Estimation of jump-diffusion processes via empirical characteristic functions

Preface The starting point for this work and eventually the subject of the whole thesis was the question: how to estimate parameters of the affine stochastic volatility jump-diffusion models. These models are very important for contingent claim pricing. Their major advantage, availability T of analytical solutions for characteristic functions, made them the models of choice for many theoretical constructions and practical applications. At the same time, estimation of parameters of stochastic volatility jump-diffusion models is not a straightforward task. The problem is coming from the variance process, which is non-observable. There are several estimation methodologies that deal with estimation problems of latent variables. One appeared to be particularly interesting. It proposes the estimator that in contrast to the other methods requires neither discretization nor simulation of the process: the Continuous Empirical Characteristic function estimator (EGF) based on the unconditional characteristic function. However, the procedure was derived only for the stochastic volatility models without jumps. Thus, it has become the subject of my research. This thesis consists of three parts. Each one is written as independent and self contained article. At the same time, questions that are answered by the second and third parts of this Work arise naturally from the issues investigated and results obtained in the first one. The first chapter is the theoretical foundation of the thesis. It proposes an estimation procedure for the stochastic volatility models with jumps both in the asset price and variance processes. The estimation procedure is based on the joint unconditional characteristic function for the stochastic process. The major analytical result of this part as well as of the whole thesis is the closed form expression for the joint unconditional characteristic function for the stochastic volatility jump-diffusion models. The empirical part of the chapter suggests that besides a stochastic volatility, jumps both in the mean and the volatility equation are relevant for modelling returns of the S&P500 index, which has been chosen as a general representative of the stock asset class. Hence, the next question is: what jump process to use to model returns of the S&P500. The decision about the jump process in the framework of the affine jump- diffusion models boils down to defining the intensity of the compound Poisson process, a constant or some function of state variables, and to choosing the distribution of the jump size. While the jump in the variance process is usually assumed to be exponential, there are at least three distributions of the jump size which are currently used for the asset log-prices: normal, exponential and double exponential. The second part of this thesis shows that normal jumps in the asset log-returns should be used if we are to model S&P500 index by a stochastic volatility jump-diffusion model. This is a surprising result. Exponential distribution has fatter tails and for this reason either exponential or double exponential jump size was expected to provide the best it of the stochastic volatility jump-diffusion models to the data. The idea of testing the efficiency of the Continuous ECF estimator on the simulated data has already appeared when the first estimation results of the first chapter were obtained. In the absence of a benchmark or any ground for comparison it is unreasonable to be sure that our parameter estimates and the true parameters of the models coincide. The conclusion of the second chapter provides one more reason to do that kind of test. Thus, the third part of this thesis concentrates on the estimation of parameters of stochastic volatility jump- diffusion models on the basis of the asset price time-series simulated from various "true" parameter sets. The goal is to show that the Continuous ECF estimator based on the joint unconditional characteristic function is capable of finding the true parameters. And, the third chapter proves that our estimator indeed has the ability to do so. Once it is clear that the Continuous ECF estimator based on the unconditional characteristic function is working, the next question does not wait to appear. The question is whether the computation effort can be reduced without affecting the efficiency of the estimator, or whether the efficiency of the estimator can be improved without dramatically increasing the computational burden. The efficiency of the Continuous ECF estimator depends on the number of dimensions of the joint unconditional characteristic function which is used for its construction. Theoretically, the more dimensions there are, the more efficient is the estimation procedure. In practice, however, this relationship is not so straightforward due to the increasing computational difficulties. The second chapter, for example, in addition to the choice of the jump process, discusses the possibility of using the marginal, i.e. one-dimensional, unconditional characteristic function in the estimation instead of the joint, bi-dimensional, unconditional characteristic function. As result, the preference for one or the other depends on the model to be estimated. Thus, the computational effort can be reduced in some cases without affecting the efficiency of the estimator. The improvement of the estimator s efficiency by increasing its dimensionality faces more difficulties. The third chapter of this thesis, in addition to what was discussed above, compares the performance of the estimators with bi- and three-dimensional unconditional characteristic functions on the simulated data. It shows that the theoretical efficiency of the Continuous ECF estimator based on the three-dimensional unconditional characteristic function is not attainable in practice, at least for the moment, due to the limitations on the computer power and optimization toolboxes available to the general public. Thus, the Continuous ECF estimator based on the joint, bi-dimensional, unconditional characteristic function has all the reasons to exist and to be used for the estimation of parameters of the stochastic volatility jump-diffusion models.

