The Risk Management of Minimum Return Guarantees

Contracts paying a guaranteed minimum rate of return and a fraction of a positive excess rate, which is specified relative to a benchmark portfolio, are closely related to unit-linked life-insurance products and can be considered as alternatives to direct investment in the underlying benchmark. They contain an embedded power option, and the key issue is the tractable and realistic hedging of this option, in order to rigorously justify valuation by arbitrage arguments and prevent the guarantees from becoming uncontrollable liabilities to the issuer. We show how to determine the contract parameters conservatively and implement robust risk-management strategies.

Better cross hedges with composite hedging? Hedging equity portfolios using financial and commodity futures

Unless a direct hedge is available, cross hedging must be used. In such circumstances portfolio theory implies that a composite hedge (the use of two or more hedging instruments to hedge a single spot position) will be beneficial. The study and use of composite hedging has been neglected; possibly because it requires the estimation of two or more hedge ratios. This paper demonstrates a statistically significant increase in out-of-sample effectiveness from the composite hedging of the Amex Oil Index using S&P500 and New York Mercantile Exchange crude oil futures. This conclusion is robust to the technique used to estimate the hedge ratios, and to allowance for transactions costs, dividends and the maturity of the futures contracts.

Chemical Immobilization Of Crosslinked Polymeric Ionic Liquids On Nitinol Wires Produces Highly Robust Sorbent Coatings For Solid-phase Microextraction.

Super elastic nitinol (NiTi) wires were exploited as highly robust supports for three distinct crosslinked polymeric ionic liquid (PIL)-based coatings in solid-phase microextraction (SPME). The oxidation of NiTi wires in a boiling (30%w/w) H2O2 solution and subsequent derivatization in vinyltrimethoxysilane (VTMS) allowed for vinyl moieties to be appended to the surface of the support. UV-initiated on-fiber copolymerization of the vinyl-substituted NiTi support with monocationic ionic liquid (IL) monomers and dicationic IL crosslinkers produced a crosslinked PIL-based network that was covalently attached to the NiTi wire. This alteration alleviated receding of the coating from the support, which was observed for an analogous crosslinked PIL applied on unmodified NiTi wires. A series of demanding extraction conditions, including extreme pH, pre-exposure to pure organic solvents, and high temperatures, were applied to investigate the versatility and robustness of the fibers. Acceptable precision of the model analytes was obtained for all fibers under these conditions. Method validation by examining the relative recovery of a homologous group of phthalate esters (PAEs) was performed in drip-brewed coffee (maintained at 60 °C) by direct immersion SPME. Acceptable recoveries were obtained for most PAEs in the part-per-billion level, even in this exceedingly harsh and complex matrix.

Robust relations between CCN and the vertical evolution of cloud drop size distribution in deep convective clouds

In-situ measurements in convective clouds (up to the freezing level) over the Amazon basin show that smoke from deforestation fires prevents clouds from precipitating until they acquire a vertical development of at least 4 km, compared to only 1-2 km in clean clouds. The average cloud depth required for the onset of warm rain increased by similar to 350 m for each additional 100 cloud condensation nuclei per cm(3) at a super-saturation of 0.5% (CCN0.5%). In polluted clouds, the diameter of modal liquid water content grows much slower with cloud depth (at least by a factor of similar to 2), due to the large number of droplets that compete for available water and to the suppressed coalescence processes. Contrary to what other studies have suggested, we did not observe this effect to reach saturation at 3000 or more accumulation mode particles per cm(3). The CCN0.5% concentration was found to be a very good predictor for the cloud depth required for the onset of warm precipitation and other microphysical factors, leaving only a secondary role for the updraft velocities in determining the cloud drop size distributions. The effective radius of the cloud droplets (r(e)) was found to be a quite robust parameter for a given environment and cloud depth, showing only a small effect of partial droplet evaporation from the cloud's mixing with its drier environment. This supports one of the basic assumptions of satellite analysis of cloud microphysical processes: the ability to look at different cloud top heights in the same region and regard their r(e) as if they had been measured inside one well developed cloud. The dependence of r(e) on the adiabatic fraction decreased higher in the clouds, especially for cleaner conditions, and disappeared at r(e)>=similar to 10 mu m. We propose that droplet coalescence, which is at its peak when warm rain is formed in the cloud at r(e)=similar to 10 mu m, continues to be significant during the cloud's mixing with the entrained air, cancelling out the decrease in r(e) due to evaporation.

