Modelling nonlinear stochastic dynamics in financial time series

For analysing financial time series two main opposing viewpoints exist, either capital markets are completely stochastic and therefore prices follow a random walk, or they are deterministic and consequently predictable. For each of these views a great variety of tools exist with which it can be tried to confirm the hypotheses. Unfortunately, these methods are not well suited for dealing with data characterised in part by both paradigms. This thesis investigates these two approaches in order to model the behaviour of financial time series. In the deterministic framework methods are used to characterise the dimensionality of embedded financial data. The stochastic approach includes here an estimation of the unconditioned and conditional return distributions using parametric, non- and semi-parametric density estimation techniques. Finally, it will be shown how elements from these two approaches could be combined to achieve a more realistic model for financial time series.

Analysis of magnetoencephaoographic data as a nonlinear dynamical system

This thesis presents the results from an investigation into the merits of analysing Magnetoencephalographic (MEG) data in the context of dynamical systems theory. MEG is the study of both the methods for the measurement of minute magnetic flux variations at the scalp, resulting from neuro-electric activity in the neocortex, as well as the techniques required to process and extract useful information from these measurements. As a result of its unique mode of action - by directly measuring neuronal activity via the resulting magnetic field fluctuations - MEG possesses a number of useful qualities which could potentially make it a powerful addition to any brain researcher's arsenal. Unfortunately, MEG research has so far failed to fulfil its early promise, being hindered in its progress by a variety of factors. Conventionally, the analysis of MEG has been dominated by the search for activity in certain spectral bands - the so-called alpha, delta, beta, etc that are commonly referred to in both academic and lay publications. Other efforts have centred upon generating optimal fits of "equivalent current dipoles" that best explain the observed field distribution. Many of these approaches carry the implicit assumption that the dynamics which result in the observed time series are linear. This is despite a variety of reasons which suggest that nonlinearity might be present in MEG recordings. By using methods that allow for nonlinear dynamics, the research described in this thesis avoids these restrictive linearity assumptions. A crucial concept underpinning this project is the belief that MEG recordings are mere observations of the evolution of the true underlying state, which is unobservable and is assumed to reflect some abstract brain cognitive state. Further, we maintain that it is unreasonable to expect these processes to be adequately described in the traditional way: as a linear sum of a large number of frequency generators. One of the main objectives of this thesis will be to prove that much more effective and powerful analysis of MEG can be achieved if one were to assume the presence of both linear and nonlinear characteristics from the outset. Our position is that the combined action of a relatively small number of these generators, coupled with external and dynamic noise sources, is more than sufficient to account for the complexity observed in the MEG recordings. Another problem that has plagued MEG researchers is the extremely low signal to noise ratios that are obtained. As the magnetic flux variations resulting from actual cortical processes can be extremely minute, the measuring devices used in MEG are, necessarily, extremely sensitive. The unfortunate side-effect of this is that even commonplace phenomena such as the earth's geomagnetic field can easily swamp signals of interest. This problem is commonly addressed by averaging over a large number of recordings. However, this has a number of notable drawbacks. In particular, it is difficult to synchronise high frequency activity which might be of interest, and often these signals will be cancelled out by the averaging process. Other problems that have been encountered are high costs and low portability of state-of-the- art multichannel machines. The result of this is that the use of MEG has, hitherto, been restricted to large institutions which are able to afford the high costs associated with the procurement and maintenance of these machines. In this project, we seek to address these issues by working almost exclusively with single channel, unaveraged MEG data. We demonstrate the applicability of a variety of methods originating from the fields of signal processing, dynamical systems, information theory and neural networks, to the analysis of MEG data. It is noteworthy that while modern signal processing tools such as independent component analysis, topographic maps and latent variable modelling have enjoyed extensive success in a variety of research areas from financial time series modelling to the analysis of sun spot activity, their use in MEG analysis has thus far been extremely limited. It is hoped that this work will help to remedy this oversight.

The nonlinear Shannon limit and the need for new fibres

This paper will review the current understanding of the so called nonlinear Shannon limit, and will speculate on methods to approach the limit through new system configurations, and increase the limit using new optical fibres. © 2012 Copyright Society of Photo-Optical Instrumentation Engineers (SPIE).

