Interactive Distributed Source Coding in Asymmetric Communication Scenarios

We provide a new unified framework, called "multiple correlated informants - single recipient" communication, to address the variations of the traditional Distributed Source Coding (DSC) problem. Different combinations of the assumptions about the communication scenarios and the objectives of communication result in different variations of the DSC problem. For each of these variations, the complexities of communication and computation of the optimal solution is determined by the combination of the underlying assumptions. In the proposed framework, we address the asymmetric, interactive, and lossless variant of the DSC problem, with various objectives of communication and provide optimal solutions for those. Also, we consider both, the worst-case and average-case scenarios.

OFDM Based Distributed Space Time Coding for Asynchronous Relay Networks

Recently Li and Xia have proposed a transmission scheme for wireless relay networks based on the Alamouti space time code and orthogonal frequency division multiplexing to combat the effect of timing errors at the relay nodes. This transmission scheme is amazingly simple and achieves a diversity order of two for any number of relays. Motivated by its simplicity, this scheme is extended to a more general transmission scheme that can achieve full cooperative diversity for any number of relays. The conditions on the distributed space time block code (DSTBC) structure that admit its application in the proposed transmission scheme are identified and it is pointed out that the recently proposed full diversity four group decodable DST-BCs from precoded co-ordinate interleaved orthogonal designs and extended Clifford algebras satisfy these conditions. It is then shown how differential encoding at the source can be combined with the proposed transmission scheme to arrive at a new transmission scheme that can achieve full cooperative diversity in asynchronous wireless relay networks with no channel information and also no timing error knowledge at the destination node. Finally, four group decodable distributed differential space time block codes applicable in this new transmission scheme for power of two number of relays are also provided.

Uplink Power Control and Base Station Association in Multichannel Cellular Networks

A combined base station association and power control problem is studied for the uplink of multichannel multicell cellular networks, in which each channel is used by exactly one cell (i.e., base station). A distributed association and power update algorithm is proposed and shown to converge to a Nash equilibrium of a noncooperative game. We consider network models with discrete mobiles (yielding an atomic congestion game), as well as a continuum of mobiles (yielding a population game). We find that the equilibria need not be Pareto efficient, nor need they be system optimal. To address the lack of system optimality, we propose pricing mechanisms. It is shown that these mechanisms can be implemented in a distributed fashion.

Time and Energy Complexity of Distributed Computation of a Class of Functions in Wireless Sensor Networks

We consider a scenario in which a wireless sensor network is formed by randomly deploying n sensors to measure some spatial function over a field, with the objective of computing a function of the measurements and communicating it to an operator station. We restrict ourselves to the class of type-threshold functions (as defined in the work of Giridhar and Kumar, 2005), of which max, min, and indicator functions are important examples: our discussions are couched in terms of the max function. We view the problem as one of message-passing distributed computation over a geometric random graph. The network is assumed to be synchronous, and the sensors synchronously measure values and then collaborate to compute and deliver the function computed with these values to the operator station. Computation algorithms differ in (1) the communication topology assumed and (2) the messages that the nodes need to exchange in order to carry out the computation. The focus of our paper is to establish (in probability) scaling laws for the time and energy complexity of the distributed function computation over random wireless networks, under the assumption of centralized contention-free scheduling of packet transmissions. First, without any constraint on the computation algorithm, we establish scaling laws for the computation time and energy expenditure for one-time maximum computation. We show that for an optimal algorithm, the computation time and energy expenditure scale, respectively, as Theta(radicn/log n) and Theta(n) asymptotically as the number of sensors n rarr infin. Second, we analyze the performance of three specific computation algorithms that may be used in specific practical situations, namely, the tree algorithm, multihop transmission, and the Ripple algorithm (a type of gossip algorithm), and obtain scaling laws for the computation time and energy expenditure as n rarr infin. In particular, we show that the computation time for these algorithms scales as Theta(radicn/lo- g n), Theta(n), and Theta(radicn log n), respectively, whereas the energy expended scales as , Theta(n), Theta(radicn/log n), and Theta(radicn log n), respectively. Finally, simulation results are provided to show that our analysis indeed captures the correct scaling. The simulations also yield estimates of the constant multipliers in the scaling laws. Our analyses throughout assume a centralized optimal scheduler, and hence, our results can be viewed as providing bounds for the performance with practical distributed schedulers.

Collecting data from distributed FOSS projects

A key trait of Free and Open Source Software (FOSS) development is its distributed nature. Nevertheless, two project-level operations, the fork and the merge of program code, are among the least well understood events in the lifespan of a FOSS project. Some projects have explicitly adopted these operations as the primary means of concurrent development. In this study, we examine the effect of highly distributed software development, is found in the Linux kernel project, on collection and modelling of software development data. We find that distributed development calls for sophisticated temporal modelling techniques where several versions of the source code tree can exist at once. Attention must be turned towards the methods of quality assurance and peer review that projects employ to manage these parallel source trees. Our analysis indicates that two new metrics, fork rate and merge rate, could be useful for determining the role of distributed version control systems in FOSS projects. The study presents a preliminary data set consisting of version control and mailing list data.

