Modeling Multivariate Interest Rates Using Time-Varying Copulas and Reducible Nonlinear Stochastic Differential Equations

We propose a new approach for modeling nonlinear multivariate interest rate processes based on time-varying copulas and reducible stochastic differential equations (SDEs). In the modeling of the marginal processes, we consider a class of nonlinear SDEs that are reducible to Ornstein--Uhlenbeck (OU) process or Cox, Ingersoll, and Ross (1985) (CIR) process. The reducibility is achieved via a nonlinear transformation function. The main advantage of this approach is that these SDEs can account for nonlinear features, observed in short-term interest rate series, while at the same time leading to exact discretization and closed-form likelihood functions. Although a rich set of specifications may be entertained, our exposition focuses on a couple of nonlinear constant elasticity volatility (CEV) processes, denoted as OU-CEV and CIR-CEV, respectively. These two processes encompass a number of existing models that have closed-form likelihood functions. The transition density, the conditional distribution function, and the steady-state density function are derived in closed form as well as the conditional and unconditional moments for both processes. In order to obtain a more flexible functional form over time, we allow the transformation function to be time varying. Results from our study of U.S. and UK short-term interest rates suggest that the new models outperform existing parametric models with closed-form likelihood functions. We also find the time-varying effects in the transformation functions statistically significant. To examine the joint behavior of interest rate series, we propose flexible nonlinear multivariate models by joining univariate nonlinear processes via appropriate copulas. We study the conditional dependence structure of the two rates using Patton (2006a) time-varying symmetrized Joe--Clayton copula. We find evidence of asymmetric dependence between the two rates, and that the level of dependence is positively related to the level of the two rates. (JEL: C13, C32, G12) Copyright The Author 2010. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org, Oxford University Press.

On solvability of linear differential equations in ${\Bbb R}^{\Bbb N}$

We construct $x^0$ in ${\Bbb R}^{\Bbb N}$ and a row-finite matrix $T=\{T_{i,j}(t)\}_{i,j\in\N}$ of polynomials of one real variable $t$ such that the Cauchy problem $\dot x(t)=T_tx(t)$, $x(0)=x^0$ in the Fr\'echet space $\R^\N$ has no solutions. We also construct a row-finite matrix $A=\{A_{i,j}(t)\}_{i,j\in\N}$ of $C^\infty(\R)$ functions such that the Cauchy problem $\dot x(t)=A_tx(t)$, $x(0)=x^0$ in ${\Bbb R}^{\Bbb N}$ has no solutions for any $x^0\in{\Bbb R}^{\Bbb N}\setminus\{0\}$. We provide some sufficient condition of solvability and of unique solvability for linear ordinary differential equations $\dot x(t)=T_tx(t)$ with matrix elements $T_{i,j}(t)$ analytically dependent on $t$.

Some results on solvability of ordinary linear differential equations in locally convex spaces

Let $\Gamma$ be the class of sequentially complete locally convex spaces such that an existence theorem holds for the linear Cauchy problem $\dot x = Ax$, $x(0) = x_0$ with respect to functions $x: R\to E$. It is proved that if $E\in \Gamma$, then $E\times R^A$ is-an-element-of $\Gamma$ for an arbitrary set $A$. It is also proved that a topological product of infinitely many infinite-dimensional Frechet spaces, each not isomorphic to $\omega$, does not belong to $\Gamma$.

GPU Acceleration of Partial Differential Equation Solvers

Differential equations are often directly solvable by analytical means only in their one dimensional version. Partial differential equations are generally not solvable by analytical means in two and three dimensions, with the exception of few special cases. In all other cases, numerical approximation methods need to be utilized. One of the most popular methods is the finite element method. The main areas of focus, here, are the Poisson heat equation and the plate bending equation. The purpose of this paper is to provide a quick walkthrough of the various approaches that the authors followed in pursuit of creating optimal solvers, accelerated with the use of graphical processing units, and comparing them in terms of accuracy and time efficiency with existing or self-made non-accelerated solvers.

