Multivariate FIAPARCH modelling of financial markets with dynamic correlations in times of crisis

This paper applies the vector AR-DCC-FIAPARCH model to eight national stock market indices' daily returns from 1988 to 2010, taking into account the structural breaks of each time series linked to the Asian and the recent Global financial crisis. We find significant cross effects, as well as long range volatility dependence, asymmetric volatility response to positive and negative shocks, and the power of returns that best fits the volatility pattern. One of the main findings of the model analysis is the higher dynamic correlations of the stock markets after a crisis event, which means increased contagion effects between the markets. The fact that during the crisis the conditional correlations remain on a high level indicates a continuous herding behaviour during these periods of increased market volatility. Finally, during the recent Global financial crisis the correlations remain on a much higher level than during the Asian financial crisis.

Modelling stock volatilities during financial crises:a time varying coefficient approach

We examine how the most prevalent stochastic properties of key financial time series have been affected during the recent financial crises. In particular we focus on changes associated with the remarkable economic events of the last two decades in the volatility dynamics, including the underlying volatility persistence and volatility spillover structure. Using daily data from several key stock market indices, the results of our bivariate GARCH models show the existence of time varying correlations as well as time varying shock and volatility spillovers between the returns of FTSE and DAX, and those of NIKKEI and Hang Seng, which became more prominent during the recent financial crisis. Our theoretical considerations on the time varying model which provides the platform upon which we integrate our multifaceted empirical approaches are also of independent interest. In particular, we provide the general solution for time varying asymmetric GARCH specifications, which is a long standing research topic. This enables us to characterize these models by deriving, first, their multistep ahead predictors, second, the first two time varying unconditional moments, and third, their covariance structure.

How much is corporate cash-pooling worth? Modelling and simulation

The paper analyzes a special corporate banking product, the so called cash-pool, which gained remarkable popularity in the recent years as firms try to centralize and manage their liquidity more efficiently. The novelty of this paper is the formalization of a valuation model which can serve as a basis for a Monte Carlo simulation to assess the most important benefits of the firms arising from the pooling of their cash holdings. The literature emphasizes several benefits of cash-pooling such as interest rate savings, economy of scale and reduced cash-flow volatility. The presented model focuses on the interest rate savings complemented with a new aspect: the reduced counterparty risk toward the bank. The main conclusion of the analysis is that the value of a cash-pool is higher in case of firms with large, diverse and volatile cash-flows having less access to the capital markets especially if the partner bank is risky and offers a high interest spread. It is also shown that cash-pooling is not the privilege of large multinational firms any more as the initial direct costs can be easily regained within a year even in the case of SMEs.

Cascade hydropower capacity increase profitability analysis with optimisation modelling

The electricity market and climate are both undergoing a change. The changes impact hydropower and provoke an interest for hydropower capacity increases. In this thesis a new methodology was developed utilising short-term hydropower optimisation and planning software for better capacity increase profitability analysis accuracy. In the methodology income increases are calculated in month long periods while varying average discharge and electricity price volatility. The monthly incomes are used for constructing year scenarios, and from different types of year scenarios a long-term profitability analysis can be made. Average price development is included utilising a multiplier. The method was applied on Oulujoki hydropower plants. It was found that the capacity additions that were analysed for Oulujoki were not profitable. However, the methodology was found versatile and useful. The result showed that short periods of peaking prices play major role in the profitability of capacity increases. Adding more discharge capacity to hydropower plants that initially bypassed water more often showed the best improvements both in income and power generation profile flexibility.

Volatility Spillover and Multivariate Volatility Impulse Response Analysis of GFC News Events

This paper applies two measures to assess spillovers across markets: the Diebold Yilmaz (2012) Spillover Index and the Hafner and Herwartz (2006) analysis of multivariate GARCH models using volatility impulse response analysis. We use two sets of data, daily realized volatility estimates taken from the Oxford Man RV library, running from the beginning of 2000 to October 2016, for the S&P500 and the FTSE, plus ten years of daily returns series for the New York Stock Exchange Index and the FTSE 100 index, from 3 January 2005 to 31 January 2015. Both data sets capture both the Global Financial Crisis (GFC) and the subsequent European Sovereign Debt Crisis (ESDC). The spillover index captures the transmission of volatility to and from markets, plus net spillovers. The key difference between the measures is that the spillover index captures an average of spillovers over a period, whilst volatility impulse responses (VIRF) have to be calibrated to conditional volatility estimated at a particular point in time. The VIRF provide information about the impact of independent shocks on volatility. In the latter analysis, we explore the impact of three different shocks, the onset of the GFC, which we date as 9 August 2007 (GFC1). It took a year for the financial crisis to come to a head, but it did so on 15 September 2008, (GFC2). The third shock is 9 May 2010. Our modelling includes leverage and asymmetric effects undertaken in the context of a multivariate GARCH model, which are then analysed using both BEKK and diagonal BEKK (DBEKK) models. A key result is that the impact of negative shocks is larger, in terms of the effects on variances and covariances, but shorter in duration, in this case a difference between three and six months.

