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.

A hedging point strategy - balancing effluent quality, economy and robustness in the control of wastewater treatment plants

An operational space map is an efficient tool to compare a large number of operational strategies to find an optimal choice of setpoints based on a multicriterion. Typically, such a multicriterion includes a weighted sum of cost of operation and effluent quality. Due to the relative high cost of aeration such a definition of optimality result in a relatively high fraction of the effluent total nitrogen in the form of ammonium. Such a strategy may however introduce a risk into operation because a low degree of ammonium removal leads to a low amount of nitrifiers. This in turn leads to a reduced ability to reject event disturbances, such as large variations in the ammonium load, drop in temperature, the presence of toxic/inhibitory compounds in the influent etc. Hedging is a risk minimisation tool, with the aim to "reduce one's risk of loss on a bet or speculation by compensating transactions on the other side" (The Concise Oxford Dictionary (1995)). In wastewater treatment plant operation hedging can be applied by choosing a higher level of ammonium removal to increase the amount of nitrifiers. This is a sensible way to introduce disturbance rejection ability into the multi criterion. In practice, this is done by deciding upon an internal effluent ammonium criterion. In some countries such as Germany, a separate criterion already applies to the level of ammonium in the effluent. However, in most countries the effluent criterion applies to total nitrogen only. In these cases, an internal effluent ammonium criterion should be selected in order to secure proper disturbance rejection ability.

Quadrature-phase noise penalties of optically and electro-optically phase-locked lasers

Focussing particularly on solid-state laser systems, the phase-noise penalties of laser injection-locking and electro-optical phase-locking are derived using linearised quantum mechanical models. The fundamental performance limit (minimum achievable output phase noise) for an injection-locked laser (IJL) system at low frequencies is equal to that of a standard phase-insensitive amplifier, whereas, in principle, that of a phase-locked laser (PLL) system can be better. At high frequencies, the output phase noise of the IJL system is limited by that of the master laser, while that of the PLL system tends to a weighted sum of contributions from the master and slave laser fields. Under conditions of large amplification, particularly where there has been significant attenuation, the noise penalties are shown to be substantial. Nonideal photodetector characteristics are shown to add significantly to the noise penalties for the PLL system. (C) 2005 Elsevier B.V. All rights reserved.

Diffusion- and perfusion-weighted MRI response to thrombolysis in stroke

Diffusion- and perfusion-weighted magnetic resonance imaging provides important pathophysiological information in acute bra-in ischemia. We performed a prospective study in 19 sub-6-hour stroke patients using serial diffusion- and perfusion-weighted imaging before intravenous thrombolysis, with repeat studies, both subacutely and at outcome. For comparison of ischemic lesion evolution and clinical outcome, we used a historical control group of 21 sub-6-hour ischemic stroke patients studied serially with diffusion- and perfusion-weighted imaging. The two groups were well matched for the baseline National Institutes of Health Stroke Scale and magnetic resonance parameters. Perfusion-weighted imaging-diffusion-weighted imaging mismatch was present in 16 of 19 patients treated with tissue plasminogen activator, and 16 of 21 controls. Perfusion-weighted imaging-diffusion-weighted imaging mismatch patients treated with tissue plaminogen activator had higher recanalization rates and enhanced reperfusion at day 3 (81% vs 47% in controls), and a greater proportion of severely hypoperfused acute mismatch tissue not progressing to infarction (82% vs -25% in controls). Despite similar baseline diffusion-weighted imaging lesions, infarct expansion was less in the recombinant tissue plaminogen activator group (14cm(3) vs 56cm(3) in controls). The positive effect of thrombolysis on lesion growth in mismatch patients translated into a greater improvement in baseline to outcome National Institutes of Health Stroke Scale in the group treated with recombinant tissue plaminogen activator, and a significantly larger proportion of patients treated with recombinant tissue plaminogen activator having a clinically meaningful improvement in National Institutes of Health Stroke Scale of;2:7 points. The natural evolution of acute perfusion-weighted imaging-diffusion-weighted imaging mismatch tissue may be altered by thrombolysis, with improved stroke outcome. This has implications for the use of diffusion- and perfusion-weighted imaging in selecting and monitoring patients for thrombolytic therapy.

