Stochastic modelling of financial time series with memory and multifractal scaling

Financial processes may possess long memory and their probability densities may display heavy tails. Many models have been developed to deal with this tail behaviour, which reflects the jumps in the sample paths. On the other hand, the presence of long memory, which contradicts the efficient market hypothesis, is still an issue for further debates. These difficulties present challenges with the problems of memory detection and modelling the co-presence of long memory and heavy tails. This PhD project aims to respond to these challenges. The first part aims to detect memory in a large number of financial time series on stock prices and exchange rates using their scaling properties. Since financial time series often exhibit stochastic trends, a common form of nonstationarity, strong trends in the data can lead to false detection of memory. We will take advantage of a technique known as multifractal detrended fluctuation analysis (MF-DFA) that can systematically eliminate trends of different orders. This method is based on the identification of scaling of the q-th-order moments and is a generalisation of the standard detrended fluctuation analysis (DFA) which uses only the second moment; that is, q = 2. We also consider the rescaled range R/S analysis and the periodogram method to detect memory in financial time series and compare their results with the MF-DFA. An interesting finding is that short memory is detected for stock prices of the American Stock Exchange (AMEX) and long memory is found present in the time series of two exchange rates, namely the French franc and the Deutsche mark. Electricity price series of the five states of Australia are also found to possess long memory. For these electricity price series, heavy tails are also pronounced in their probability densities. The second part of the thesis develops models to represent short-memory and longmemory financial processes as detected in Part I. These models take the form of continuous-time AR(∞) -type equations whose kernel is the Laplace transform of a finite Borel measure. By imposing appropriate conditions on this measure, short memory or long memory in the dynamics of the solution will result. A specific form of the models, which has a good MA(∞) -type representation, is presented for the short memory case. Parameter estimation of this type of models is performed via least squares, and the models are applied to the stock prices in the AMEX, which have been established in Part I to possess short memory. By selecting the kernel in the continuous-time AR(∞) -type equations to have the form of Riemann-Liouville fractional derivative, we obtain a fractional stochastic differential equation driven by Brownian motion. This type of equations is used to represent financial processes with long memory, whose dynamics is described by the fractional derivative in the equation. These models are estimated via quasi-likelihood, namely via a continuoustime version of the Gauss-Whittle method. The models are applied to the exchange rates and the electricity prices of Part I with the aim of confirming their possible long-range dependence established by MF-DFA. The third part of the thesis provides an application of the results established in Parts I and II to characterise and classify financial markets. We will pay attention to the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX), the NASDAQ Stock Exchange (NASDAQ) and the Toronto Stock Exchange (TSX). The parameters from MF-DFA and those of the short-memory AR(∞) -type models will be employed in this classification. We propose the Fisher discriminant algorithm to find a classifier in the two and three-dimensional spaces of data sets and then provide cross-validation to verify discriminant accuracies. This classification is useful for understanding and predicting the behaviour of different processes within the same market. The fourth part of the thesis investigates the heavy-tailed behaviour of financial processes which may also possess long memory. We consider fractional stochastic differential equations driven by stable noise to model financial processes such as electricity prices. The long memory of electricity prices is represented by a fractional derivative, while the stable noise input models their non-Gaussianity via the tails of their probability density. A method using the empirical densities and MF-DFA will be provided to estimate all the parameters of the model and simulate sample paths of the equation. The method is then applied to analyse daily spot prices for five states of Australia. Comparison with the results obtained from the R/S analysis, periodogram method and MF-DFA are provided. The results from fractional SDEs agree with those from MF-DFA, which are based on multifractal scaling, while those from the periodograms, which are based on the second order, seem to underestimate the long memory dynamics of the process. This highlights the need and usefulness of fractal methods in modelling non-Gaussian financial processes with long memory.

Does physical protection of soil organic matter attenuate temperature sensitivity?

Global climate change may induce accelerated soil organic matter (SOM) decomposition through increased soil temperature, and thus impact the C balance in soils. We hypothesized that compartmentalization of substrates and decomposers in the soil matrix would decrease SOM sensitivity to temperature. We tested our hypothesis with three short-term laboratory incubations with differing physical protection treatments conducted at different temperatures. Overall, CO2 efflux increased with temperature, but responses among physical protection treatments were not consistently different. Similar respiration quotient (Q(10)) values across physical protection treatments did not support our original hypothesis that the largest Q(10) values would be observed in the treatment with the least physical protection. Compartmentalization of substrates and decomposers is known to reduce the decomposability of otherwise labile material, but the hypothesized attenuation of temperature sensitivity was not detected, and thus the sensitivity is probably driven by the thermodynamics of biochemical reactions as expressed by Arrhenius-type equations.