The Basic Reproduction Number Obtained From Jacobian And Next Generation Matrices - A Case Study Of Dengue Transmission Modelling.

The basic reproduction number is a key parameter in mathematical modelling of transmissible diseases. From the stability analysis of the disease free equilibrium, by applying Routh-Hurwitz criteria, a threshold is obtained, which is called the basic reproduction number. However, the application of spectral radius theory on the next generation matrix provides a different expression for the basic reproduction number, that is, the square root of the previously found formula. If the spectral radius of the next generation matrix is defined as the geometric mean of partial reproduction numbers, however the product of these partial numbers is the basic reproduction number, then both methods provide the same expression. In order to show this statement, dengue transmission modelling incorporating or not the transovarian transmission is considered as a case study. Also tuberculosis transmission and sexually transmitted infection modellings are taken as further examples.

Importance of considering a material micro-failure criterion in the numerical modelling of the shot peening process applied to parabolic leaf springs

Shot peening is a cold-working mechanical process in which a shot stream is propelled against a component surface. Its purpose is to introduce compressive residual stresses on component surfaces for increasing the fatigue resistance. This process is widely applied in springs due to the cyclical loads requirements. This paper presents a numerical modelling of shot peening process using the finite element method. The results are compared with experimental measurements of the residual stresses, obtained by the X-rays diffraction technique, in leaf springs submitted to this process. Furthermore, the results are compared with empirical and numerical correlations developed by other authors.

A contribution for thermoeconomic modelling: A methodology proposal

This work presents a thermoeconomic optimization methodology for the analysis and design of energy systems. This methodology involves economic aspects related to the exergy conception, in order to develop a tool to assist the equipment selection, operation mode choice as well as to optimize the thermal plants design. It also presents the concepts related to exergy in a general scope and in thermoeconomics which combines the thermal sciences principles (thermodynamics, heat transfer, and fluid mechanics) and the economic engineering in order to rationalize energy systems investment decisions, development and operation. Even in this paper, it develops a thermoeconomic methodology through the use of a simple mathematical model, involving thermodynamics parameters and costs evaluation, also defining the objective function as the exergetic production cost. The optimization problem evaluation is developed for two energy systems. First is applied to a steam compression refrigeration system and then to a cogeneration system using backpressure steam turbine. (C) 2010 Elsevier Ltd. All rights reserved.

Thermal error evaluation and modelling of a CNC cylindrical grinding machine

With the relentless quest for improved performance driving ever tighter tolerances for manufacturing, machine tools are sometimes unable to meet the desired requirements. One option to improve the tolerances of machine tools is to compensate for their errors. Among all possible sources of machine tool error, thermally induced errors are, in general for newer machines, the most important. The present work demonstrates the evaluation and modelling of the behaviour of the thermal errors of a CNC cylindrical grinding machine during its warm-up period.

Performance of the Equivalent Reservoir Modelling Technique for Multi-Reservoir Hydropower Systems

This paper investigates the validity of a simplified equivalent reservoir representation of a multi-reservoir hydroelectric system for modelling its optimal operation for power maximization. This simplification, proposed by Arvanitidis and Rosing (IEEE Trans Power Appar Syst 89(2):319-325, 1970), imputes a potential energy equivalent reservoir with energy inflows and outflows. The hydroelectric system is also modelled for power maximization considering individual reservoir characteristics without simplifications. Both optimization models employed MINOS package for solution of the non-linear programming problems. A comparison between total optimized power generation over the planning horizon by the two methods shows that the equivalent reservoir is capable of producing satisfactory power estimates with less than 6% underestimation. The generation and total reservoir storage trajectories along the planning horizon obtained by equivalent reservoir method, however, presented significant discrepancies as compared to those found in the detailed modelling. This study is motivated by the fact that Brazilian generation system operations are based on the equivalent reservoir method as part of the power dispatch procedures. The potential energy equivalent reservoir is an alternative which eliminates problems with the dimensionality of state variables in a dynamic programming model.

