Identifying Structural Breaks in Stochastic Mortality Models

In recent years, the issue of life expectancy has become of utmost importance to pension providers, insurance companies, and government bodies in the developed world. Significant and consistent improvements in mortality rates and hence life expectancy have led to unprecedented increases in the cost of providing for older ages. This has resulted in an explosion of stochastic mortality models forecasting trends in mortality data to anticipate future life expectancy and hence quantify the costs of providing for future aging populations. Many stochastic models of mortality rates identify linear trends in mortality rates by time, age, and cohort and forecast these trends into the future by using standard statistical methods. These approaches rely on the assumption that structural breaks in the trend do not exist or do not have a significant impact on the mortality forecasts. Recent literature has started to question this assumption. In this paper, we carry out a comprehensive investigation of the presence or of structural breaks in a selection of leading mortality models. We find that structural breaks are present in the majority of cases. In particular, we find that allowing for structural break, where present, improves the forecast result significantly.

Structural Breaks in Mortality Models and their Consequences

In recent years, the issue of life expectancy has become of upmost importance to pension providers, insurance companies and the government bodies in the developed world. Significant and consistent improvements in mortality rates and, hence, life expectancy have led to unprecedented increases in the cost of providing for older ages. This has resulted in an explosion of stochastic mortality models forecasting trends in mortality data in order to anticipate future life expectancy and, hence, quantify the costs of providing for future aging populations. Many stochastic models of mortality rates identify linear trends in mortality rates by time, age and cohort, and forecast these trends into the future using standard statistical methods. The modeling approaches used failed to capture the effects of any structural change in the trend and, thus, potentially produced incorrect forecasts of future mortality rates. In this paper, we look at a range of leading stochastic models of mortality and test for structural breaks in the trend time series.

Models of Mortality - Analysing the Residuals

The area of mortality modelling has received significant attention over the last 20 years owing to the need to quantify and forecast improving mortality rates. This need is driven primarily by the concern of governments, professionals, insurance and actuarial professionals and individuals to be able to fund their old age. In particular, to quantify the costs of increasing longevity we need suitable model of mortality rates that capture the dynamics of the data and forecast them with sufficient accuracy to make them useful. In this paper we test several of those models by considering the fitting quality and in particular, testing the residuals of those models for normality properties. In a wide ranging study considering 30 countries we find that almost exclusively the residuals do not demonstrate normality. Further, in Hurst tests of the residuals we find evidence that structure remains that is not captured by the models.

Dynamic pricing model and algorithm for perishable products with fuzzy demand (ABS 2* Journal)

This paper studies the dynamic pricing problem of selling fixed stock of perishable items over a finite horizon, where the decision maker does not have the necessary historic data to estimate the distribution of uncertain demand, but has imprecise information about the quantity demand. We model this uncertainty using fuzzy variables. The dynamic pricing problem based on credibility theory is formulated using three fuzzy programming models, viz.: the fuzzy expected revenue maximization model, a-optimistic revenue maximization model, and credibility maximization model. Fuzzy simulations for functions with fuzzy parameters are given and embedded into a genetic algorithm to design a hybrid intelligent algorithm to solve these three models. Finally, a real-world example is presented to highlight the effectiveness of the developed model and algorithm.

Analytical description of stochastic field-Line wandering in magnetic turbulence

A nonperturbative nonlinear statistical approach is presented to describe turbulent magnetic systems embedded in a uniform mean magnetic field. A general formula in the form of an ordinary differential equation for magnetic field-line wandering (random walk) is derived. By considering the solution of this equation for different limits several new results are obtained. As an example, it is demonstrated that the stochastic wandering of magnetic field-lines in a two-component turbulence model leads to superdiffusive transport, contrary to an existing diffusive picture. The validity of quasilinear theory for field-line wandering is discussed, with respect to different turbulence geometry models, and previous diffusive results are shown to be deduced in appropriate limits.

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.

