Data uncertainty in real estate forecasting

The rapid expansion of the TMT sector in the late 1990s and more recent growing regulatory and corporate focus on business continuity and security have raised the profile of data centres. Data centres offer a unique blend of occupational, physical and technological characteristics compared to conventional real estate assets. Limited trading and heterogeneity of data centres also causes higher levels of appraisal uncertainty. In practice, the application of conventional discounted cash flow approaches requires information about a wide range of inputs that is difficult to derive from limited market signals or estimate analytically. This paper outlines an approach that uses pricing signals from similar traded cash flows is proposed. Based upon ‘the law of one price’, the method draws upon the premise that two identical future cash flows must have the same value now. Given the difficulties of estimating exit values, an alternative is that the expected cash flows of data centre are analysed over the life cycle of the building, with corporate bond yields used to provide a proxy for the appropriate discount rates for lease income. Since liabilities are quite diverse, a number of proxies are suggested as discount and capitalisation rates including indexed-linked, fixed interest and zero-coupon bonds. Although there are rarely assets that have identical cash flows and some approximation is necessary, the level of appraiser subjectivity is dramatically reduced.

An improvement in clear-air turbulence forecasting based on spontaneous imbalance theory: the ULTURB algorithm

Recent research has shown that Lighthill–Ford spontaneous gravity wave generation theory, when applied to numerical model data, can help predict areas of clear-air turbulence. It is hypothesized that this is the case because spontaneously generated atmospheric gravity waves may initiate turbulence by locally modifying the stability and wind shear. As an improvement on the original research, this paper describes the creation of an ‘operational’ algorithm (ULTURB) with three modifications to the original method: (1) extending the altitude range for which the method is effective downward to the top of the boundary layer, (2) adding turbulent kinetic energy production from the environment to the locally produced turbulent kinetic energy production, and, (3) transforming turbulent kinetic energy dissipation to eddy dissipation rate, the turbulence metric becoming the worldwide ‘standard’. In a comparison of ULTURB with the original method and with the Graphical Turbulence Guidance second version (GTG2) automated procedure for forecasting mid- and upper-level aircraft turbulence ULTURB performed better for all turbulence intensities. Since ULTURB, unlike GTG2, is founded on a self-consistent dynamical theory, it may offer forecasters better insight into the causes of the clear-air turbulence and may ultimately enhance its predictability.

Advances in sequential data assimilation and numerical weather forecasting: an Ensemble Transform Kalman-Bucy Filter, a study on clustering in deterministic Ensemble Square Root Filters, and a test of a new time stepping scheme in an atmospheric model

This dissertation deals with aspects of sequential data assimilation (in particular ensemble Kalman filtering) and numerical weather forecasting. In the first part, the recently formulated Ensemble Kalman-Bucy (EnKBF) filter is revisited. It is shown that the previously used numerical integration scheme fails when the magnitude of the background error covariance grows beyond that of the observational error covariance in the forecast window. Therefore, we present a suitable integration scheme that handles the stiffening of the differential equations involved and doesn’t represent further computational expense. Moreover, a transform-based alternative to the EnKBF is developed: under this scheme, the operations are performed in the ensemble space instead of in the state space. Advantages of this formulation are explained. For the first time, the EnKBF is implemented in an atmospheric model. The second part of this work deals with ensemble clustering, a phenomenon that arises when performing data assimilation using of deterministic ensemble square root filters in highly nonlinear forecast models. Namely, an M-member ensemble detaches into an outlier and a cluster of M-1 members. Previous works may suggest that this issue represents a failure of EnSRFs; this work dispels that notion. It is shown that ensemble clustering can be reverted also due to nonlinear processes, in particular the alternation between nonlinear expansion and compression of the ensemble for different regions of the attractor. Some EnSRFs that use random rotations have been developed to overcome this issue; these formulations are analyzed and their advantages and disadvantages with respect to common EnSRFs are discussed. The third and last part contains the implementation of the Robert-Asselin-Williams (RAW) filter in an atmospheric model. The RAW filter is an improvement to the widely popular Robert-Asselin filter that successfully suppresses spurious computational waves while avoiding any distortion in the mean value of the function. Using statistical significance tests both at the local and field level, it is shown that the climatology of the SPEEDY model is not modified by the changed time stepping scheme; hence, no retuning of the parameterizations is required. It is found the accuracy of the medium-term forecasts is increased by using the RAW filter.