Fully probabilistic control for stochastic nonlinear control systems with input dependent noise

Robust controllers for nonlinear stochastic systems with functional uncertainties can be consistently designed using probabilistic control methods. In this paper a generalised probabilistic controller design for the minimisation of the Kullback-Leibler divergence between the actual joint probability density function (pdf) of the closed loop control system, and an ideal joint pdf is presented emphasising how the uncertainty can be systematically incorporated in the absence of reliable systems models. To achieve this objective all probabilistic models of the system are estimated from process data using mixture density networks (MDNs) where all the parameters of the estimated pdfs are taken to be state and control input dependent. Based on this dependency of the density parameters on the input values, explicit formulations to the construction of optimal generalised probabilistic controllers are obtained through the techniques of dynamic programming and adaptive critic methods. Using the proposed generalised probabilistic controller, the conditional joint pdfs can be made to follow the ideal ones. A simulation example is used to demonstrate the implementation of the algorithm and encouraging results are obtained.

Serum α-tocopherol has a nonlinear inverse association with periodontitis among US adults

Background: Previous experimental models suggest that vitamin E may ameliorate periodontitis. However, epidemiologic studies show inconsistent evidence in supporting this plausible association. Objective: We aimed to investigate the association between serum α-tocopherol (αT) and γ-tocopherol (γT) and periodontitis in a large cross-sectional US population. Methods: This study included 4708 participants in the 1999–2001 NHANES. Serum tocopherols were measured by HPLC and values were adjusted by total cholesterol (TC). Periodontal status was assessed by mean clinical attachment loss (CAL) and probing pocket depth (PPD). Total periodontitis (TPD) was defined as the sum of mild, moderate, and severe periodontitis. All measurements were performed by NHANES. Results: Means ± SDs of serum αT:TC ratio from low to high quartiles were 4.0 ± 0.4, 4.8 ± 0.2, 5.7 ± 0.4, and 9.1 ± 2.7 μmol/mmol. In multivariate regression models, αT:TC quartiles were inversely associated with mean CAL (P-trend = 0.06), mean PPD (P-trend < 0.001), and TPD (P-trend < 0.001) overall. Adjusted mean differences (95% CIs) between the first and fourth quartile of αT:TC were 0.12 mm (0.03, 0.20; P-difference = 0.005) for mean CAL and 0.12 mm (0.06, 0.17; P < 0.001) for mean PPD, whereas corresponding OR for TPD was 1.65 (95% CI: 1.26, 2.16; P-difference = 0.001). In a dose-response analysis, a clear inverse association between αT:TC and mean CAL, mean PPD, and TPD was observed among participants with relatively low αT:TC. No differences were seen in participants with higher αT:TC ratios. Participants with γT:TC ratio in the interquartile range showed a significantly lower mean PPD than those in the highest quartile. Conclusions: A nonlinear inverse association was observed between serum αT and severity of periodontitis, which was restricted to adults with normal but relatively low αT status. These findings warrant further confirmation in longitudinal or intervention settings.

Nonlinear inverse synthesis for high spectral efficiency transmission in optical fibers

In linear communication channels, spectral components (modes) defined by the Fourier transform of the signal propagate without interactions with each other. In certain nonlinear channels, such as the one modelled by the classical nonlinear Schrödinger equation, there are nonlinear modes (nonlinear signal spectrum) that also propagate without interacting with each other and without corresponding nonlinear cross talk, effectively, in a linear manner. Here, we describe in a constructive way how to introduce such nonlinear modes for a given input signal. We investigate the performance of the nonlinear inverse synthesis (NIS) method, in which the information is encoded directly onto the continuous part of the nonlinear signal spectrum. This transmission technique, combined with the appropriate distributed Raman amplification, can provide an effective eigenvalue division multiplexing with high spectral efficiency, thanks to highly suppressed channel cross talk. The proposed NIS approach can be integrated with any modulation formats. Here, we demonstrate numerically the feasibility of merging the NIS technique in a burst mode with high spectral efficiency methods, such as orthogonal frequency division multiplexing and Nyquist pulse shaping with advanced modulation formats (e.g., QPSK, 16QAM, and 64QAM), showing a performance improvement up to 4.5 dB, which is comparable to results achievable with multi-step per span digital back propagation.

Application of Artificial Intelligence Methods to Computer Design of Inorganic Compounds

In this paper the main problems for computer design of materials, which would have predefined properties, with the use of artificial intelligence methods are presented. The DB on inorganic compound properties and the system of DBs on materials for electronics with completely assessed information: phase diagram DB of material systems with semiconducting phases and DB on acousto-optical, electro-optical, and nonlinear optical properties are considered. These DBs are a source of information for data analysis. Using the DBs and artificial intelligence methods we have predicted thousands of new compounds in ternary, quaternary and more complicated chemical systems and estimated some of their properties (crystal structure type, melting point, homogeneity region etc.). The comparison of our predictions with experimental data, obtained later, showed that the average reliability of predicted inorganic compounds exceeds 80%. The perspectives of computational material design with the use of artificial intelligence methods are considered.