Hepatic hemangiomas: Factors associated with T2 shine-through effect on diffusion-weighted MR sequences.

PURPOSE: To determine the frequency and factors associated with the presence of T2 shine-through effect in hepatic hemangiomas on diffusion-weighted (DW) magnetic resonance (MR) sequences. MATERIALS AND METHODS: This retrospective study was approved by institutional review board with waiver of informed consent. One hundred forty-nine consecutive patients with 388 hepatic hemangiomas who underwent a liver MR between January 2010 and November 2011 were included. MR analysis evaluated the lesion characteristics (signal intensities and enhancement patterns (classical, rapidly filling, delayed filling)), the presence of T2 shine-through effect on DW sequences (b values of 0, 150, and 600s/mm(2)), and apparent diffusion coefficient (ADC) values. Multivariate analysis was performed to study the factors associated with the T2 shine-through effect. RESULTS: T2 shine-through effect was observed in 204/388 (52.6%) of hepatic hemangiomas and in 100 (67.1%) patients. Mean ADC value of hemangiomas with T2 shine-through effect was significantly lower than hemangiomas without (2.0±0.48 vs 2.38±0.45, P<.0001). On multivariate analysis, high signal intensity on fat-suppressed T2-weighted fast spin-echo images, hemangiomas with classical or delayed enhancement, and the ADC of the liver were the only significant factors associated with T2 shine-through effect. CONCLUSION: T2 shine-through effect is commonly observed in hepatic hemangiomas and is related to hemangiomas characteristics. Radiologists should be aware of this phenomenon which could lead to misdiagnosis. Its presence should not question the diagnosis of hemangiomas when typical MR findings are found.

Predicting future distributions of mountain plants under climate change: does dispersal capacity matter?

Many studies have investigated the impacts that climate change could potentially have on the distribution of plant species, but few have attempted to constrain projections through plant dispersal limitations. Instead, most studies published so far have been using the simplification of considering dispersal as either unlimited or null. However, depending on a species' dispersal capacity, landscape fragmentation, and the rate of climatic change, these assumptions can lead to serious over- or underestimation of a species' future distribution. To quantify the discrepancies between unlimited, realistic, and no dispersal scenarios, we carried out projections of future distribution over the 21st century for 287 mountain plant species in a study area of the Western Swiss Alps. For each species, simulations were run for four dispersal scenarios (unlimited dispersal, no dispersal, realistic dispersal and realistic dispersal with long-distance dispersal events) and under four climate change scenarios. Although simulations accounting for realistic dispersal limitations did significantly differ from those considering dispersal as unlimited or null in terms of projected future distribution, using the unlimited dispersal simplification nevertheless provided good approximations for species extinctions under more moderate climate change scenarios. Overall, simulations accounting for dispersal limitations produced, for our mountainous study area, results that were significantly closer to unlimited dispersal than to no dispersal. Finally, analyzing the temporal pattern of species extinctions over the entire 21st century showed that, due to the possibility of a large number of species shifting their distribution to higher elevation, important species extinctions for our study area might not occur before the 2080-2100 time periods.

Can we disentangle predator-prey interactions from species distributions at a macro-scale? A case study with a raptor species.