How simple grazing rules can lead to persistent boundaries in vegetation communities.

Natural landscape boundaries between vegetation communities are dynamically influenced by the selective grazing of herbivores. Here we show how this may be an emergent property of very simple animal decisions, without the need for any sophisticated choice rules etc., using a model based on biased diffusion. Animal grazing intensity is coupled with plant competition, resulting in reaction-diffusion dynamics, from which stable boundaries spontaneously emerge. In the model, animals affect their resources by both consumption and trampling. It is assumed that forage consists of two heterogeneously distributed competing resource species, one that is preferred (grass) over the other (heather) by the animals. The solutions to the resulting system of differential equations for three cases a) optimal foraging, b) random walk foraging and c) taxis-diffusion are presented. Optimal and random foraging gave unrealistic results, but taxis-diffusion accorded well with field observations. Persistent boundaries between patches of near-monoculture vegetation were predicted, with these boundaries drifting in response to overall grazing pressure (grass advancing with increased grazing and vice versa). The reaction-taxis-diffusion model provides the first mathematical explanation for such vegetation mosaic dynamics and the parameters of the model are open to experimental testing.

On the semiclassical approach to cold atomic collisions

We extend the semiclassical description of two-state atomic collisions to low energies for which the impact parameter treatment fails. The problem reduces to solving a system of first-order differential equations with coefficients whose semiclassical asymptotes experience the Stokes phenomenon in the complex coordinate plane. Primitive semiclassical and uniform Airy approximations are discussed.

Segmentation of optic disc in retinal images using an improved gradient vector flow algorithm

Image segmentation plays an important role in the analysis of retinal images as the extraction of the optic disk provides important cues for accurate diagnosis of various retinopathic diseases. In recent years, gradient vector flow (GVF) based algorithms have been used successfully to successfully segment a variety of medical imagery. However, due to the compromise of internal and external energy forces within the resulting partial differential equations, these methods can lead to less accurate segmentation results in certain cases. In this paper, we propose the use of a new mean shift-based GVF segmentation algorithm that drives the internal/external energies towards the correct direction. The proposed method incorporates a mean shift operation within the standard GVF cost function to arrive at a more accurate segmentation. Experimental results on a large dataset of retinal images demonstrate that the presented method optimally detects the border of the optic disc.

Dust lattice wave dispersion relations in two-dimensional hexagonal crystals including the effect of dust charge polarization

A dusty plasma crystalline configuration with equal charge dust grains and mass is considered. Both charge and mass of each dust species are taken to be constant. Two differential equations for a two-dimensional hexagonal crystal on the basis of a Yukawa-type potential energy and a

Mean shift based gradient vector flow for image segmentation

In recent years, gradient vector flow (GVF) based algorithms have been successfully used to segment a variety of 2-D and 3-D imagery. However, due to the compromise of internal and external energy forces within the resulting partial differential equations, these methods may lead to biased segmentation results. In this paper, we propose MSGVF, a mean shift based GVF segmentation algorithm that can successfully locate the correct borders. MSGVF is developed so that when the contour reaches equilibrium, the various forces resulting from the different energy terms are balanced. In addition, the smoothness constraint of image pixels is kept so that over- or under-segmentation can be reduced. Experimental results on publicly accessible datasets of dermoscopic and optic disc images demonstrate that the proposed method effectively detects the borders of the objects of interest.

Dynamic Modeling and Interaction of Hybrid Natural Gas and Electricity Supply System in Microgrid

Natural gas (NG) network and electric network are becoming tightly integrated by microturbines in the microgrid. Interactions between these two networks are not well captured by the traditional microturbine (MT) models. To address this issue, two improved models for single-shaft MT and split-shaft MT are proposed in this paper. In addition, dynamic models of the hybrid natural gas and electricity system (HGES) are developed for the analysis of their interactions. Dynamic behaviors of natural gas in pipes are described by partial differential equations (PDEs), while the electric network is described by differential algebraic equations (DAEs). So the overall network is a typical two-time scale dynamic system. Numerical studies indicate that the two-time scale algorithm is faster and can capture the interactions between the two networks. The results also show the HGES with a single-shaft MT is a weakly coupled system in which disturbances in the two networks mainly influence the dc link voltage of the MT, while the split-shaft MT is a strongly coupled system where the impact of an event will affect both networks.

