Credit risk of interest rate swaps : a comparative study of CIR and Monte Carlo simulation approach

This paper compares the credit risk profile for two types of model, the Monte Carlo model used in the existing literature, and the Cox, Ingersoll and Ross (CIR) model. Each of the profiles has a concave or hump-backed shape, reflecting the amortisation and diffusion effects. However, the CIR model generates significantly different results. In addition, we consider the sensitivity of these models of credit risk to initial interest rates, volatility, maturity, kappa and delta. The results show that the sensitivities vary across the models, and we explore the meaning of that variation.

A marginalised Markov Chain Monte Carlo approach for model based analysis of EEG data

The work presented in this paper focuses on fitting of a neural mass model to EEG data. Neurophysiology inspired mathematical models were developed for simulating brain's electrical activity imaged through Electroencephalography (EEG) more than three decades ago. At the present well informative models which even describe the functional integration of cortical regions also exists. However, a very limited amount of work is reported in literature on the subject of model fitting to actual EEG data. Here, we present a Bayesian approach for parameter estimation of the EEG model via a marginalized Markov Chain Monte Carlo (MCMC) approach.

Monte Carlo calculations of the free energy of binary SII hydrogen clathrate hydrates for identifying efficient promoter molecules

The thermodynamics of binary sII hydrogen clathrates with secondary guest molecules is studied with Monte Carlo simulations. The small cages of the sII unit cell are occupied by one H2 guest molecule. Different promoter molecules entrapped in the large cages are considered. Simulations are conducted at a pressure of 1000 atm in a temperature range of 233?293 K. To determine the stabilizing effect of different promoter molecules on the clathrate, the Gibbs free energy of fully and partially occupied sII hydrogen clathrates are calculated. Our aim is to predict what would be an efficient promoter molecule using properties such as size, dipole moment, and hydrogen bonding capability. The gas clathrate configurational and free energies are compared. The entropy makes a considerable contribution to the free energy and should be taken into account in determining stability conditions of binary sII hydrogen clathrates.

Monte Carlo simulations and capital structure research

The evolution of the debt ratio under alternative types of managerialbehavior can generate non-standard leverage processes. This createsproblems for statistical inference in empirical capital structure research. We argue in this paper that when the data generating process is not standard, a useful way to evaluate the appropriateness of inferences and the empirical methodology is via Monte Carlo simulations that mimic the data generating process under alternative assumptions about managerial behavior. We illustrate with several examples.

Dopamine transporter (DAT1) VNTR polymorphism and alcoholism in two culturally different populations of South India

It is well established that the central dopaminergic reward pathway is likely involved in alcohol intake and the progression of alcohol dependence. Dopamine transporter (DAT1) mediates the active re-uptake of DA from the synapse and is a principal regulator of dopaminergic neurotransmission. The gene for the human DAT1 displays several polymorphisms, including a 40-bp variable number of tandem repeats (VNTR) ranging from 3 to 16 copies in the 3′-untranslated region (UTR) of the gene. To assess the role of this gene in alcoholism, we genotyped the VNTR of DAT1 gene in a sample of 206 subjects from the Kota population (111 alcohol dependence cases and 95 controls) and 142 subjects from Badaga population (81 alcohol dependence cases and 61 controls). Both populations inhabit a similar environmental zone, but have different ethnic histories. Phenotype was defined based on the DSM-IV criteria. Genotyping was performed using PCR and electrophoresis. The association of DAT1 with alcoholism was tested by using the Clump v1.9 program which uses the Monte Carlo method. In both Kota and Badaga populations, the allele A10 was the most frequent allele followed by allele A9. The genotypic distribution is in Hardy–Weinberg equilibrium in both cases and control groups of Kota and Badaga populations. The DAT1 VNTR was significantly associated with alcoholism in Badaga population but not in Kota population. Our results suggest that the A9 allele of the DAT gene is involved in vulnerability to alcoholism, but that these associations are population specific.

