A framework for valuing derivative securities

This paper develops a general framework for valuing a wide range of derivative securities. Rather than focusing on the stochastic process of the underlying security and developing an instantaneously-riskless hedge portfolio, we focus on the terminal distribution of the underlying security. This enables the derivative security to be valued as the weighted sum of a number of component pieces. The component pieces are simply the different payoffs that the security generates in different states of the world, and they are weighted by the probability of the particular state of the world occurring. A full set of derivations is provided. To illustrate its use, the valuation framework is applied to plain-vanilla call and put options, as well as a range of derivatives including caps, floors, collars, supershares, and digital options.

An empirical framework for studying desistance as a process

Recent reviews of the desistance literature have advocated studying desistance as a process, yet current empirical methods continue to measure desistance as a discrete state. In this paper, we propose a framework for empirical research that recognizes desistance as a developmental process. This approach focuses on changes in the offending rare rather than on offending itself We describe a statistical model to implement this approach and provide an empirical example. We conclude with several suggestions for future research endeavors that arise from our conceptualization of desistance.

Habitat complexity, spatial interference, and "minimum risk distribution": a framework for population stability

In the past century, the debate over whether or not density-dependent factors regulate populations has generally focused on changes in mean population density, ignoring the spatial variance around the mean as unimportant noise. In an attempt to provide a different framework for understanding population dynamics based on individual fitness, this paper discusses the crucial role of spatial variability itself on the stability of insect populations. The advantages of this method are the following: (1) it is founded on evolutionary principles rather than post hoc assumptions; (2) it erects hypotheses that can be tested; and (3) it links disparate ecological schools, including spatial dynamics, behavioral ecology, preference-performance, and plant apparency into an overall framework. At the core of this framework, habitat complexity governs insect spatial variance. which in turn determines population stability. First, the minimum risk distribution (MRD) is defined as the spatial distribution of individuals that results in the minimum number of premature deaths in a population given the distribution of mortality risk in the habitat (and, therefore, leading to maximized population growth). The greater the divergence of actual spatial patterns of individuals from the MRD, the greater the reduction of population growth and size from high, unstable levels. Then, based on extensive data from 29 populations of the processionary caterpillar, Ochrogaster lunifer, four steps are used to test the effect of habitat interference on population growth rates. (1) The costs (increasing the risk of scramble competition) and benefits (decreasing the risk of inverse density-dependent predation) of egg and larval aggregation are quantified. (2) These costs and benefits, along with the distribution of resources, are used to construct the MRD for each habitat. (3) The MRD is used as a benchmark against which the actual spatial pattern of individuals is compared. The degree of divergence of the actual spatial pattern from the MRD is quantified for each of the 29 habitats. (4) Finally, indices of habitat complexity are used to provide highly accurate predictions of spatial divergence from the MRD, showing that habitat interference reduces population growth rates from high, unstable levels. The reason for the divergence appears to be that high levels of background vegetation (vegetation other than host plants) interfere with female host-searching behavior. This leads to a spatial distribution of egg batches with high mortality risk, and therefore lower population growth. Knowledge of the MRD in other species should be a highly effective means of predicting trends in population dynamics. Species with high divergence between their actual spatial distribution and their MRD may display relatively stable dynamics at low population levels. In contrast, species with low divergence should experience high levels of intragenerational population growth leading to frequent habitat-wide outbreaks and unstable dynamics in the long term. Six hypotheses, erected under the framework of spatial interference, are discussed, and future tests are suggested.

Saving, productivity and national income: a discrete-time geometric framework

This paper proposes an alternative geometric framework for analysing the inter-relationship between domestic saving, productivity and income determination in discrete time. The framework provides a means of understanding how low saving economies like the United States sustained high growth rates in the 1990s whereas high saving Japan did not. It also illustrates how the causality between saving and economic activity runs both ways and that discrete changes in national output and income depend on both current and previous accumulation behaviour. The open economy analogue reveals how international capital movements can create external account imbalances that enhance income growth for both borrower and lender economies. (C) 2002 Elsevier Science B.V. All rights reserved.

A framework for extreme-event control in wastewater treatment

In this paper an approach to extreme event control in wastewater treatment plant operation by use of automatic supervisory control is discussed. The framework presented is based on the fact that different operational conditions manifest themselves as clusters in a multivariate measurement space. These clusters are identified and linked to specific and corresponding events by use of principal component analysis and fuzzy c-means clustering. A reduced system model is assigned to each type of extreme event and used to calculate appropriate local controller set points. In earlier work we have shown that this approach is applicable to wastewater treatment control using look-up tables to determine current set points. In this work we focus on the automatic determination of appropriate set points by use of steady state and dynamic predictions. The performance of a relatively simple steady-state supervisory controller is compared with that of a model predictive supervisory controller. Also, a look-up table approach is included in the comparison, as it provides a simple and robust alternative to the steady-state and model predictive controllers, The methodology is illustrated in a simulation study.