The application of statistical process control charts to the detection and monitoring of hospital-acquired infections

The monitoring of infection control indicators including hospital-acquired infections is an established part of quality maintenance programmes in many health-care facilities. However, surveillance data use can be frustrated by the infrequent nature of many infections. Traditional methods of analysis often provide delayed identification of increasing infection occurrence, placing patients at preventable risk. The application of Shewhart, Cumulative Sum (CUSUM) and Exponentially Weighted Moving Average (EWMA) statistical process control charts to the monitoring of indicator infections allows continuous real-time assessment. The Shewhart chart will detect large changes, while CUSUM and EWMA methods are more suited to recognition of small to moderate sustained change. When used together, Shewhart and EWMA methods are ideal for monitoring bacteraemia and multiresistant organism rates. Shewhart and CUSUM charts are suitable for surgical infection surveillance.

A segmentation-based and partial-volume-compensated method for an accurate measurement of lateral ventricular volumes on T-1-weighted magnetic resonance images

Lateral ventricular volumes based on segmented brain MR images can be significantly underestimated if partial volume effects are not considered. This is because a group of voxels in the neighborhood of lateral ventricles is often mis-classified as gray matter voxels due to partial volume effects. This group of voxels is actually a mixture of ventricular cerebro-spinal fluid and the white matter and therefore, a portion of it should be included as part of the lateral ventricular structure. In this note, we describe an automated method for the measurement of lateral ventricular volumes on segmented brain MR images. Image segmentation was carried in combination of intensity correction and thresholding. The method is featured with a procedure for addressing mis-classified voxels in the surrounding of lateral ventricles. A detailed analysis showed that lateral ventricular volumes could be underestimated by 10 to 30% depending upon the size of the lateral ventricular structure, if mis-classified voxels were not included. Validation of the method was done through comparison with the averaged manually traced volumes. Finally, the merit of the method is demonstrated in the evaluation of the rate of lateral ventricular enlargement. (C) 2001 Elsevier Science Inc. All rights reserved.

Purchasing Power Parities for Industry Comparisons Using Weighted Elteto-Koves-Szulc (EKS) Methods

This study has three main objectives. First, it develops a generalization of the commonly used EKS method to multilateral price comparisons. It is shown that the EKS system can be generalized so that weights can be attached to each of the link comparisons used in the EKS computations. These weights can account for differing levels of reliability of the underlying binary comparisons. Second, various reliability measures and corresponding weighting schemes are presented and their merits discussed. Finally, these new methods are applied to an international data set of manufacturing prices from the ICOP project. Although theoretically superior, it appears that the empirical impact of the weighted EKS method is generally small compared to the unweighted EKS. It is also found that this impact is larger when it is applied at lower levels of aggregation. Finally, the importance of using sector specific PPPs in assessing relative levels of manufacturing productivity is indicated.

The design of planar gradient coils. Part ll: A weighted superposition method

In this work a superposition technique for designing gradient coils for the purpose of magnetic resonance imaging is outlined, which uses an optimized weight function superimposed upon an initial winding similar to that obtained from the target field method to generate the final wire winding. This work builds on the preliminary work performed in Part I on designing planar insertable gradient coils for high resolution imaging. The proposed superposition method for designing gradient coils results in coil patterns with relatively low inductances and the gradient coils can be used as inserts into existing magnetic resonance imaging hardware. The new scheme has the capacity to obtain images faster with more detail due to the deliver of greater magnetic held gradients. The proposed method for designing gradient coils is compared with a variant of the state-of-the-art target field method for planar gradient coils designs, and it is shown that the weighted superposition approach outperforms the well-known the classical method.

On the equivalence of weighted Country-Product-Dummy (CPD) Method and the Rao-System for multilateral price comparisons

The country-product-dummy (CPD) method, originally proposed in Summers (1973), has recently been revisited in its weighted formulation to handle a variety of data related situations (Rao and Timmer, 2000, 2003; Heravi et al., 2001; Rao, 2001; Aten and Menezes, 2002; Heston and Aten, 2002; Deaton et al., 2004). The CPD method is also increasingly being used in the context of hedonic modelling instead of its original purpose of filling holes in Summers (1973). However, the CPD method is seen, among practitioners, as a black box due to its regression formulation. The main objective of the paper is to establish equivalence of purchasing power parities and international prices derived from the application of the weighted-CPD method with those arising out of the Rao-system for multilateral comparisons. A major implication of this result is that the weighted-CPD method would then be a natural method of aggregation at all levels of aggregation within the context of international comparisons.