A monotonicity index for the monotone fuzzy modeling problem

In this paper, the problem of maintaining the (global) monotonicity and local monotonicity properties between the input(s) and the output of an FIS model is addressed. This is known as the monotone fuzzy modeling problem. In our previous work, this problem has been tackled by developing some mathematical conditions for an FIS model to observe the monotonicity property. These mathematical conditions are used as a set of governing equations for undertaking FIS modeling problems, and have been extended to some advanced FIS modeling techniques. Here, we examine an alternative to the monotone fuzzy modeling problem by introducing a monotonicity index. The monotonicity index is employed as an approximate indicator to measure the fulfillment of an FIS model to the monotonicity property. It allows the FIS model to be constructed using an optimization method, or be tuned to achieve a better performance, without knowing the exact mathematical conditions of the FIS model to satisfy the monotonicity property. Besides, the monotonicity index can be extended to FIS modeling that involves the local monotonicity problem. We also analyze the relationship between the FIS model and its monotonicity property fulfillment, as well as derived mathematical conditions, using the Monte Carlo method.

Multiscale modelling of stress and strain partitioning in high strength dual phase steels

Multiscale modelling of stress and strain partitioning in DP steel was carried out using both realistic microstructure-based RVE models as well as stochastic microstructures generated by Monte Carlo method. The stochastic microstructure models were shown to resemble that of realistic microstructures, enabling research on the specific aspects of the microstructure that could be difficult to control and study during experimental work. One such feature of the realistic microstructures studied in this work was the grain size and microstructure morphology. The microstructures were generated with varying average grain sizes while all other parameters, such as boundary conditions, material properties and volume fractions of martensite and ferrite were kept constant. It is found that the effect of grain size is much more pronounced during the initial localisation of the plastic deformation at and around the interface of the phases. In addition, the decrease in ductility and increase in strength of the DP steels are directly related to the refinement of grain sizes of each phase and the stress-strain partitioning in between them.

Superannuation retirement balances: A surprising outcome

Aim: Although the guaranteed superannuation system is believed by many to provide a safe and adequate source of funds in retirement, some will be unpleasantly surprised. The aim of this paper is to demonstrate the significant effect of the economic cycle on the final accumulated balance in superannuation retirement accounts. Method: A Monte Carlo simulation is used to illustrate the variance in outcomes that can be expected for a hypothetical individual. Results: The expected accumulated superannuation balances for two hypothetical individuals are estimated. The spread of outcomes is used to illustrate the problem of using only the mean of the distribution as a predictor of wealth in the retirement years. Conclusions: Many retirees rely on superannuation to fund their retirement. However regular contributions to superannuation does not ensure a predictable outcome, and active management of contributions is required if retirement goals are to be met.

Integrating acoustic telemetry into mark-recapture models to improve the precision of apparent survival and abundance estimates

Capture-mark-recapture models are useful tools for estimating demographic parameters but often result in low precision when recapture rates are low. Low recapture rates are typical in many study systems including fishing-based studies. Incorporating auxiliary data into the models can improve precision and in some cases enable parameter estimation. Here, we present a novel application of acoustic telemetry for the estimation of apparent survival and abundance within capture-mark-recapture analysis using open population models. Our case study is based on simultaneously collecting longline fishing and acoustic telemetry data for a large mobile apex predator, the broadnose sevengill shark (Notorhynchus cepedianus), at a coastal site in Tasmania, Australia. Cormack-Jolly-Seber models showed that longline data alone had very low recapture rates while acoustic telemetry data for the same time period resulted in at least tenfold higher recapture rates. The apparent survival estimates were similar for the two datasets but the acoustic telemetry data showed much greater precision and enabled apparent survival parameter estimation for one dataset, which was inestimable using fishing data alone. Combined acoustic telemetry and longline data were incorporated into Jolly-Seber models using a Monte Carlo simulation approach. Abundance estimates were comparable to those with longline data only; however, the inclusion of acoustic telemetry data increased precision in the estimates. We conclude that acoustic telemetry is a useful tool for incorporating in capture-mark-recapture studies in the marine environment. Future studies should consider the application of acoustic telemetry within this framework when setting up the study design and sampling program.