Robust STATCOM control for the stabilisation of fixed-speed wind turbines during low voltages

This paper presents a robust voltage control scheme for fixed-speed wind generators using a static synchronous compensator (STATCOM) controller. To enable a linear and robust control framework with structured uncertainty, the overall system is represented by a linear part plus a nonlinear part that covers an operating range of interest required to ensure stability during severe low voltages. The proposed methodology is flexible and readily applicable to larger wind farms of different configurations. The performance of the control strategy is demonstrated on a two area test system. Large disturbance simulations demonstrate that the proposed controller enhances voltage stability as well as transient stability of induction generators during low voltage ride through (LVRT) transients and thus enhances the LVRT capability. (C) 2011 Elsevier Ltd. All rights reserved.

Robust state prediction for descriptor systems

This paper deals with the problem of state prediction for descriptor systems subject to bounded uncertainties. The problem is stated in terms of the optimization of an appropriate quadratic functional. This functional is well suited to derive not only the robust predictor for descriptor systems but also that for usual state-space systems. Numerical examples are included in order to demonstrate the performance of this new filter. (C) 2008 Elsevier Ltd. All rights reserved.

Experimental investigation on adaptive robust controller designs applied to a free-floating space manipulator

This paper aims to formulate and investigate the application of various nonlinear H(infinity) control methods to a fiee-floating space manipulator subject to parametric uncertainties and external disturbances. From a tutorial perspective, a model-based approach and adaptive procedures based on linear parametrization, neural networks and fuzzy systems are covered by this work. A comparative study is conducted based on experimental implementations performed with an actual underactuated fixed-base planar manipulator which is, following the DEM concept, dynamically equivalent to a free-floating space manipulator. (C) 2011 Elsevier Ltd. All rights reserved.

Robust Control of Flight Simulator Motion Base

The purpose of this study is to apply robust inverse dynamics control for a six-degree-of-freedom flight simulator motion system. From an implementation viewpoint, simplification of the inverse dynamics control law is introduced by assuming control law matrices as constants. The robust control strategy is applied in the outer loop of the inverse dynamic control to counteract the effects of imperfect compensation due this simplification. The control strategy is designed using the Lyapunov stability theory. Forward and inverse kinematics and a full dynamic model of a six-degree-of-freedom motion base driven by electromechanical actuators are briefly presented. A describing function, acceleration step response and some maneuvers computed from the washout filter were used to evaluate the performance of the controllers.

Robust integration of real time optimization with linear model predictive control

Here, we study the stable integration of real time optimization (RTO) with model predictive control (MPC) in a three layer structure. The intermediate layer is a quadratic programming whose objective is to compute reachable targets to the MPC layer that lie at the minimum distance to the optimum set points that are produced by the RTO layer. The lower layer is an infinite horizon MPC with guaranteed stability with additional constraints that force the feasibility and convergence of the target calculation layer. It is also considered the case in which there is polytopic uncertainty in the steady state model considered in the target calculation. The dynamic part of the MPC model is also considered unknown but it is assumed to be represented by one of the models of a discrete set of models. The efficiency of the methods presented here is illustrated with the simulation of a low order system. (C) 2010 Elsevier Ltd. All rights reserved.