Preparing engineering graduates for the knowledge economy through blended delivery of mathematics

Contemporary higher education institutions are making significant efforts to develop cohesive, meaningful and effective learning experiences for Science, Technology, Engineering and Mathematics (STEM) curricula to prepare graduates for challenges in the modern knowledge economy, thus enhancing their employability (Carnevale et al, 2011). This can inspire innovative redesign of learning experiences embedded in technology-enhanced educational environments and the development of research-informed, pedagogically reliable strategies fostering interactions between various agents of the learning-teaching process. This paper reports on the results of a project aimed at enhancing students’ learning experiences by redesigning a large, first year mathematics unit for Engineering students at a large metropolitan public university. Within the project, the current study investigates the effectiveness of selected, technology-mediated pedagogical approaches used over three semesters. Grounded in user-centred instructional design, the pedagogical approaches explored the opportunities for learning created by designing an environment containing technological, social and educational affordances. A qualitative analysis of mixed-type questionnaires distributed to students indicated important inter-relations between participants’ frames of references of the learning-teaching process and stressed the importance (and difficulty) of creating appropriate functional context. Conclusions drawn from this study may inform instructional design for blended delivery of STEM-focused programs that endeavor to enhance students’ employability by educating work-ready graduates.

Turbulence and Mixing in the Environment: Multi-Device Study in a Sub-tropical Estuary

In an estuary, mixing and dispersion result from a combination of large-scale advection and smallscale turbulence, which are complex to estimate. The predictions of scalar transport and mixing are often inferred and rarely accurate, due to inadequate understanding of the contributions of these difference scales to estuarine recirculation. A multi-device field study was conducted in a small sub-tropical estuary under neap tide conditions with near-zero fresh water discharge for about 48 hours. During the study, acoustic Doppler velocimeters (ADV) were sampled at high frequency (50 Hz), while an acoustic Doppler current profiler (ADCP) and global positioning system (GPS) tracked drifters were used to obtain some lower frequency spatial distribution of the flow parameters within the estuary. The velocity measurements were complemented with some continuous measurement of water depth, conductivity, temperature and some other physiochemical parameters. Thorough quality control was carried out by implementation of relevant error removal filters on the individual data set to intercept spurious data. A triple decomposition (TD) technique was introduced to access the contributions of tides, resonance and ‘true’ turbulence in the flow field. The time series of mean flow measurements for both the ADCP and drifter were consistent with those of the mean ADV data when sampled within a similar spatial domain. The tidal scale fluctuation of velocity and water level were used to examine the response of the estuary to tidal inertial current. The channel exhibited a mixed type wave with a typical phase-lag between 0.035π– 0.116π. A striking feature of the ADV velocity data was the slow fluctuations, which exhibited large amplitudes of up to 50% of the tidal amplitude, particularly in slack waters. Such slow fluctuations were simultaneously observed in a number of physiochemical properties of the channel. The ensuing turbulence field showed some degree of anisotropy. For all ADV units, the horizontal turbulence ratio ranged between 0.4 and 0.9, and decreased towards the bed, while the vertical turbulence ratio was on average unity at z = 0.32 m and approximately 0.5 for the upper ADV (z = 0.55 m). The result of the statistical analysis suggested that the ebb phase turbulence field was dominated by eddies that evolved from ejection type process, while that of the flood phase contained mixed eddies with significant amount related to sweep type process. Over 65% of the skewness values fell within the range expected of a finite Gaussian distribution and the bulk of the excess kurtosis values (over 70%) fell within the range of -0.5 and +2. The TD technique described herein allowed the characterisation of a broader temporal scale of fluctuations of the high frequency data sampled within the durations of a few tidal cycles. The study provides characterisation of the ranges of fluctuation required for an accurate modelling of shallow water dispersion and mixing in a sub-tropical estuary.

The effect of surface tension in porous wave maker problems

Using a mixed-type Fourier transform of a general form in the case of water of infinite depth and the method of eigenfunction expansion in the case of water of finite depth, several boundary-value problems involving the propagation and scattering of time harmonic surface water waves by vertical porous walls have been fully investigated, taking into account the effect of surface tension also. Known results are recovered either directly or as particular cases of the general problems under consideration.

