glioblastoma (GBM) has focused on deducing gene signatures predicting prognosis. The present study evaluated the mRNA expression of selected genes and correlated with outcome to arrive at a prognostic gene signature. Methods: Patients with GBM (n = 123) were prospectively recruited, treated with a uniform protocol and followed up. Expression of 175 genes in GBM tissue was determined using qRT-PCR. A supervised principal component analysis followed by derivation of gene signature was performed. Independent validation of the signature was done using TCGA data. Gene Ontology and KEGG pathway analysis was carried out among patients from TCGA cohort. Results: A 14 gene signature was identified that predicted outcome in GBM. A weighted gene (WG) score was found to be an independent predictor of survival in multivariate analysis in the present cohort (HR = 2.507; B = 0.919; p < 0.001) and in TCGA cohort. Risk stratification by standardized WG score classified patients into low and high risk predicting survival both in our cohort (p = <0.001) and TCGA cohort (p = 0.001). Pathway analysis using the most differentially regulated genes (n = 76) between the low and high risk groups revealed association of activated inflammatory/immune response pathways and mesenchymal subtype in the high risk group. Conclusion: We have identified a 14 gene expression signature that can predict survival in GBM patients. A network analysis revealed activation of inflammatory response pathway specifically in high risk group. These findings may have implications in understanding of gliomagenesis, development of targeted therapies and selection of high risk cancer patients for alternate adjuvant therapies.

Supplier selection based on supply chain ecosystem, performance and risk criteria

A supply chain ecosystem consists of the elements of the supply chain and the entities that influence the goods, information and financial flows through the supply chain. These influences come through government regulations, human, financial and natural resources, logistics infrastructure and management, etc., and thus affect the supply chain performance. Similarly, all the ecosystem elements also contribute to the risk. The aim of this paper is to identify both performances-based and risk-based decision criteria, which are important and critical to the supply chain. A two step approach using fuzzy AHP and fuzzy technique for order of preference by similarity to ideal solution has been proposed for multi-criteria decision-making and illustrated using a numerical example. The first step does the selection without considering risks and then in the next step suppliers are ranked according to their risk profiles. Later, the two ranks are consolidated into one. In subsequent section, the method is also extended for multi-tier supplier selection. In short, we are presenting a method for the design of a resilient supply chain, in this paper.

Study on the Effect of Dead Time and its Compensation for Bus-Clamping PWM Techniques

Dead-time is provided in between the gating signals of the top and bottom semiconductor switches in an inverter leg to prevent the shorting of DC bus. Due to this dead time, there is a significant unwanted change in the output voltage of the inverter. The effect is different for different pulse width modulation (PWM) methodologies. The effect of dead-time on the output fundamental voltage is studied theoretically as well as experimentally for bus-clamping PWM methodologies. Further, experimental observations on the effectiveness of dead-time compensation are presented.