Collecting data from distributed FOSS projects

A key trait of Free and Open Source Software (FOSS) development is its distributed nature. Nevertheless, two project-level operations, the fork and the merge of program code, are among the least well understood events in the lifespan of a FOSS project. Some projects have explicitly adopted these operations as the primary means of concurrent development. In this study, we examine the effect of highly distributed software development, is found in the Linux kernel project, on collection and modelling of software development data. We find that distributed development calls for sophisticated temporal modelling techniques where several versions of the source code tree can exist at once. Attention must be turned towards the methods of quality assurance and peer review that projects employ to manage these parallel source trees. Our analysis indicates that two new metrics, fork rate and merge rate, could be useful for determining the role of distributed version control systems in FOSS projects. The study presents a preliminary data set consisting of version control and mailing list data.

Application of D transforms in the analysis of nonlinear distributed parameter systems

The scope of application of Laplace transforms presently limited to the study of linear partial differential equations, is extended to the nonlinear domain by this study. This has been achieved by modifying the definition of D transforms, put forth recently for the study of classes of nonlinear lumped parameter systems. The appropriate properties of the new D transforms are presented to bring out their applicability in the analysis of nonlinear distributed parameter systems.

Equivalence conditions for classes of linear and non-linear distributed parameter systems

Equivalence of certain classes of second-order non-linear distributed parameter systems and corresponding linear third-order systems is established through a differential transformation technique. As linear systems are amenable to analysis through existing techniques, this study is expected to offer a method of tackling certain classes of non-linear problems which may otherwise prove to be formidable in nature.

Modeling and Forecasting Implied Volatility: Implications for Trading, Pricing, and Risk Management

Modeling and forecasting of implied volatility (IV) is important to both practitioners and academics, especially in trading, pricing, hedging, and risk management activities, all of which require an accurate volatility. However, it has become challenging since the 1987 stock market crash, as implied volatilities (IVs) recovered from stock index options present two patterns: volatility smirk(skew) and volatility term-structure, if the two are examined at the same time, presents a rich implied volatility surface (IVS). This implies that the assumptions behind the Black-Scholes (1973) model do not hold empirically, as asset prices are mostly influenced by many underlying risk factors. This thesis, consists of four essays, is modeling and forecasting implied volatility in the presence of options markets’ empirical regularities. The first essay is modeling the dynamics IVS, it extends the Dumas, Fleming and Whaley (DFW) (1998) framework; for instance, using moneyness in the implied forward price and OTM put-call options on the FTSE100 index, a nonlinear optimization is used to estimate different models and thereby produce rich, smooth IVSs. Here, the constant-volatility model fails to explain the variations in the rich IVS. Next, it is found that three factors can explain about 69-88% of the variance in the IVS. Of this, on average, 56% is explained by the level factor, 15% by the term-structure factor, and the additional 7% by the jump-fear factor. The second essay proposes a quantile regression model for modeling contemporaneous asymmetric return-volatility relationship, which is the generalization of Hibbert et al. (2008) model. The results show strong negative asymmetric return-volatility relationship at various quantiles of IV distributions, it is monotonically increasing when moving from the median quantile to the uppermost quantile (i.e., 95%); therefore, OLS underestimates this relationship at upper quantiles. Additionally, the asymmetric relationship is more pronounced with the smirk (skew) adjusted volatility index measure in comparison to the old volatility index measure. Nonetheless, the volatility indices are ranked in terms of asymmetric volatility as follows: VIX, VSTOXX, VDAX, and VXN. The third essay examines the information content of the new-VDAX volatility index to forecast daily Value-at-Risk (VaR) estimates and compares its VaR forecasts with the forecasts of the Filtered Historical Simulation and RiskMetrics. All daily VaR models are then backtested from 1992-2009 using unconditional, independence, conditional coverage, and quadratic-score tests. It is found that the VDAX subsumes almost all information required for the volatility of daily VaR forecasts for a portfolio of the DAX30 index; implied-VaR models outperform all other VaR models. The fourth essay models the risk factors driving the swaption IVs. It is found that three factors can explain 94-97% of the variation in each of the EUR, USD, and GBP swaption IVs. There are significant linkages across factors, and bi-directional causality is at work between the factors implied by EUR and USD swaption IVs. Furthermore, the factors implied by EUR and USD IVs respond to each others’ shocks; however, surprisingly, GBP does not affect them. Second, the string market model calibration results show it can efficiently reproduce (or forecast) the volatility surface for each of the swaptions markets.