Regularized logistic models for probabilistic forecasting and diagnostics

Logistic models are studied as a tool to convert dynamical forecast information (deterministic and ensemble) into probability forecasts. A logistic model is obtained by setting the logarithmic odds ratio equal to a linear combination of the inputs. As with any statistical model, logistic models will suffer from overfitting if the number of inputs is comparable to the number of forecast instances. Computational approaches to avoid overfitting by regularization are discussed, and efficient techniques for model assessment and selection are presented. A logit version of the lasso (originally a linear regression technique), is discussed. In lasso models, less important inputs are identified and the corresponding coefficient is set to zero, providing an efficient and automatic model reduction procedure. For the same reason, lasso models are particularly appealing for diagnostic purposes.

The concept of exchangeability in ensemble forecasting

A set of random variables is exchangeable if its joint distribution function is invariant under permutation of the arguments. The concept of exchangeability is discussed, with a view towards potential application in evaluating ensemble forecasts. It is argued that the paradigm of ensembles being an independent draw from an underlying distribution function is probably too narrow; allowing ensemble members to be merely exchangeable might be a more versatile model. The question is discussed whether established methods of ensemble evaluation need alteration under this model, with reliability being given particular attention. It turns out that the standard methodology of rank histograms can still be applied. As a first application of the exchangeability concept, it is shown that the method of minimum spanning trees to evaluate the reliability of high dimensional ensembles is mathematically sound.

Anthropogenic greenhouse gas contribution to flood risk in England and Wales in autumn 2000

Interest in attributing the risk of damaging weather-related events to anthropogenic climate change is increasing1. Yet climate models used to study the attribution problem typically do not resolve the weather systems associated with damaging events2 such as the UK floods of October and November 2000. Occurring during the wettest autumn in England and Wales since records began in 17663, 4, these floods damaged nearly 10,000 properties across that region, disrupted services severely, and caused insured losses estimated at £1.3 billion (refs 5, 6). Although the flooding was deemed a ‘wake-up call’ to the impacts of climate change at the time7, such claims are typically supported only by general thermodynamic arguments that suggest increased extreme precipitation under global warming, but fail8, 9 to account fully for the complex hydrometeorology4, 10 associated with flooding. Here we present a multi-step, physically based ‘probabilistic event attribution’ framework showing that it is very likely that global anthropogenic greenhouse gas emissions substantially increased the risk of flood occurrence in England and Wales in autumn 2000. Using publicly volunteered distributed computing11, 12, we generate several thousand seasonal-forecast-resolution climate model simulations of autumn 2000 weather, both under realistic conditions, and under conditions as they might have been had these greenhouse gas emissions and the resulting large-scale warming never occurred. Results are fed into a precipitation-runoff model that is used to simulate severe daily river runoff events in England and Wales (proxy indicators of flood events). The precise magnitude of the anthropogenic contribution remains uncertain, but in nine out of ten cases our model results indicate that twentieth-century anthropogenic greenhouse gas emissions increased the risk of floods occurring in England and Wales in autumn 2000 by more than 20%, and in two out of three cases by more than 90%.

Probabilistic forecasting: why model imperfection is a poison pill

This volume is a serious attempt to open up the subject of European philosophy of science to real thought, and provide the structural basis for the interdisciplinary development of its specialist fields, but also to provoke reflection on the idea of ‘European philosophy of science’. This efforts should foster a contemporaneous reflection on what might be meant by philosophy of science in Europe and European philosophy of science, and how in fact awareness of it could assist philosophers interpret and motivate their research through a stronger collective identity. The overarching aim is to set the background for a collaborative project organising, systematising, and ultimately forging an identity for, European philosophy of science by creating research structures and developing research networks across Europe to promote its development.

