Local Utility Functions and Local Probability Transformations

This note shows that, under appropriate conditions, preferences may be locally approximated by the linear utility or risk-neutral preference functional associated with a local probability transformation.

Canonical valuation of options in the presence of stochastic volatility

Proposed by M. Stutzer (1996), canonical valuation is a new method for valuing derivative securities under the risk-neutral framework. It is non-parametric, simple to apply, and, unlike many alternative approaches, does not require any option data. Although canonical valuation has great potential, its applicability in realistic scenarios has not yet been widely tested. This article documents the ability of canonical valuation to price derivatives in a number of settings. In a constant-volatility world, canonical estimates of option prices struggle to match a Black-Scholes estimate based on historical volatility. However, in a more realistic stochastic-volatility setting, canonical valuation outperforms the Black-Scholes model. As the volatility generating process becomes further removed from the constant-volatility world, the relative performance edge of canonical valuation is more evident. In general, the results are encouraging that canonical valuation is a useful technique for valuing derivatives. (C) 2005 Wiley Periodicals, Inc.

Speciation and absolute bioavailability: risk assessment of arsenic-contaminated sites in a residential suburb in Canberra

Watson is a fully developed suburb of some 30 years in Canberra (the capital city of Australia), A plunge dip using arsenical pesticides for tick control was operated there between 1946 and 1960, Chemical investigations revealed that many soil samples obtained from the study area contained levels of arsenic exceeding the current health-based investigation levels of 100 mg kg(-1) set by the National Health and Medical Research Council in Australia, For the speciation study, nine composite samples of surface and sub-surface soils and a composite sample of rocks were selected. ICP-MS analysis showed that arsenic levels in these samples ranged from 32 to 1597 mg kg(-1), Chemical speciation of arsenic showed that the arsenite (trivalent) components were 0.32-56% in the soil and 44.8% in the rock composite samples. Using a rat model, the absolute bioavailability of these contaminated soils relative to As3+ or As5+ ranged from 1.02 to 9.87% and 0.26 to 2.98%, respectively, An attempt was made to develop a suitable leachate test as an index of bioavailability. However, the results indicated that there was no significant correlation between the bioavailability and leachates using neutral pH water or 1 M HCl. Our results indicate that speciation is highly significant for the interpretation of bioavailability and risk assessment data; the bioavailable fractions of arsenic in soils from Watson are small and therefore the health impact upon the environment and humans due to this element is limited.

Absolute risk of breast cancer for Australian women with a family history

Background: The purpose of the present paper was to estimate the absolute risk of breast cancer over the remainder of a lifetime in Australian women with different categories of family history. Methods: Age-specific breast cancer incidence rates were adjusted for screening effects, and rates in those with no family history were estimated using the attributable fraction (AF). Relative risks from a published meta-analysis were applied to obtain incidence rates for different categories of family history, and age-specific incidence was converted to cumulative risk of breast cancer. The risk estimates were based upon Australian population statistics and published relative risks. Breast cancer incidence was from New South Wales women for 1996. The AF was calculated using prevalence of a family history of breast cancer from data on Queensland women. The cumulative absolute risk of breast cancer was calculated from decade and mid-decade ages to age 79 years, not adjusted for competing causes of death. Results: Lifetime risk is approximately 8.6% (1 in 12) for the general population and 7.8% (1 in 13) for those without a family history. Women with one relative affected have lifetime risks of 1 in 6-8 and those with two relatives affected have lifetime risks of 1 in 4-6. The cumulative residual lifetime risk decreases with advancing age; by age 60 years all groups with only one relative affected have well above a 90% probability of not developing breast cancer to age 79 years. Conclusions: These Australian risk statistics are useful for public information and in the clinical setting. Risks given here apply to women with average breast cancer risk from other risk factors.