A reference business process for ecological niche modelling

Ecological niche modelling combines species occurrence points with environmental raster layers in order to obtain models for describing the probabilistic distribution of species. The process to generate an ecological niche model is complex. It requires dealing with a large amount of data, use of different software packages for data conversion, for model generation and for different types of processing and analyses, among other functionalities. A software platform that integrates all requirements under a single and seamless interface would be very helpful for users. Furthermore, since biodiversity modelling is constantly evolving, new requirements are constantly being added in terms of functions, algorithms and data formats. This evolution must be accompanied by any software intended to be used in this area. In this scenario, a Service-Oriented Architecture (SOA) is an appropriate choice for designing such systems. According to SOA best practices and methodologies, the design of a reference business process must be performed prior to the architecture definition. The purpose is to understand the complexities of the process (business process in this context refers to the ecological niche modelling problem) and to design an architecture able to offer a comprehensive solution, called a reference architecture, that can be further detailed when implementing specific systems. This paper presents a reference business process for ecological niche modelling, as part of a major work focused on the definition of a reference architecture based on SOA concepts that will be used to evolve the openModeller software package for species modelling. The basic steps that are performed while developing a model are described, highlighting important aspects, based on the knowledge of modelling experts. In order to illustrate the steps defined for the process, an experiment was developed, modelling the distribution of Ouratea spectabilis (Mart.) Engl. (Ochnaceae) using openModeller. As a consequence of the knowledge gained with this work, many desirable improvements on the modelling software packages have been identified and are presented. Also, a discussion on the potential for large-scale experimentation in ecological niche modelling is provided, highlighting opportunities for research. The results obtained are very important for those involved in the development of modelling tools and systems, for requirement analysis and to provide insight on new features and trends for this category of systems. They can also be very helpful for beginners in modelling research, who can use the process and the experiment example as a guide to this complex activity. (c) 2008 Elsevier B.V. All rights reserved.

Mean sea-level rise impacts on Santos Bay, Southeastern Brazil - physical modelling study

The greenhouse effect and resulting increase in the Earth`s temperature may accelerate the mean sea-level rise. The natural response of bays and estuaries to this rise, such as this case study of Santos Bay (Brazil), will include change in shoreline position, land flooding and wetlands impacts. The main impacts of this scenario were studied in a physical model built in the Coastal and Harbour Division of Hydraulic Laboratory, University of Sao Paulo, and the main conclusions are presented in this paper. The model reproduces near 1,000 km(2) of the study area, including Santos, Sao Vicente, Praia Grande, Cubatao, Guaruja and Bertioga cities.

MODELLING AND CONTROL OF ERSW PROCESSES BY NEURONAL NETWORK

A study on the use of artificial intelligence (AI) techniques for the modelling and subsequent control of an electric resistance spot welding process (ERSW) is presented. The ERSW process is characterized by the coupling of thermal, electrical, mechanical, and metallurgical phenomena. For this reason, early attempts to model it using computational methods established as the methods of finite differences, finite element, and finite volumes, ask for simplifications that lead the model obtained far from reality or very costly in terms of computational costs, to be used in a real-time control system. In this sense, the authors have developed an ERSW controller that uses fuzzy logic to adjust the energy transferred to the weld nugget. The proposed control strategies differ in the speed with which it reaches convergence. Moreover, their application for a quality control of spot weld through artificial neural networks (ANN) is discussed.

Modelling grain boundary migration during geometric dynamic recrystallization

High-angle grain boundary migration is predicted during geometric dynamic recrystallization (GDRX) by two types of mathematical models. Both models consider the driving pressure due to curvature and a sinusoidal driving pressure owing to subgrain walls connected to the grain boundary. One model is based on the finite difference solution of a kinetic equation, and the other, on a numerical technique in which the boundary is subdivided into linear segments. The models show that an initially flat boundary becomes serrated, with the peak and valley migrating into both adjacent grains, as observed during GDRX. When the sinusoidal driving pressure amplitude is smaller than 2 pi, the boundary stops migrating, reaching an equilibrium shape. Otherwise, when the amplitude is larger than 2 pi, equilibrium is never reached and the boundary migrates indefinitely, which would cause the protrusions of two serrated parallel boundaries to impinge on each other, creating smaller equiaxed grains.

Thermodynamic modelling of an Al(2)O(3)-MnO system using the ionic model

The thermodynamic assessment of an Al(2)O(3)-MnO pseudo-binary system has been carried out with the use of an ionic model. The use of the electro-neutrality principles in addition to the constitutive relations, between site fractions of the species on each sub-lattice, the thermodynamics descriptions of each solid phase has been determined to make possible the solubility description. Based on the thermodynamics descriptions of each phase in addition to thermo-chemical data obtained from the literature, the Gibbs energy functions were optimized for each phase of the Al(2)O(3)-MnO system with the support of PARROT(R) module from ThemoCalc(R) package. A thermodynamic database was obtained, in agreement with the thermo-chemical data extracted from the literature, to describe the Al(2)O(3)-MnO system including the solubility description of solid phases. (C) 2009 Elsevier Ltd. All rights reserved.