Stochastic control strategies and adaptive critic methods

Adaptive critic methods have common roots as generalizations of dynamic programming for neural reinforcement learning approaches. Since they approximate the dynamic programming solutions, they are potentially suitable for learning in noisy, nonlinear and nonstationary environments. In this study, a novel probabilistic dual heuristic programming (DHP) based adaptive critic controller is proposed. Distinct to current approaches, the proposed probabilistic (DHP) adaptive critic method takes uncertainties of forward model and inverse controller into consideration. Therefore, it is suitable for deterministic and stochastic control problems characterized by functional uncertainty. Theoretical development of the proposed method is validated by analytically evaluating the correct value of the cost function which satisfies the Bellman equation in a linear quadratic control problem. The target value of the critic network is then calculated and shown to be equal to the analytically derived correct value.

A mixture density network approach to modelling and exploiting uncertainty in nonlinear control problems

In nonlinear and stochastic control problems, learning an efficient feed-forward controller is not amenable to conventional neurocontrol methods. For these approaches, estimating and then incorporating uncertainty in the controller and feed-forward models can produce more robust control results. Here, we introduce a novel inversion-based neurocontroller for solving control problems involving uncertain nonlinear systems which could also compensate for multi-valued systems. The approach uses recent developments in neural networks, especially in the context of modelling statistical distributions, which are applied to forward and inverse plant models. Provided that certain conditions are met, an estimate of the intrinsic uncertainty for the outputs of neural networks can be obtained using the statistical properties of networks. More generally, multicomponent distributions can be modelled by the mixture density network. Based on importance sampling from these distributions a novel robust inverse control approach is obtained. This importance sampling provides a structured and principled approach to constrain the complexity of the search space for the ideal control law. The developed methodology circumvents the dynamic programming problem by using the predicted neural network uncertainty to localise the possible control solutions to consider. A nonlinear multi-variable system with different delays between the input-output pairs is used to demonstrate the successful application of the developed control algorithm. The proposed method is suitable for redundant control systems and allows us to model strongly non-Gaussian distributions of control signal as well as processes with hysteresis. © 2004 Elsevier Ltd. All rights reserved.

Nonlinear Waves: An Introduction

This book deals with equations of mathematical physics as the different modifications of the KdV equation, the Camassa-Holm type equations, several modifications of Burger's equation, the Hunter-Saxton equation, conservation laws equations and others. The equations originate from physics but are proposed here for their investigation via purely mathematical methods in the frames of university courses. More precisely, we propose classification theorems for the traveling wave solutions for a sufficiently large class of third order nonlinear PDE when the corresponding profiles develop different kind of singularities (cusps, peaks), existence and uniqueness results, etc. The orbital stability of the periodic solutions of traveling type for mKdV equations are also studied. Of great interest too is the interaction of peakon type solutions of the Camassa-Holm equation and the solvability of the classical and generalized Cauchy problem for the Hunter-Saxton equation. The Riemann problem for special systems of conservation laws and the corresponding -shocks are also considered. As it concerns numerical methods we apply the CNN approach. The book is addressed to a broader audience including graduate students, Ph.D. students, mathematicians, physicist, engineers and specialists in the domain of PDE.

An efficient, approximate path-following algorithm for elastic net based nonlinear spike enhancement

Unwanted spike noise in a digital signal is a common problem in digital filtering. However, sometimes the spikes are wanted and other, superimposed, signals are unwanted, and linear, time invariant (LTI) filtering is ineffective because the spikes are wideband - overlapping with independent noise in the frequency domain. So, no LTI filter can separate them, necessitating nonlinear filtering. However, there are applications in which the noise includes drift or smooth signals for which LTI filters are ideal. We describe a nonlinear filter formulated as the solution to an elastic net regularization problem, which attenuates band-limited signals and independent noise, while enhancing superimposed spikes. Making use of known analytic solutions a novel, approximate path-following algorithm is given that provides a good, filtered output with reduced computational effort by comparison to standard convex optimization methods. Accurate performance is shown on real, noisy electrophysiological recordings of neural spikes.