Hierarchical Bayesian models in ecology: Reconstructing species interaction networks from non-homogeneous species abundance data

The relationships among organisms and their surroundings can be of immense complexity. To describe and understand an ecosystem as a tangled bank, multiple ways of interaction and their effects have to be considered, such as predation, competition, mutualism and facilitation. Understanding the resulting interaction networks is a challenge in changing environments, e.g. to predict knock-on effects of invasive species and to understand how climate change impacts biodiversity. The elucidation of complex ecological systems with their interactions will benefit enormously from the development of new machine learning tools that aim to infer the structure of interaction networks from field data. In the present study, we propose a novel Bayesian regression and multiple changepoint model (BRAM) for reconstructing species interaction networks from observed species distributions. The model has been devised to allow robust inference in the presence of spatial autocorrelation and distributional heterogeneity. We have evaluated the model on simulated data that combines a trophic niche model with a stochastic population model on a 2-dimensional lattice, and we have compared the performance of our model with L1-penalized sparse regression (LASSO) and non-linear Bayesian networks with the BDe scoring scheme. In addition, we have applied our method to plant ground coverage data from the western shore of the Outer Hebrides with the objective to infer the ecological interactions. (C) 2012 Elsevier B.V. All rights reserved.

Three-dimensional delayed-detonation models with nucleosynthesis for type ia supernovae

We present results for a suite of 14 three-dimensional, high-resolution hydrodynamical simulations of delayed-detonation models of Type Ia supernova (SN Ia) explosions. This model suite comprises the first set of three-dimensional SN Ia simulations with detailed isotopic yield information. As such, it may serve as a data base for Chandrasekhar-mass delayed-detonation model nucleosynthetic yields and for deriving synthetic observables such as spectra and light curves. We employ aphysically motivated, stochastic model based on turbulent velocity fluctuations and fuel density to calculate in situ the deflagration-to-detonation transition probabilities. To obtain different strengths of the deflagration phase and thereby different degrees of pre-expansion, we have chosen a sequence of initial models with 1, 3, 5, 10, 20, 40, 100, 150, 200, 300 and 1600 (two different realizations) ignition kernels in a hydrostatic white dwarf with a central density of 2.9 × 10 g cm, as well as one high central density (5.5 × 10 g cm) and one low central density (1.0 × 10 g cm) rendition of the 100 ignition kernel configuration. For each simulation, we determined detailed nucleosynthetic yields by postprocessing10 tracer particles with a 384 nuclide reaction network. All delayed-detonation models result in explosions unbinding thewhite dwarf, producing a range of 56Ni masses from 0.32 to 1.11M. As a general trend, the models predict that the stableneutron-rich iron-group isotopes are not found at the lowest velocities, but rather at intermediate velocities (~3000×10 000 km s) in a shell surrounding a Ni-rich core. The models further predict relatively low-velocity oxygen and carbon, with typical minimum velocities around 4000 and 10 000 km s, respectively. © 2012 The Authors. Published by Oxford University Press on behalf of the Royal Astronomical Society.

Relative role of deterministic and stochastic determinants of soil animal community: a spatially explicit analysis of oribatid mites

1. Ecologists are debating the relative role of deterministic and stochastic determinants of community structure. Although the high diversity and strong spatial structure of soil animal assemblages could provide ecologists with an ideal ecological scenario, surprisingly little information is available on these assemblages.
2. We studied species-rich soil oribatid mite assemblages from a Mediterranean beech forest and a grassland. We applied multivariate regression approaches and analysed spatial autocorrelation at multiple spatial scales using Moran's eigenvectors. Results were used to partition community variance in terms of the amount of variation uniquely accounted for by environmental correlates (e.g. organic matter) and geographical position. Estimated neutral diversity and immigration parameters were also applied to a soil animal group for the first time to simulate patterns of community dissimilarity expected under neutrality, thereby testing neutral predictions.
3. After accounting for spatial autocorrelation, the correlation between community structure and key environmental parameters disappeared: about 40% of community variation consisted of spatial patterns independent of measured environmental variables such as organic matter. Environmentally independent spatial patterns encompassed the entire range of scales accounted for by the sampling design (from tens of cm to 100 m). This spatial variation could be due to either unmeasured but spatially structured variables or stochastic drift mediated by dispersal. Observed levels of community dissimilarity were significantly different from those predicted by neutral models.
4. Oribatid mite assemblages are dominated by processes involving both deterministic and stochastic components and operating at multiple scales. Spatial patterns independent of the measured environmental variables are a prominent feature of the targeted assemblages, but patterns of community dissimilarity do not match neutral predictions. This suggests that either niche-mediated competition or environmental filtering or both are contributing to the core structure of the community. This study indicates new lines of investigation for understanding the mechanisms that determine the signature of the deterministic component of animal community assembly.