A framework for table driven testing of Java classes

With the advent of object-oriented languages and the portability of Java, the development and use of class libraries has become widespread. Effective class reuse depends on class reliability which in turn depends on thorough testing. This paper describes a class testing approach based on modeling each test case with a tuple and then generating large numbers of tuples to thoroughly cover an input space with many interesting combinations of values. The testing approach is supported by the Roast framework for the testing of Java classes. Roast provides automated tuple generation based on boundary values, unit operations that support driver standardization, and test case templates used for code generation. Roast produces thorough, compact test drivers with low development and maintenance cost. The framework and tool support are illustrated on a number of non-trivial classes, including a graphical user interface policy manager. Quantitative results are presented to substantiate the practicality and effectiveness of the approach. Copyright (C) 2002 John Wiley Sons, Ltd.

Engaging with theories of dialogue and voice: Using Bakhtin as a framework to understand teaching and learning Indigenous Australian women's performance

In this paper I explore the Indigenous Australian women's performance classroom (hereafter ANTH2120) as a dialectic and discursive space where the location of possibility is opened for female Indigenous performers to enter into a dialogue from and between both non-Indigenous and Indigenous voices. The work of Bakhtin on dialogue serves as a useful standpoint for understanding the multiple speaking positions and texts in the ANTH2120 context. Bakhtin emphasizes performance, history, actuality and the openness of dialogue to provide an important framework for analysing multiple speaking positions and ways of making meaning through dialogue between shifting and differing subjectivities. I begin by briefly critiquing Bakhtin's "dialogic imagination" and consider the application and usefulness of concepts such as dialogism, heteroglossia and the utterance to understanding the ANTH2120 classroom as a polyphonic and discursive space. I then turn to an analysis of dialogue in the ANTH2120 classroom and primarily situate my gaze on an examination of the interactions that took place between the voices of myself as family/teacher/student and senior Yanyuwa women from the r e m o t e N o r t h e r n T e r r i t o r y A b o r i g i n a l c o m m u n i t y o f B o r r o l o o l a as family/performers/teachers. The 2000 and 2001 Yanyuwa women's performance workshops will be used as examples of the way power is constantly shifting in this dialogue to allow particular voices to speak with authority, and for others to remain silent as roles and relationships between myself and the Yanyuwa women change. Conclusions will be drawn regarding how my subject positions and white race privilege affect who speaks, who listens and on whose terms, and further, the efficacy of this pedagogical platform for opening up the location of possibility for Indigenous Australian women to play a powerful part in the construction of knowledges about women's performance traditions.

Bridging the gap between different statistical approaches: An integrated framework for modelling

This paper proposes a template for modelling complex datasets that integrates traditional statistical modelling approaches with more recent advances in statistics and modelling through an exploratory framework. Our approach builds on the well-known and long standing traditional idea of 'good practice in statistics' by establishing a comprehensive framework for modelling that focuses on exploration, prediction, interpretation and reliability assessment, a relatively new idea that allows individual assessment of predictions. The integrated framework we present comprises two stages. The first involves the use of exploratory methods to help visually understand the data and identify a parsimonious set of explanatory variables. The second encompasses a two step modelling process, where the use of non-parametric methods such as decision trees and generalized additive models are promoted to identify important variables and their modelling relationship with the response before a final predictive model is considered. We focus on fitting the predictive model using parametric, non-parametric and Bayesian approaches. This paper is motivated by a medical problem where interest focuses on developing a risk stratification system for morbidity of 1,710 cardiac patients given a suite of demographic, clinical and preoperative variables. Although the methods we use are applied specifically to this case study, these methods can be applied across any field, irrespective of the type of response.

Is maximizing resilience compatible with established ecological goal functions?

Cropp and Gabric [Ecosystem adaptation: do ecosystems maximise resilience? Ecology. In press] used a simple phytoplanktonzooplankton-nutrient model and a genetic algorithm to determine the parameter values that would maximize the value of certain goal functions. These goal functions were to maximize biomass, maximize flux, maximize flux to biomass ratio, and maximize resilience. It was found that maximizing goal functions maximized resilience. The objective of this study was to investigate whether the Cropp and Gabric [Ecosystem adaptation: do ecosystems maximise resilience? Ecology. In press] result was indicative of a general ecosystem principle, or peculiar to the model and parameter ranges used. This study successfully replicated the Cropp and Gabric [Ecosystem adaptation: do ecosystems maximise resilience? Ecology. In press] experiment for a number of different model types, however, a different interpretation of the results is made. A new metric, concordance, was devised to describe the agreement between goal functions. It was found that resilience has the highest concordance of all goal functions trialled. for most model types. This implies that resilience offers a compromise between the established ecological goal functions. The parameter value range used is found to affect the parameter versus goal function relationships. Local maxima and minima affected the relationship between parameters and goal functions, and between goal functions. (C) 2003 Elsevier B.V. All rights reserved.