Incorporating Higher Moments into Value at Risk Forecasting

Value-at-risk (VaR) forecasting generally relies on a parametric density function of portfolio returns that ignores higher moments or assumes them constant. In this paper, we propose a simple approach to forecasting of a portfolio VaR. We employ the Gram-Charlier expansion (GCE) augmenting the standard normal distribution with the first four moments, which are allowed to vary over time. In an extensive empirical study, we compare the GCE approach to other models of VaR forecasting and conclude that it provides accurate and robust estimates of the realized VaR. In spite of its simplicity, on our dataset GCE outperforms other estimates that are generated by both constant and time-varying higher-moments models.

Dynamic Density Forecasts for Multivariate Asset Returns

We propose a simple and flexible framework for forecasting the joint density of asset returns. The multinormal distribution is augmented with a polynomial in (time-varying) non-central co-moments of assets. We estimate the coefficients of the polynomial via the Method of Moments for a carefully selected set of co-moments. In an extensive empirical study, we compare the proposed model with a range of other models widely used in the literature. Employing a recently proposed as well as standard techniques to evaluate multivariate forecasts, we conclude that the augmented joint density provides highly accurate forecasts of the “negative tail” of the joint distribution.

Maximum likelihood estimation of higher-order integer-valued autoregressive processes

In this article, we extend the earlier work of Freeland and McCabe [Journal of time Series Analysis (2004) Vol. 25, pp. 701–722] and develop a general framework for maximum likelihood (ML) analysis of higher-order integer-valued autoregressive processes. Our exposition includes the case where the innovation sequence has a Poisson distribution and the thinning is binomial. A recursive representation of the transition probability of the model is proposed. Based on this transition probability, we derive expressions for the score function and the Fisher information matrix, which form the basis for ML estimation and inference. Similar to the results in Freeland and McCabe (2004), we show that the score function and the Fisher information matrix can be neatly represented as conditional expectations. Using the INAR(2) speci?cation with binomial thinning and Poisson innovations, we examine both the asymptotic e?ciency and ?nite sample properties of the ML estimator in relation to the widely used conditional least
squares (CLS) and Yule–Walker (YW) estimators. We conclude that, if the Poisson assumption can be justi?ed, there are substantial gains to be had from using ML especially when the thinning parameters are large.

Maximum likelihood estimation of higher-order integer-valued autoregressive processes

Corrigendum Vol. 30, Issue 2, 259, Article first published online: 15 MAR 2009 to correct the order of authors names: Bu R., K. Hadri, and B. McCabe.

Explaining young mortality

Stochastic modeling of mortality rates focuses on fitting linear models to logarithmically adjusted mortality data from the middle or late ages. Whilst this modeling enables insurers to project mortality rates and hence price mortality products it does not provide good fit for younger aged mortality. Mortality rates below the early 20's are important to model as they give an insight into estimates of the cohort effect for more recent years of birth. It is also important given the cumulative nature of life expectancy to be able to forecast mortality improvements at all ages. When we attempt to fit existing models to a wider age range, 5-89, rather than 20-89 or 50-89, their weaknesses are revealed as the results are not satisfactory. The linear innovations in existing models are not flexible enough to capture the non-linear profile of mortality rates that we see at the lower ages. In this paper we modify an existing 4 factor model of mortality to enable better fitting to a wider age range, and using data from seven developed countries our empirical results show that the proposed model has a better fit to the actual data, is robust, and has good forecasting ability.

Nash equilibria of network formation games under consent

We investigate the Nash equilibria of game theoretic models of network formation based on explicit consent in link formation. These so-called “consent models” explicitly take account of link formation costs. We provide characterizations of Nash equilibria of such consent models under both one-sided and two-sided costs of link formation. We relate these equilibrium concepts to link-based stability concepts, in particular strong link deletion proofness.

Nonparametric Estimation of Data Dimensionality Prior to Data Compression: the case of the Human Development Index

In many applications in applied statistics researchers reduce the complexity of a data set by combining a group of variables into a single measure using factor analysis or an index number. We argue that such compression loses information if the data actually has high dimensionality. We advocate the use of a non-parametric estimator, commonly used in physics (the Takens estimator), to estimate the correlation dimension of the data prior to compression. The advantage of this approach over traditional linear data compression approaches is that the data does not have to be linearized. Applying our ideas to the United Nations Human Development Index we find that the four variables that are used in its construction have dimension three and the index loses information.

Peer effects in UK adolescent substance use: Never mind the classmates?

This article estimates peer influences on the alcohol, tobacco and cannabis use of UK adolescents. We present evidence of large, positive and statistically significant peer effects in all three behaviours when classmates are taken as the reference group. We also find large, positive and statistically significant associations between own substance use and friends' substance use. When both reference groups are considered simultaneously, the influence of classmates either disappears or is much reduced, whereas the association between own and friends' behaviours does not change. The suggestion is that classmate behaviour is primarily relevant only inasmuch as it proxies for friends' behaviour.

Secure Implementation in Production Economies

This paper shows that, in production economies, the generalized serial social choice functions defined by Shenker (1992) are securely implementable (in the sense of Saijo et al., 2007) and that they include the well-known fixed path social choice functions.

Investigating the Potential Impact of Four-dimensional Computed Tomography (4DCT) on Toxicity, Outcomes and Dose Escalation for Radical Lung Cancer Radiotherapy

AIMS: To investigate the potential dosimetric and clinical benefits predicted by using four-dimensional computed tomography (4DCT) compared with 3DCT in the planning of radical radiotherapy for non-small cell lung cancer.