Steffensen Methods for Solving Generalized Equations

2000 Mathematics Subject Classification: 65G99, 65K10, 47H04.

Eigenvalue communications in nonlinear fiber channels

Continuous progress in optical communication technology and corresponding increasing data rates in core fiber communication systems are stimulated by the evergrowing capacity demand due to constantly emerging new bandwidth-hungry services like cloud computing, ultra-high-definition video streams, etc. This demand is pushing the required capacity of optical communication lines close to the theoretical limit of a standard single-mode fiber, which is imposed by Kerr nonlinearity [1–4]. In recent years, there have been extensive efforts in mitigating the detrimental impact of fiber nonlinearity on signal transmission, through various compensation techniques. However, there are still many challenges in applying these methods, because a majority of technologies utilized in the inherently nonlinear fiber communication systems had been originally developed for linear communication channels. Thereby, the application of ”linear techniques” in a fiber communication systems is inevitably limited by the nonlinear properties of the fiber medium. The quest for the optimal design of a nonlinear transmission channels, development of nonlinear communication technqiues and the usage of nonlinearity in a“constructive” way have occupied researchers for quite a long time.

Channel model and lower capacity bound for the transmission based on nonlinear Fourier transform

The integrability of the nonlinear Schräodinger equation (NLSE) by the inverse scattering transform shown in a seminal work [1] gave an interesting opportunity to treat the corresponding nonlinear channel similar to a linear one by using the nonlinear Fourier transform. Integrability of the NLSE is in the background of the old idea of eigenvalue communications [2] that was resurrected in recent works [3{7]. In [6, 7] the new method for the coherent optical transmission employing the continuous nonlinear spectral data | nonlinear inverse synthesis was introduced. It assumes the modulation and detection of data using directly the continuous part of nonlinear spectrum associated with an integrable transmission channel (the NLSE in the case considered). Although such a transmission method is inherently free from nonlinear impairments, the noisy signal corruptions, arising due to the ampli¯er spontaneous emission, inevitably degrade the optical system performance. We study properties of the noise-corrupted channel model in the nonlinear spectral domain attributed to NLSE. We derive the general stochastic equations governing the signal evolution inside the nonlinear spectral domain and elucidate the properties of the emerging nonlinear spectral noise using well-established methods of perturbation theory based on inverse scattering transform [8]. It is shown that in the presence of small noise the communication channel in the nonlinear domain is the additive Gaussian channel with memory and signal-dependent correlation matrix. We demonstrate that the effective spectral noise acquires colouring", its autocorrelation function becomes slow decaying and non-diagonal as a function of \frequencies", and the noise loses its circular symmetry, becoming elliptically polarized. Then we derive a low bound for the spectral effiency for such a channel. Our main result is that by using the nonlinear spectral techniques one can significantly increase the achievable spectral effiency compared to the currently available methods [9]. REFERENCES 1. Zakharov, V. E. and A. B. Shabat, Sov. Phys. JETP, Vol. 34, 62{69, 1972. 2. Hasegawa, A. and T. Nyu, J. Lightwave Technol., Vol. 11, 395{399, 1993. 3. Yousefi, M. I. and F. R. Kschischang, IEEE Trans. Inf. Theory, Vol. 60, 4312{4328, 2014. 4. Yousefi, M. I. and F. R. Kschischang, IEEE Trans. Inf. Theory, Vol. 60, 4329{4345 2014. 5. Yousefi, M. I. and F. R. Kschischang, IEEE Trans. Inf. Theory, Vol. 60, 4346{4369, 2014. 6. Prilepsky, J. E., S. A. Derevyanko, K. J. Blow, I. Gabitov, and S. K. Turitsyn, Phys. Rev. Lett., Vol. 113, 013901, 2014. 7. Le, S. T., J. E. Prilepsky, and S. K. Turitsyn, Opt. Express, Vol. 22, 26720{26741, 2014. 8. Kaup, D. J. and A. C. Newell, Proc. R. Soc. Lond. A, Vol. 361, 413{446, 1978. 9. Essiambre, R.-J., G. Kramer, P. J. Winzer, G. J. Foschini, and B. Goebel, J. Lightwave Technol., Vol. 28, 662{701, 2010.

Demonstration of nonlinear inverse synthesis transmission over transoceanic distances

Nonlinear Fourier transform (NFT) and eigenvalue communication with the use of nonlinear signal spectrum (both discrete and continuous), have been recently discussed as promising transmission methods to combat fiber nonlinearity impairments. In this paper, for the first time, we demonstrate the generation, detection and transmission performance over transoceanic distances of 10 Gbaud and nonlinear inverse synthesis (NIS) based signal (4 Gb/s line rate), in which the transmitted information is encoded directly onto the continuous part of the signal nonlinear spectrum. By applying effective digital signal processing techniques, a reach of 7344 km was achieved with a bit-error-rate (BER) (2.1×10-2) below the 20% FEC threshold. This represents an improvement by a factor of ~12 in data capacity x distance product compared with other previously demonstrated NFT-based systems, showing a significant advance in the active research area of NFT-based communication systems.