There is a debate on whether an influence of biotic interactions on species distributions can be reflected at macro-scale levels. Whereas the influence of biotic interactions on spatial arrangements is beginning to be studied at local scales, similar studies at macro-scale levels are scarce. There is no example disentangling, from other similarities with related species, the influence of predator-prey interactions on species distributions at macro-scale levels. In this study we aimed to disentangle predator-prey interactions from species distribution data following an experimental approach including a factorial design. As a case of study we selected the short-toed eagle because of its known specialization on certain prey reptiles. We used presence-absence data at a 100 Km2 spatial resolution to extract the explanatory capacity of different environmental predictors (five abiotic and two biotic predictors) on the short-toed eagle species distribution in Peninsular Spain. Abiotic predictors were relevant climatic and topographic variables, and relevant biotic predictors were prey richness and forest density. In addition to the short-toed eagle, we also obtained the predictor's explanatory capacities for i) species of the same family Accipitridae (as a reference), ii) for other birds of different families (as controls) and iii) species with randomly selected presences (as null models). We run 650 models to test for similarities of the short-toed eagle, controls and null models with reference species, assessed by regressions of explanatory capacities. We found higher similarities between the short-toed eagle and other species of the family Accipitridae than for the other two groups. Once corrected by the family effect, our analyses revealed a signal of predator-prey interaction embedded in species distribution data. This result was corroborated with additional analyses testing for differences in the concordance between the distributions of different bird categories and the distributions of either prey or non-prey species of the short-toed eagle. Our analyses were useful to disentangle a signal of predator-prey interactions from species distribution data at a macro-scale. This study highlights the importance of disentangling specific features from the variation shared with a given taxonomic level.

Robust accelerated failure time regression

Robust estimators for accelerated failure time models with asymmetric (or symmetric) error distribution and censored observations are proposed. It is assumed that the error model belongs to a log-location-scale family of distributions and that the mean response is the parameter of interest. Since scale is a main component of mean, scale is not treated as a nuisance parameter. A three steps procedure is proposed. In the first step, an initial high breakdown point S estimate is computed. In the second step, observations that are unlikely under the estimated model are rejected or down weighted. Finally, a weighted maximum likelihood estimate is computed. To define the estimates, functions of censored residuals are replaced by their estimated conditional expectation given that the response is larger than the observed censored value. The rejection rule in the second step is based on an adaptive cut-off that, asymptotically, does not reject any observation when the data are generat ed according to the model. Therefore, the final estimate attains full efficiency at the model, with respect to the maximum likelihood estimate, while maintaining the breakdown point of the initial estimator. Asymptotic results are provided. The new procedure is evaluated with the help of Monte Carlo simulations. Two examples with real data are discussed.

MBIS: multivariate Bayesian image segmentation tool.

We present MBIS (Multivariate Bayesian Image Segmentation tool), a clustering tool based on the mixture of multivariate normal distributions model. MBIS supports multichannel bias field correction based on a B-spline model. A second methodological novelty is the inclusion of graph-cuts optimization for the stationary anisotropic hidden Markov random field model. Along with MBIS, we release an evaluation framework that contains three different experiments on multi-site data. We first validate the accuracy of segmentation and the estimated bias field for each channel. MBIS outperforms a widely used segmentation tool in a cross-comparison evaluation. The second experiment demonstrates the robustness of results on atlas-free segmentation of two image sets from scan-rescan protocols on 21 healthy subjects. Multivariate segmentation is more replicable than the monospectral counterpart on T1-weighted images. Finally, we provide a third experiment to illustrate how MBIS can be used in a large-scale study of tissue volume change with increasing age in 584 healthy subjects. This last result is meaningful as multivariate segmentation performs robustly without the need for prior knowledge.

High b-value Diffusion-weighted Imaging: A Sensitive Method to Reveal White Matter Changes in Schizophrenia