Robust model predictive controller with output feedback and target tracking

A model predictive controller (MPC) is proposed, which is robustly stable for some classes of model uncertainty and to unknown disturbances. It is considered as the case of open-loop stable systems, where only the inputs and controlled outputs are measured. It is assumed that the controller will work in a scenario where target tracking is also required. Here, it is extended to the nominal infinite horizon MPC with output feedback. The method considers an extended cost function that can be made globally convergent for any finite input horizon considered for the uncertain system. The method is based on the explicit inclusion of cost contracting constraints in the control problem. The controller considers the output feedback case through a non-minimal state-space model that is built using past output measurements and past input increments. The application of the robust output feedback MPC is illustrated through the simulation of a low-order multivariable system.

Robust model predictive control with zone control

Model predictive control (MPC) is usually implemented as a control strategy where the system outputs are controlled within specified zones, instead of fixed set points. One strategy to implement the zone control is by means of the selection of different weights for the output error in the control cost function. A disadvantage of this approach is that closed-loop stability cannot be guaranteed, as a different linear controller may be activated at each time step. A way to implement a stable zone control is by means of the use of an infinite horizon cost in which the set point is an additional variable of the control problem. In this case, the set point is restricted to remain inside the output zone and an appropriate output slack variable is included in the optimisation problem to assure the recursive feasibility of the control optimisation problem. Following this approach, a robust MPC is developed for the case of multi-model uncertainty of open-loop stable systems. The controller is devoted to maintain the outputs within their corresponding feasible zone, while reaching the desired optimal input target. Simulation of a process of the oil re. ning industry illustrates the performance of the proposed strategy.

Sampled Control for Mean-Variance Hedging in a Jump Diffusion Financial Market

In this technical note we consider the mean-variance hedging problem of a jump diffusion continuous state space financial model with the re-balancing strategies for the hedging portfolio taken at discrete times, a situation that more closely reflects real market conditions. A direct expression based on some change of measures, not depending on any recursions, is derived for the optimal hedging strategy as well as for the ""fair hedging price"" considering any given payoff. For the case of a European call option these expressions can be evaluated in a closed form.

Hemichordates and deuterostome evolution: robust molecular phylogenetic support for a hemichordate plus echinoderm clade

Hemichordates were traditionally allied to the chordates, but recent molecular analyses have suggested that hemichordates are a sister group to the echinoderms, a relationship that has important consequences for the interpretation of the evolution of deuterostome body plans. However, the molecular phylogenetic analyses to date have not provided robust support for the hemichordate + echinoderm clade. We use a maximum likelihood framework, including the parametric bootstrap, to reanalyze DNA data from complete mitochondrial genomes and nuclear 18S rRNA. This approach provides the first statistically significant support for the hemichordate + echinoderm clade from molecular data. This grouping implies that the ancestral deuterostome had features that included an adult with a pharynx and a dorsal nerve cord and an indirectly developing dipleurula-like larva.

Robust Mixture Modelling Using the t Distribution

Normal mixture models are being increasingly used to model the distributions of a wide variety of random phenomena and to cluster sets of continuous multivariate data. However, for a set of data containing a group or groups of observations with longer than normal tails or atypical observations, the use of normal components may unduly affect the fit of the mixture model. In this paper, we consider a more robust approach by modelling the data by a mixture of t distributions. The use of the ECM algorithm to fit this t mixture model is described and examples of its use are given in the context of clustering multivariate data in the presence of atypical observations in the form of background noise.

The HI Parkes All Sky Survey: southern observations, calibration and robust imaging

The acquisition of HI Parkes All Shy Survey (HIPASS) southern sky data commenced at the Australia Telescope National Facility's Parkes 64-m telescope in 1997 February, and was completed in 2000 March. HIPASS is the deepest HI survey yet of the sky south of declination +2 degrees, and is sensitive to emission out to 170 h(75)(-1) Mpc. The characteristic root mean square noise in the survey images is 13.3 mJy. This paper describes the survey observations, which comprise 23 020 eight-degree scans of 9-min duration, and details the techniques used to calibrate and image the data. The processing algorithms are successfully designed to be statistically robust to the presence of interference signals, and are particular to imaging point (or nearly point) sources. Specifically, a major improvement in image quality is obtained by designing a median-gridding algorithm which uses the median estimator in place of the mean estimator.