Stochastic and deterministic processes interact in the assembly of desert microbial communities on a global scale

Extreme arid regions in the worlds' major deserts are typified by quartz pavement terrain. Cryptic hypolithic communities colonize the ventral surface of quartz rocks and this habitat is characterized by a relative lack of environmental and trophic complexity. Combined with readily identifiable major environmental stressors this provides a tractable model system for determining the relative role of stochastic and deterministic drivers in community assembly. Through analyzing an original, worldwide data set of 16S rRNA-gene defined bacterial communities from the most extreme deserts on the Earth, we show that functional assemblages within the communities were subject to different assembly influences. Null models applied to the photosynthetic assemblage revealed that stochastic processes exerted most effect on the assemblage, although the level of community dissimilarity varied between continents in a manner not always consistent with neutral models. The heterotrophic assemblages displayed signatures of niche processes across four continents, whereas in other cases they conformed to neutral predictions. Importantly, for continents where neutrality was either rejected or accepted, assembly drivers differed between the two functional groups. This study demonstrates that multi-trophic microbial systems may not be fully described by a single set of niche or neutral assembly rules and that stochasticity is likely a major determinant of such systems, with significant variation in the influence of these determinants on a global scale.

An optimisation of Gaussian mixture models for integer processing units

This paper investigates sub-integer implementations of the adaptive Gaussian mixture model (GMM) for background/foreground segmentation to allow the deployment of the method on low cost/low power processors that lack Floating Point Unit (FPU). We propose two novel integer computer arithmetic techniques to update Gaussian parameters. Specifically, the mean value and the variance of each Gaussian are updated by a redefined and generalised "round'' operation that emulates the original updating rules for a large set of learning rates. Weights are represented by counters that are updated following stochastic rules to allow a wider range of learning rates and the weight trend is approximated by a line or a staircase. We demonstrate that the memory footprint and computational cost of GMM are significantly reduced, without significantly affecting the performance of background/foreground segmentation.

Integrating Multiple Point Statistics with Aerial Geophysical Data to assist Groundwater Flow Models

The process of accounting for heterogeneity has made significant advances in statistical research, primarily in the framework of stochastic analysis and the development of multiple-point statistics (MPS). Among MPS techniques, the direct sampling (DS) method is tested to determine its ability to delineate heterogeneity from aerial magnetics data in a regional sandstone aquifer intruded by low-permeability volcanic dykes in Northern Ireland, UK. The use of two two-dimensional bivariate training images aids in creating spatial probability distributions of heterogeneities of hydrogeological interest, despite relatively ‘noisy’ magnetics data (i.e. including hydrogeologically irrelevant urban noise and regional geologic effects). These distributions are incorporated into a hierarchy system where previously published density function and upscaling methods are applied to derive regional distributions of equivalent hydraulic conductivity tensor K. Several K models, as determined by several stochastic realisations of MPS dyke locations, are computed within groundwater flow models and evaluated by comparing modelled heads with field observations. Results show a significant improvement in model calibration when compared to a simplistic homogeneous and isotropic aquifer model that does not account for the dyke occurrence evidenced by airborne magnetic data. The best model is obtained when normal and reverse polarity dykes are computed separately within MPS simulations and when a probability threshold of 0.7 is applied. The presented stochastic approach also provides improvement when compared to a previously published deterministic anisotropic model based on the unprocessed (i.e. noisy) airborne magnetics. This demonstrates the potential of coupling MPS to airborne geophysical data for regional groundwater modelling.

Proposal for a Noninterferometric Test of Collapse Models in Optomechanical Systems

The test of modifications to quantum mechanics aimed at identifying the fundamental reasons behind the unobservability of quantum mechanical superpositions at the macroscale is a crucial goal of modern quantum mechanics. Within the context of collapse models, current proposals based on interferometric techniques for their falsification are far from the experimental state of the art. Here we discuss an alternative approach to the testing of quantum collapse models that, by bypassing the need for the preparation of quantum superposition states might help us addressing nonlinear stochastic mechanisms such as the one at the basis of the continuous spontaneous localization model.