Background: b-value is the parameter characterizing the intensity of the diffusion weighting during image acquisition. Data acquisition is usually performed with low b value (b~1000 s/mm2). Evidence shows that high b-values (b>2000 s/mm2) are more sensitive to the slow diffusion compartment (SDC) and maybe more sensitive in detecting white matter (WM) anomalies in schizophrenia.Methods: 12 male patients with schizophrenia (mean age 35 +/-3 years) and 16 healthy male controls matched for age were scanned with a low b-value (1000 s/mm2) and a high b-value (4000 s/mm2) protocol. Apparent diffusion coefficient (ADC) is a measure of the average diffusion distance of water molecules per time unit (mm2/s). ADC maps were generated for all individuals. 8 region of interests (frontal and parietal region bilaterally, centrum semi-ovale bilaterally and anterior and posterior corpus callosum) were manually traced blind to diagnosis.Results: ADC measures acquired with high b-value imaging were more sensitive in detecting differences between schizophrenia patients and healthy controls than low b-value imaging with a gain in significance by a factor of 20- 100 times despite the lower image Signal-to-noise ratio (SNR). Increased ADC was identified in patient's WM (p=0.00015) with major contributions from left and right centrum semi-ovale and to a lesser extent right parietal region.Conclusions: Our results may be related to the sensitivity of high b-value imaging to the SDC believed to reflect mainly the intra-axonal and myelin bound water pool. High b-value imaging might be more sensitive and specific to WM anomalies in schizophrenia than low b-value imaging

Athletic injuries of the extensor carpi ulnaris subsheath: MRI findings and utility of gadolinium-enhanced fat-saturated T1-weighted sequences with wrist pronation and supination.

OBJECTIVE: To report the magnetic resonance imaging (MRI) findings in athletic injuries of the extensor carpi ulnaris (ECU) subsheath, assessing the utility of gadolinium-enhanced (Gd) fat-saturated (FS) T1-weighted sequences with wrist pronation and supination. METHODS: Sixteen patients (13 male, three female; mean age 30.3 years) with athletic injuries of the ECU subsheath sustained between January 2003 and June 2009 were included in this retrospective study. Initial and follow-up 1.5-T wrist MRIs were performed with transverse T1-weighted and STIR sequences in pronation, and Gd FS T1-weighted sequences with wrist pronation and supination. Two radiologists assessed the type of injury (A to C), ECU tendon stability, associated lesions and rated pulse sequences using a three-point scale: 1=poor, 2=good and 3=excellent. RESULTS: Gd-enhanced FS T1-weighted transverse sequences in supination (2.63) and pronation (2.56) were most valuable, compared with STIR (2.19) and T1-weighted (1.94). Nine type A, one type B and six type C injuries were found. There were trends towards diminution in size, signal intensity and enhancement of associated pouches on follow-up MRI and tendon stabilisation within the ulnar groove. CONCLUSION: Gd-enhanced FS T1-weighted sequences with wrist pronation and supination are most valuable in assessing and follow-up athletic injuries of the ECU subsheath on 1.5-T MRI.

Hepatic hemangiomas : factors associated with T2 shine-through effect on diffusion-weighted MR sequences

Objectifs: Déterminer la fréquence et les facteurs prédictifs de l'effet T2 shine-through dans l'hémangiome hépatique. Matériels et méthodes: Entre janvier 2010 et novembre 2011, l'imagerie par résonance magnétique du foie de 149 patients avec 388 hémangiomes hépatiques a été revue rétrospectivement. Les caractéristiques lésionnelles: la taille, la localisation, le signal et l'aspect en T1, T2 et en diffusion, l'effet T2 shine-through, le coefficient apparent de diffusion des hémangiomes hépatiques et du foie et type de rehaussement ont été évalués. Résultats: L'effet T2 shine-through était observé dans 204/388 (52.6%) des hémangiomes hépatiques et 100 (67.1%) patients. L'ADC moyen des hémangiomas avec T2 shine-through effect était significativement plus bas que les hémangiomas sans T2 shine-through effect (2.0 +/- 0.48 vs 2.38 +/- 0.45 10"3 mm2/s, P < .0001). L'analyse multivariée retrouvait comme facteurs indépendants de la présence d'un effet T2 shine-through un hypersignal sur les images fat- suppressed T2-weighted fast spin-echo, les hémangiomes avec un rehaussement classique et retardé, et l'ADC du foie. Conclusion: Le T2 shine-through effect est fréquemment observé dans les hémangiomes hépatiques et dépend des caractéristiques lésionnelles. Sa présence ne remet pas en question le diagnostic lorsque les signes IRM typiques sont présents.