MATERIALS AND METHODS:
Twenty patients were planned using free breathing 4DCT then retrospectively delineated on three-dimensional helical scan sets (3DCT). Beam arrangement and total dose (55 Gy in 20 fractions) were matched for 3D and 4D plans. Plans were compared for differences in planning target volume (PTV) geometrics and normal tissue complication probability (NTCP) for organs at risk using dose volume histograms. Tumour control probability and NTCP were modelled using the Lyman-Kutcher-Burman (LKB) model. This was compared with a predictive clinical algorithm (Maastro), which is based on patient characteristics, including: age, performance status, smoking history, lung function, tumour staging and concomitant chemotherapy, to predict survival and toxicity outcomes. Potential therapeutic gains were investigated by applying isotoxic dose escalation to both plans using constraints for mean lung dose (18 Gy), oesophageal maximum (70 Gy) and spinal cord maximum (48 Gy).

RESULTS:
4DCT based plans had lower PTV volumes, a lower dose to organs at risk and lower predicted NTCP rates on LKB modelling (P < 0.006). The clinical algorithm showed no difference for predicted 2-year survival and dyspnoea rates between the groups, but did predict for lower oesophageal toxicity with 4DCT plans (P = 0.001). There was no correlation between LKB modelling and the clinical algorithm for lung toxicity or survival. Dose escalation was possible in 15/20 cases, with a mean increase in dose by a factor of 1.19 (10.45 Gy) using 4DCT compared with 3DCT plans.

CONCLUSIONS:
4DCT can theoretically improve therapeutic ratio and dose escalation based on dosimetric parameters and mathematical modelling. However, when individual characteristics are incorporated, this gain may be less evident in terms of survival and dyspnoea rates. 4DCT allows potential for isotoxic dose escalation, which may lead to improved local control and better overall survival.

Device-Free Person Detection and Ranging in UWB Networks

We present a novel device-free stationary person detection and ranging method, that is applicable to ultra-wide bandwidth (UWB) networks. The method utilizes a fixed UWB infrastructure and does not require a training database of template waveforms. Instead, the method capitalizes on the fact that a human presence induces small low-frequency variations that stand out against the background signal, which is mainly affected by wideband noise. We analyze the detection probability, and validate our findings with numerical simulations and experiments with off-the-shelf UWB transceivers in an indoor environment. © 2007-2012 IEEE.

Multiuser Cognitive Relay Networks: Joint Impact of Direct and Relay Communications

In this paper, we propose a multiuser cognitive relay network, where multiple secondary sources communicate with a secondary destination through the assistance of a secondary relay in the presence of secondary direct links and multiple primary receivers. We consider the two relaying protocols of amplify-and-forward (AF) and decode-and-forward (DF), and take into account the availability of direct links from the secondary sources to the secondary destination. With this in mind, we propose an optimal solution for cognitive multiuser scheduling by selecting the optimal secondary source, which maximizes the received signal-to-noise ratio (SNR) at the secondary destination using maximal ratio combining. This is done by taking into account both the direct link and the relay link in the multiuser selection criterion. For both AF and DF relaying protocols, we first derive closed-form expressions for the outage probability and then provide the asymptotic outage probability, which determines the diversity behavior of the multiuser cognitive relay network. Finally, this paper is corroborated by representative numerical examples.

A-level Mathematics Module Choice and Subsequent Performance in First Year of an Engineering Degree

The A-level Mathematics qualification is based on a compulsory set of pure maths modules and a selection of applied maths modules. The flexibility in choice of applied modules has led to concerns that many students would proceed to study engineering at university with little background in mechanics. A survey of aerospace and mechanical engineering students in our university revealed that a combination of mechanics and statistics (the basic module in both) was by far the most popular choice of optional modules in A-level Mathematics, meaning that only about one-quarter of the class had studied mechanics beyond the basic module within school mathematics. Investigation of student performance in two core, first-year engineering courses, which build on a mechanics foundation, indicated that any benefits for students who studied the extra mechanics at school were small. These results give concern about the depth of understanding in mechanics gained during A-level Mathematics.

Secure Multiuser Multiple Amplify-and-Forward Relay Networks in Presence of Multiple Eavesdroppers

In this paper, we study the information-theoretical security of a downlink multiuser cooperative relaying network with multiple intermediate amplify-and-forward (AF) relays, where there exist multiple eavesdroppers which can overhear the message. To prevent the wiretap and strength the network security, we select one best relay and user pair, so that the selected user can receive the message from the base station assisted by the selected relay. The relay and user selection is performed by maximizing the ratio of the received signal-to-noise ratio (SNR) at the user to the eavesdroppers, which is based on both the main and eavesdropper links. For the considered system, we derive the closed-form expression of the secrecy outage probability, and provide the asymptotic expression in high main-to-eavesdropper ratio (MER) region. From the asymptotic analysis, we can find that the system diversity order is equivalent to the number of relays regardless of the number of users and eavesdroppers.

Performance analysis of switch-and-stay combining in two-way relay systems with analog network coding and time-division broadcast protocols

In this paper, weconsider switch-and-stay combining (SSC) in two-way relay systems with two amplify-and-forward relays, one of which is activated to assist the information exchange between the two sources. The system operates in either analog network coding (ANC) protocol where the communication is only achieved with the help of the active relay or timedivision broadcast (TDBC) protocol where the direct link between two sources can be utilized to exploit more diversity gain. In both cases, we study the outage probability and bit error rate (BER) for Rayleigh fading channels. In particular, we derive closed-form lower bounds for the outage probability and the average BER, which remain tight for different fading conditions. We also present asymptotic analysis for both the outage probability and the average BER at high signalto-noise ratio. It is shown that SSC can achieve the full diversity order in two-way relay systems for both ANC and TDBC protocols with proper switching thresholds. Copyright © 2014 John Wiley & Sons, Ltd.