Influence of patient age and implantation technique on the probability of re-replacement of the homograft aortic valve

Background and aim of the study: Results of valve re-replacement (reoperation) in 898 patients undergoing aortic valve replacement with cryopreserved homograft valves between 1975 and 1998 are reported. The study aim was to provide estimates of unconditional probability of valve reoperation and cumulative incidence function (actual risk) of reoperation. Methods: Valves were implanted by subcoronary insertion (n = 500), inclusion cylinder (n = 46), and aortic root replacement (n = 352). Probability of reoperation was estimated by adopting a mixture model framework within which estimates were adjusted for two risk factors: patient age at initial replacement, and implantation technique. Results: For a patient aged 50 years, the probability of reoperation in his/her lifetime was estimated as 44% and 56% for non-root and root replacement techniques, respectively. For a patient aged 70 years, estimated probability of reoperation was 16% and 25%, respectively. Given that a reoperation is required, patients with non-root replacement have a higher hazard rate than those with root replacement (hazards ratio = 1.4), indicating that non-root replacement patients tend to undergo reoperation earlier before death than root replacement patients. Conclusion: Younger patient age and root versus non-root replacement are risk factors for reoperation. Valve durability is much less in younger patients, while root replacement patients appear more likely to live longer and hence are more likely to require reoperation.

Comparing predictions of extinction risk using models and subjective judgement

Models of population dynamics are commonly used to predict risks in ecology, particularly risks of population decline. There is often considerable uncertainty associated with these predictions. However, alternatives to predictions based on population models have not been assessed. We used simulation models of hypothetical species to generate the kinds of data that might typically be available to ecologists and then invited other researchers to predict risks of population declines using these data. The accuracy of the predictions was assessed by comparison with the forecasts of the original model. The researchers used either population models or subjective judgement to make their predictions. Predictions made using models were only slightly more accurate than subjective judgements of risk. However, predictions using models tended to be unbiased, while subjective judgements were biased towards over-estimation. Psychology literature suggests that the bias of subjective judgements is likely to vary somewhat unpredictably among people, depending on their stake in the outcome. This will make subjective predictions more uncertain and less transparent than those based on models. (C) 2004 Elsevier SAS. All rights reserved.

Use of methotrexate in older patients - A risk-benefit assessment

Methotrexate is eliminated almost entirely by the kidneys. The risk of methotrexate toxicity is therefore increased in patients with poor renal function, most likely as a result of drug accumulation. Declining renal function with age may thus be an important predictor of toxicity to methotrexate. Up to 60% of all patients who receive methotrexate for rheumatoid arthritis (RA) discontinue taking it because of adverse effects, most of which occur during the first year of therapy. Gastrointestinal complications are the most common adverse effects of methotrexate, but hepatotoxicity, haematological toxicity, pulmonary toxicity, lymphoproliferative disorders and exacerbation of rheumatic nodules have all been reported, Decreased renal function as a result of disease and/or aging appears to be an important determinant of hepatic, lymphoproli ferative and haematological toxicity, Concomitant use of low doses of folic acid has been recommended as an approach to limiting toxicity. Interactions between methotrexate and several nonsteroidal anti-inflammatory drugs have been reported, but they may not be clinically significant. However, caution is advised in the use of such combinations in patients with reduced renal function. More serious toxicities (e.g. pancytopenia) may result when other inhibitors of folate utilisation [e.g. cotrimoxazole (trimethoprim-sulfamethoxazole)] or inhibitors of renal tubular secretion (e.g. probenecid) are combined with methotrexate. Before starting low dose methotrexate therapy in patients with RA, a full blood count, liver function tests, renal function tests and chest radiography should be performed. Blood counts and liver function tests should be repeated at regular intervals. Therapeutic drug monitoring of methotrexate has also been suggested as a means of limiting toxicity. Patients with RA usually respond very favourably to low dose methotrexate therapy, and the probability of patients continuing their treatment beyond 5 years is greater than for other slow-acting antirheumatic drugs. Thus, given its sustained clinical utility and relatively predictable toxicity profile, low dose methotrexate is a useful addition to the therapy of RA.

A risk-based system to penalize and reward line management for occupational safety and health performance

Penalizing line management for the occurrence of lost time injuries has in some cases had unintended negative consequences. These are discussed. An alternative system is suggested that penalizes line management for accidents where the combination of the probability of recurrence and the maximum reasonable consequences such a recurrence may have exceeds an agreed limit. A reward is given for prompt effective control of the risk to below the agreed risk limit. The reward is smaller than the penalty. High-risk accidents require independent investigation by a safety officer using analytical techniques. Two case examples are given to illustrate the system. Continuous safety improvement is driven by a planned reduction in the agreed risk limit over time and reward for proactive risk assessment and control.