Regulation of the activity of mung bean (Phaseolus aureus) glutamine synthetase by amino acids and nucleotides

The activity of glutamine synthetase isolated from the germinated seedlings of Phaseolus aureus was regulated by feedback inhibition by alanine, glycine, histidine, AMP, and ADP. When glutamate was the varied substrate, alanine, histidine, and glycine were partial noncompetitive, competitive, and mixed-type inhibitors, respectively. The type of inhibition by these amino acids was confirmed by fractional inhibition analysis. The adenine nucleotides, AMP and ADP, completely inhibited the enzyme activity and were competitive with respect to ATP. Multiple inhibition analyses revealed the presence of separate and nonexclusive binding sites for the amino acids and mutually exclusive sites for adenine nucleotides. Cumulative inhibition was observed with these end products.

Synergistic effect of colchicine and iodide ions on the corrosion of mild steel in 0.5 M H2SO4

The inhibition behavior of colchicine (CC) on the corrosion of mild steel in 0.5 M H2SO4 was evaluated by electrochemical methods such as potentiodynamic polarization and electrochemical impedance spectroscopic measurements. The inhibition efficiency increases with increasing concentration of CC. The potentiodynamic polarization results reveal that CC act as a mixed-type inhibitor by retarding both cathodic and anodic corrosion reactions. Additionally, the synergism was carried out between CC and KI to improve the corrosion inhibition behavior of CC on mild steel. The adsorption of both CC alone and the combined inhibitor (CC + KI) on mild steel surface follows Langmuir adsorption isotherm. The synergism parameter (S (theta) ) was calculated to recognize the existence of synergism between CC and iodide ions. Lastly, an adsorption mechanism of CC molecules with iodide ions is discussed.

Electrochemical, gravimetric and quantum chemical analysis of mild steel corrosion inhibition by colchicine in 1 M HCl medium

The inhibition effect of colchicine (CC) on mild steel (MS) corrosion in 1 M HCl solution has been investigated by electrochemical techniques such as electrochemical impedance spectroscopy, potentiodynamic polarization, chronoamperometry and also by the gravimetric method. Polarization studies showed that CC acts as mixed type corrosion inhibitor. The inhibitor adsorption process in the MS/CC/HCl system was studied at different temperatures (303-333 K). The adsorption of CC on MS surface is an exothermic process and obeys the Langmuir adsorption isotherm. Based on potential of zero charge values and quantum chemical parameters, the mechanism of adsorption has been proposed.

Some problems in nonlinear elasticity

Two separate problems are discussed: axisymmetric equilibrium configurations of a circular membrane under pressure and subject to thrust along its edge, and the buckling of a circular cylindrical shell.

An ordinary differential equation governing the circular membrane is imbedded in a family of n-dimensional nonlinear equations. Phase plane methods are used to examine the number of solutions corresponding to a parameter which generalizes the thrust, as well as other parameters determining the shape of the nonlinearity and the undeformed shape of the membrane. It is found that in any number of dimensions there exists a value of the generalized thrust for which a countable infinity of solutions exist if some of the remaining parameters are made sufficiently large. Criteria describing the number of solutions in other cases are also given.

Donnell-type equations are used to model a circular cylindrical shell. The static problem of bifurcation of buckled modes from Poisson expansion is analyzed using an iteration scheme and pertubation methods. Analysis shows that although buckling loads are usually simple eigenvalues, they may have arbitrarily large but finite multiplicity when the ratio of the shell's length and circumference is rational. A numerical study of the critical buckling load for simple eigenvalues indicates that the number of waves along the axis of the deformed shell is roughly proportional to the length of the shell, suggesting the possibility of a "characteristic length." Further numerical work indicates that initial post-buckling curves are typically steep, although the load may increase or decrease. It is shown that either a sheet of solutions or two distinct branches bifurcate from a double eigenvalue. Furthermore, a shell may be subject to a uniform torque, even though one is not prescribed at the ends of the shell, through the interaction of two modes with the same number of circumferential waves. Finally, multiple time scale techniques are used to study the dynamic buckling of a rectangular plate as well as a circular cylindrical shell; transition to a new steady state amplitude determined by the nonlinearity is shown. The importance of damping in determining equilibrium configurations independent of initial conditions is illustrated.

Marine biology of the Sierra Leone River Estuary. 1. The physical environment

The Sierra Leone River Estuary is a relatively young drowned river valley, it is shallow except for a deep channel which passes close to the Freetown shoreline. The upper reaches merge into a network of creeks and channels fringed by large areas of mangrove swamps. It is a tidal estuary of the semi-mixed type with the saline oceanic water entering it on a diurnal cycle. The climate of Sierra Leone is marked by a very distinct change between a very wet rainy season and a dry season. The tidal range of the Estuary (spring 3.03m; neap 2.28m) does not impede normal use of the harbour. The tidal variations can be felt as far as 42 miles inland along the water courses of the Sierra Leone River and its tributaries. The volume of fresh water entering the Estuary is large during the rainy season and greatly reduced during the dry season. Consequently there is a marked fall in salinity during the rainy season and higher salinities due to the marine influence prevailing during the dry season. The nature of the shores and bottom, the hydrography and chemistry of the estuarine system have been outlined in relation to the prevailing climatic conditions.