Solutions of fourth-order parabolic equation modeling thin film growth

In this paper we study the well-posedness for a fourth-order parabolic equation modeling epitaxial thin film growth. Using Kato's Method [1], [2] and [3] we establish existence, uniqueness and regularity of the solution to the model, in suitable spaces, namelyC⁰([0,T];L^p(Ω)) where  with 1<α<2, n∈N and n≥2. We also show the global existence solution to the nonlinear parabolic equations for small initial data. Our main tools are L_p–L_q-estimates, regularization property of the linear part of e^−tΔ2 and successive approximations. Furthermore, we illustrate the qualitative behavior of the approximate solution through some numerical simulations. The approximate solutions exhibit some favorable absorption properties of the model, which highlight the stabilizing effect of our specific formulation of the source term associated with the upward hopping of atoms. Consequently, the solutions describe well some experimentally observed phenomena, which characterize the growth of thin film such as grain coarsening, island formation and thickness growth.

Elastodynamic Modeling and Analysis for an Exechon Parallel Kinematic Machine

As a newly invented parallel kinematic machine (PKM), Exechon has attracted intensive attention from both academic and industrial fields due to its conceptual high performance. Nevertheless, the dynamic behaviors of Exechon PKM have not been thoroughly investigated because of its structural and kinematic complexities. To identify the dynamic characteristics of Exechon PKM, an elastodynamic model is proposed with the substructure synthesis technique in this paper. The Exechon PKM is divided into a moving platform subsystem, a fixed base subsystem and three limb subsystems according to its structural features. Differential equations of motion for the limb subsystem are derived through finite element (FE) formulations by modeling the complex limb structure as a spatial beam with corresponding geometric cross sections. Meanwhile, revolute, universal, and spherical joints are simplified into virtual lumped springs associated with equivalent stiffnesses and mass at their geometric centers. Differential equations of motion for the moving platform are derived with Newton's second law after treating the platform as a rigid body due to its comparatively high rigidity. After introducing the deformation compatibility conditions between the platform and the limbs, governing differential equations of motion for Exechon PKM are derived. The solution to characteristic equations leads to natural frequencies and corresponding modal shapes of the PKM at any typical configuration. In order to predict the dynamic behaviors in a quick manner, an algorithm is proposed to numerically compute the distributions of natural frequencies throughout the workspace. Simulation results reveal that the lower natural frequencies are strongly position-dependent and distributed axial-symmetrically due to the structure symmetry of the limbs. At the last stage, a parametric analysis is carried out to identify the effects of structural, dimensional, and stiffness parameters on the system's dynamic characteristics with the purpose of providing useful information for optimal design and performance improvement of the Exechon PKM. The elastodynamic modeling methodology and dynamic analysis procedure can be well extended to other overconstrained PKMs with minor modifications.

A compendium of modelling techniques

This Integration Insight provides a brief overview of the most popular modelling techniques used to analyse complex real-world problems, as well as some less popular but highly relevant techniques. The modelling methods are divided into three categories, with each encompassing a number of methods, as follows: 1) Qualitative Aggregate Models (Soft Systems Methodology, Concept Maps and Mind Mapping, Scenario Planning, Causal (Loop) Diagrams), 2) Quantitative Aggregate Models (Function fitting and Regression, Bayesian Nets, System of differential equations / Dynamical systems, System Dynamics, Evolutionary Algorithms) and 3) Individual Oriented Models (Cellular Automata, Microsimulation, Agent Based Models, Discrete Event Simulation, Social Network
Analysis). Each technique is broadly described with example uses, key attributes and reference material.