The design of hazard risk assessment matrices for ranking occupational health risks and their application in mining and minerals processing

Two hazard risk assessment matrices for the ranking of occupational health risks are described. The qualitative matrix uses qualitative measures of probability and consequence to determine risk assessment codes for hazard-disease combinations. A walk-through survey of an underground metalliferous mine and concentrator is used to demonstrate how the qualitative matrix can be applied to determine priorities for the control of occupational health hazards. The semi-quantitative matrix uses attributable risk as a quantitative measure of probability and uses qualitative measures of consequence. A practical application of this matrix is the determination of occupational health priorities using existing epidemiological studies. Calculated attributable risks from epidemiological studies of hazard-disease combinations in mining and minerals processing are used as examples. These historic response data do not reflect the risks associated with current exposures. A method using current exposure data, known exposure-response relationships and the semi-quantitative matrix is proposed for more accurate and current risk rankings.

Exposing extinction risk analysis to pathogens: Is disease just another form of density dependence?

In the United States and several other countries., the development of population viability analyses (PVA) is a legal requirement of any species survival plan developed for threatened and endangered species. Despite the importance of pathogens in natural populations, little attention has been given to host-pathogen dynamics in PVA. To study the effect of infectious pathogens on extinction risk estimates generated from PVA, we review and synthesize the relevance of host-pathogen dynamics in analyses of extinction risk. We then develop a stochastic, density-dependent host-parasite model to investigate the effects of disease on the persistence of endangered populations. We show that this model converges on a Ricker model of density dependence under a suite of limiting assumptions, including. a high probability that epidemics will arrive and occur. Using this modeling framework, we then quantify: (1) dynamic differences between time series generated by disease and Ricker processes with the same parameters; (2) observed probabilities of quasi-extinction for populations exposed to disease or self-limitation; and (3) bias in probabilities of quasi-extinction estimated by density-independent PVAs when populations experience either form of density dependence. Our results suggest two generalities about the relationships among disease, PVA, and the management of endangered species. First, disease more strongly increases variability in host abundance and, thus, the probability of quasi-extinction, than does self-limitation. This result stems from the fact that the effects and the probability of occurrence of disease are both density dependent. Second, estimates of quasi-extinction are more often overly optimistic for populations experiencing disease than for those subject to self-limitation. Thus, although the results of density-independent PVAs may be relatively robust to some particular assumptions about density dependence, they are less robust when endangered populations are known to be susceptible to disease. If potential management actions involve manipulating pathogens, then it may be useful to. model disease explicitly.

Screening with magnetic resonance imaging and mammography of a UK population at high familial risk of breast cancer: a prospective multicentre cohort study (MARIBS)

Background Women genetically predisposed to breast cancer often develop the disease at a young age when dense breast tissue reduces the sensitivity of X-ray mammography. Our aim was, therefore, to compare contrast enhanced magnetic resonance imaging (CE MRI) with mammography for screening. Methods We did a prospective multicentre cohort study in 649 women aged 35-49 years with a strong family history of breast cancer or a high probability of a BRCA1, BRCA2, or TP53 mutation. We recruited participants from 22 centres in the UK, and offered the women annual screening with CE MRI and mammography for 2-7 years. Findings We diagnosed 35 cancers in the 649 women screened with both mammography and CE MRI (1881 screens): 19 by CE MRI only, six by mammography only, and eight by both, with two interval cases. Sensitivity was significantly higher for CE MRI (77%, 95% CI 60-90) than for mammography (40%, 24-58; p=0.01), and was 94% (81-99) when both methods were used. Specificity was 93% (92-95) for mammography, 81% (80-83) for CE MRI (p

Effect of conditional release from hospitalization on mortality risk

Objectives: This study considered the protective value provided by conditional release. It assessed the contribution of conditional release to mortality risk among patients with mental disorders severe enough to require psychiatric hospitalization during a mental health treatment span of 13.5 years in Victoria, Australia. Methods: Death records were obtained from the Australian National Death Index for a sample of 24,973 Victorian Psychiatric Case Register patients with a history of psychiatric hospitalizations: 8,879 had experienced at least one conditional release during community care intervals and 16,094 had not. Risk of death was assessed with standardized mortality ratios of the general population of Victoria. Relative risk of death among patients with and without past experience of conditional release was computed with risk and odds ratios. The contribution of conditional release to mortality, taking into account use of community care services, age, gender, inpatient experience, and diagnosis, as well as other controls, was assessed with logistic regression. Results: Patients who had been hospitalized showed higher mortality risk than the general population. Sixteen percent ( 4,034) died. Patients exposed to conditional release, however, had a 14 percent reduction in probability of noninjury-related death and a 24 percent reduction per day on orders in the probability of death from injury compared with those not offered such oversight throughout their mental health treatment, all other factors taken into account. Conclusions: Conditional release can offer protective oversight for those considered dangerous to self or others and appears to reduce mortality risk among those with disorders severe enough to require psychiatric hospitalization.