Run-up of solitary waves on twin conical islands using a boussinesq model

This paper investigates the interaction of solitary waves (representative of tsunamis) with idealized flat-topped conical islands. The investigation is based on simulations produced by a numerical model that solves the two-dimensional Boussinesq-type equations of Madsen and Sørensen using a total variation diminishing Lax-Wendroff scheme. After verification against published laboratory data on solitary wave run-up at a single island, the numerical model is applied to study the maximum run-up at a pair of identical conical islands located at different spacings apart for various angles of wave attack. The predicted results indicate that the maximum run-up can be attenuated or enhanced according to the position of the second island because of wave refraction, diffraction, and reflection. It is also observed that the local wave height and hence run-up can be amplified at certain gap spacing between the islands, owing to the interference between the incident waves and the reflected waves between islands. © 2012 American Society of Mechanical Engineers.

Measurement of threading dislocation densities in GaN by wet chemical etching

We demonstrate a technique based on wet chemical etching that enables quick and accurate evaluation of edge- and screw/mixed-type threading dislocations (TDs) in GaN. Large and small etch pits are formed by phosphoric acid on the etched surfaces. The large etch pits are attributed to screw/mixed TDs and the small ones to edge TDs, according to their locations on the surface and Burgers vectors of TDs. Additionally, the origin of small etch pits is confirmed by a transmission electron microscopy. The difference in the size of etch pits is discussed in view of their origin and merging. Overetching at elevated temperatures or for a long time may result in merging of individual etch pits and underestimating of the density of TDs. Wet chemical etching has also been proved efficient in revealing the distribution of TDs in epitaxial lateral overgrowth GaN.

Adsorption and Corrosion Inhibition Behavior of Mild Steel by One Derivative of Benzoic-Triazole in Acidic Solution

A newly synthesized benzoic-triazole derivative 3,5-dimethylbenzoic acid [1,2,4]triazol-l-ylmethyl ester (DBT) was investigated as a corrosion inhibitor of mild steel in 1 M HCl solution using weight loss measurements, potentiodynamic polarization, SEM, and EIS methods. The results revealed that DBT was an excellent inhibitor, and the inhibition efficiencies obtained from weight loss and electrochemical experiments were in good agreement. Using the potentiodynamic polarization technique, the inhibitor was proved to have a mixed-type character for mild steel by suppressing both anodic and cathodic reactions on the metal surface. The number of water molecules (X) replaced by a molecule of organic adsorbate was determined from the Flory-Huggins, Dhar-Flory-Huggins, and Bockris-Swinkels substitutional adsorption isotherms applied to the data obtained from the gravimetric experiments performed on a mild steel specimen in 1 M HCl solution at 298 K.

Investigation on the corrosion inhibitive effect of 2H-pyrazole-triazole derivatives in acidic solution

Four research methods, such as weight loss test, electrochemical techniques, adsorption isotherm, and quantum chemical calculation, were employed in this paper to study the inhibition efficiency (IE) and inhibition mechanism of three 2H-pyrazole-triazole derivatives, BHOT, FHOT, and CHOT in 1 M HCl solution for mild steel. Using the electrochemical technique, three inhibitors were proved to show a mixed-type character for mild steel by suppressing both anodic and cathodic reactions on the steel surface. The adsorption models of three compounds were established at different temperatures according to their adsorption isotherms. The results of the quantum chemical calculation method indicated that the adsorption sites of 2H-pyrazole-triazole derivatives were strongly centralized on benzene ring, triazole ring, or other substituents. All the results showed that the three derivatives were excellent inhibitors in I M HCl solution for mild steel.

Corrosion inhibition of mild steel in acidic solution by some oxo-triazole derivatives

The oxo-triazole derivative (DTP) was synthesized and its inhibiting action on the corrosion of mild steel in sulphuric acid was investigated by means of weight loss, potentiodynamic polarization, EIS and SEM. The results revealed that DTP was an excellent inhibitor and the inhibition efficiencies obtained from weight loss experiment and electrochemical experiment were in good agreement. Potentiodynamic polarization studies clearly revealed that DTP acted essentially as the mixed-type inhibitor. Thermodynamic and kinetic parameters were obtained from weight loss of the different experimental temperatures, which suggested that at different temperatures (298-333 K) the adsorption of DTP on metal surface obeyed Langmuir adsorption isotherm model. (C) 2009 Elsevier Ltd. All rights reserved.