Conditional Moments in Asset Pricing

A better understanding of stock price changes is important in guiding many economic activities. Since prices often do not change without good reasons, searching for related explanatory variables has involved many enthusiasts. This book seeks answers from prices per se by relating price changes to their conditional moments. This is based on the belief that prices are the products of a complex psychological and economic process and their conditional moments derive ultimately from these psychological and economic shocks. Utilizing information about conditional moments hence makes it an attractive alternative to using other selective financial variables in explaining price changes. The first paper examines the relation between the conditional mean and the conditional variance using information about moments in three types of conditional distributions; it finds that the significance of the estimated mean and variance ratio can be affected by the assumed distributions and the time variations in skewness. The second paper decomposes the conditional industry volatility into a concurrent market component and an industry specific component; it finds that market volatility is on average responsible for a rather small share of total industry volatility — 6 to 9 percent in UK and 2 to 3 percent in Germany. The third paper looks at the heteroskedasticity in stock returns through an ARCH process supplemented with a set of conditioning information variables; it finds that the heteroskedasticity in stock returns allows for several forms of heteroskedasticity that include deterministic changes in variances due to seasonal factors, random adjustments in variances due to market and macro factors, and ARCH processes with past information. The fourth paper examines the role of higher moments — especially skewness and kurtosis — in determining the expected returns; it finds that total skewness and total kurtosis are more relevant non-beta risk measures and that they are costly to be diversified due either to the possible eliminations of their desirable parts or to the unsustainability of diversification strategies based on them.

Modeling Nonlinearities and Asymmetries in Asset Pricing

Financial time series tend to behave in a manner that is not directly drawn from a normal distribution. Asymmetries and nonlinearities are usually seen and these characteristics need to be taken into account. To make forecasts and predictions of future return and risk is rather complicated. The existing models for predicting risk are of help to a certain degree, but the complexity in financial time series data makes it difficult. The introduction of nonlinearities and asymmetries for the purpose of better models and forecasts regarding both mean and variance is supported by the essays in this dissertation. Linear and nonlinear models are consequently introduced in this dissertation. The advantages of nonlinear models are that they can take into account asymmetries. Asymmetric patterns usually mean that large negative returns appear more often than positive returns of the same magnitude. This goes hand in hand with the fact that negative returns are associated with higher risk than in the case where positive returns of the same magnitude are observed. The reason why these models are of high importance lies in the ability to make the best possible estimations and predictions of future returns and for predicting risk.

New Evidence on the Properties of the Financial Statement Information Pricing Process

This study contributes to our knowledge of how information contained in financial statements is interpreted and priced by the stock market in two aspects. First, the empirical findings indicate that investors interpret some of the information contained in new financial statements in the context of the information of prior financial statements. Second, two central hypotheses offered in earlier literature to explain the significant connection between publicly available financial statement information and future abnormal returns, that the signals proxy for risk and that the information is priced with a delay, are evaluated utilizing a new methodology. It is found that the mentioned significant connection for some financial statement signals can be explained by that the signals proxy for risk and for other financial statement signals by that the information contained in the signals is priced with a delay.

Hedging Options with Different Time Units in the Pricing Models

This study examined the effects of the Greeks of the options and the trading results of delta hedging strategies, with three different time units or option-pricing models. These time units were calendar time, trading time and continuous time using discrete approximation (CTDA) time. The CTDA time model is a pricing model, that among others accounts for intraday and weekend, patterns in volatility. For the CTDA time model some additional theta measures, which were believed to be usable in trading, were developed. The study appears to verify that there were differences in the Greeks with different time units. It also revealed that these differences influence the delta hedging of options or portfolios. Although it is difficult to say anything about which is the most usable of the different time models, as this much depends on the traders view of the passing of time, different market conditions and different portfolios, the CTDA time model can be viewed as an attractive alternative.

The Day of the Week Effect and Option Pricing - A Study of the German Option Market

The use of different time units in option pricing may lead to inconsistent estimates of time decay and spurious jumps in implied volatilities. Different time units in the pricing model leads to different implied volatilities although the option price itself is the same.The chosen time unit should make it necessary to adjust the volatility parameter only when there are some fundamental reasons for it and not due to wrong specifications of the model. This paper examined the effects of option pricing using different time hypotheses and empirically investigated which time frame the option markets in Germany employ over weekdays. The paper specifically tries to get a picture of how the market prices options. The results seem to verify that the German market behaves in a fashion that deviates from the most traditional time units in option pricing, calendar and trading days. The study also showed that the implied volatility of Thursdays was somewhat higher and thus differed from the pattern of other days of the week. Using a GARCH model to further investigate the effect showed that although a traditional tests, like the analysis of variance, indicated a negative return for Thursday during the same period as the implied volatilities used, this was not supported using a GARCH model.

Technology-related peso problems in stock returns

Although empirical evidence suggests the contrary, many asset pricing models assume stock returns to be symmetrically distributed. In this paper it is argued that the occurrence of negative jumps in a firm's future earnings and, consequently, in its stock price, is positively related to the level of network externalities in the firm's product market. If the ex post frequency of these negative jumps in a sample does not equal the ex ante assessed probability of occurrence, the sample is subject to a peso problem. The hypothesis is tested for by regressing the skewness coefficient of a firm’s realised stock return distribution on the firm’s R&D intensity, i.e. the ratio of the firm’s research and development expenditure to its net sales. The empirical results support the technology-related peso problem hypothesis. In samples subject to such a peso problem, the returns are biased up and the variance is biased down.