Risk of serious NSAID-related gastrointestinal events during long-term exposure: a systematic review

Objective: Exposure to non-steroidal anti-inflammatory drugs (NSAIDs) is associated wit increased risk of serious gastrointestinal (GI) events compared with non-exposure. We investigated whether that risk is sustained over time. Data sources: Cochrane Controlled Trials Register (to 2002); MEDLINE, EMBASE, Derwent Drug File and Current Contents (1999-2002); manual searching of reviews (1999-2002). Study selection: From 479 search results reviewed and 221 articles retrieved, seven studies of patients exposed to prescription non-selective NSAIDs for more than 6 months and reporting time-dependent serious GI event rates were selected for quantitative data synthesis. These were stratified into two groups by study design. Data extraction: Incidence of GI events and number of patients at specific time points were extracted. Data synthesis: Meta-regression analyses were performed. Change in risk was evaluated by testing whether the slope of the regression line declined over time. Four randomised controlled trials (RCTs) provided evaluable data from five NSAID arms (aspirin, naproxen, two ibuprofen arms, and diclofenac). When the RCT data were combined, a small significant decline in annualised risk was seen: -0.005% (95% Cl, -0.008% to -0.001%) per month. Sensitivity analyses were conducted because there was disparity within the RCT data. The pooled estimate from three cohort studies showed no significant decline in annualised risk over periods up to 2 years: -0.003% (95% Cl, -0.008% to 0.003%) per month. Conclusions: Small decreases in risk over time were observed; these were of negligible clinical importance. For patients who need long-term (> 6 months) treatment, precautionary measures should be considered to reduce the net probability of serious GI events over the anticipated treatment duration. The effect of intermittent versus regular daily therapy on long-term risk needs further investigation.

Socioeconomic disadvantage and changes in health risk behaviours in Australia: 1989-90 to 2001

Objective. Lower socioeconomic status (SES) is associated in industrialized countries with unhealthy lifestyle characteristics, such as smoking, physical inactivity and being overweight or obese. This paper examines changes over time in the association between SES and smoking status, physical activity and being overweight or obese in Australia. Methods. Data were taken from three successive national health surveys in Australia carried out in 1989-90 (n = 54 576), 1995 (n = 53 828) and 2001 (n = 26 863). Participants in these surveys were selected using a national probability sampling strategy, and aggregated data for geographical areas are used to determine the changing association between SES and lifestyle over time. Findings. Overall, men had less healthy lifestyles, In 2001 inverse SES trends for both men and women showed that those living in lower SES areas were more likely to smoke and to be sedentary and obese, There were some important socioeconomic changes over the period 1989-90 to 2001. The least socioeconomically disadvantaged areas had the largest decrease in the percentage of people smoking tobacco (24% decrease for men and 12% for women) and the largest decrease in the percentage of people reporting sedentary activity levels (25% decrease for men and 22% for women). While there has been a general increase in the percentage over time of those who are overweight or obese, there is a modest trend for being overweight to have increased (by about 16% only among females) among those living in areas of higher SES. Conclusion. Socioeconomic inequalities have been increasing for several key risk behaviours related to health; this suggests that T specific population-based prevention strategies intended to reduce health inequalities are needed.

National whoppercropper - risk management discussion support software

It is a paradox that in a country with one of the most variable climates in the world, cropping decisions are sometimes made with limited consideration of production and resource management risks. There are significant opportunities for improved performance based on targeted information regarding risks resulting from decision options. WhopperCropper is a tool to help agricultural advisors and farmers capture these benefits and use it to add value to their intuition and experience. WhopperCropper allows probability analysis of the effects of a range of selectable crop inputs and existing resources on yield and economic outcomes. Inputs can include agronomic inputs (e.g crop type, N fertiliser rate), resources (e.g soil water at sowing), and seasonal climate forecast (SOI phase). WhopperCropper has been successfully developed and refined as a discussion-support process for decision makers and their advisers in the northern grains region of Australia. The next phase of the project will build on the current project by extending its application nationally and enhancing the resource management aspects. A commercial partner, with over 800 advisor clients nationally, will participate in the project.