Forecasting extinction risk of ectotherms under climate warming: an evolutionary perspective

1. It has been postulated that climate warming may pose the greatest threat species in the tropics, where ectotherms have evolved more thermal specialist physiologies. Although species could rapidly respond to environmental change through adaptation, little is known about the potential for thermal adaptation, especially in tropical species. 2. In the light of the limited empirical evidence available and predictions from mutation-selection theory, we might expect tropical ectotherms to have limited genetic variance to enable adaptation. However, as a consequence of thermodynamic constraints, we might expect this disadvantage to be at least partially offset by a fitness advantage, that is, the ‘hotter-is-better’ hypothesis. 3. Using an established quantitative genetics model and metabolic scaling relationships, we integrate the consequences of the opposing forces of thermal specialization and thermodynamic constraints on adaptive potential by evaluating extinction risk under climate warming. We conclude that the potential advantage of a higher maximal development rate can in theory more than offset the potential disadvantage of lower genetic variance associated with a thermal specialist strategy. 4. Quantitative estimates of extinction risk are fundamentally very sensitive to estimates of generation time and genetic variance. However, our qualitative conclusion that the relative risk of extinction is likely to be lower for tropical species than for temperate species is robust to assumptions regarding the effects of effective population size, mutation rate and birth rate per capita. 5. With a view to improving ecological forecasts, we use this modelling framework to review the sensitivity of our predictions to the model’s underpinning theoretical assumptions and the empirical basis of macroecological patterns that suggest thermal specialization and fitness increase towards the tropics. We conclude by suggesting priority areas for further empirical research.

A change detection approach to flood mapping in urban areas using TerraSAR-X

Very high-resolution Synthetic Aperture Radar sensors represent an alternative to aerial photography for delineating floods in built-up environments where flood risk is highest. However, even with currently available SAR image resolutions of 3 m and higher, signal returns from man-made structures hamper the accurate mapping of flooded areas. Enhanced image processing algorithms and a better exploitation of image archives are required to facilitate the use of microwave remote sensing data for monitoring flood dynamics in urban areas. In this study a hybrid methodology combining radiometric thresholding, region growing and change detection is introduced as an approach enabling the automated, objective and reliable flood extent extraction from very high-resolution urban SAR images. The method is based on the calibration of a statistical distribution of “open water” backscatter values inferred from SAR images of floods. SAR images acquired during dry conditions enable the identification of areas i) that are not “visible” to the sensor (i.e. regions affected by ‘layover’ and ‘shadow’) and ii) that systematically behave as specular reflectors (e.g. smooth tarmac, permanent water bodies). Change detection with respect to a pre- or post flood reference image thereby reduces over-detection of inundated areas. A case study of the July 2007 Severn River flood (UK) observed by the very high-resolution SAR sensor on board TerraSAR-X as well as airborne photography highlights advantages and limitations of the proposed method. We conclude that even though the fully automated SAR-based flood mapping technique overcomes some limitations of previous methods, further technological and methodological improvements are necessary for SAR-based flood detection in urban areas to match the flood mapping capability of high quality aerial photography.

Deriving global flood hazard maps of fluvial floods through a physical model cascade

Global flood hazard maps can be used in the assessment of flood risk in a number of different applications, including (re)insurance and large scale flood preparedness. Such global hazard maps can be generated using large scale physically based models of rainfall-runoff and river routing, when used in conjunction with a number of post-processing methods. In this study, the European Centre for Medium Range Weather Forecasts (ECMWF) land surface model is coupled to ERA-Interim reanalysis meteorological forcing data, and resultant runoff is passed to a river routing algorithm which simulates floodplains and flood flow across the global land area. The global hazard map is based on a 30 yr (1979–2010) simulation period. A Gumbel distribution is fitted to the annual maxima flows to derive a number of flood return periods. The return periods are calculated initially for a 25×25 km grid, which is then reprojected onto a 1×1 km grid to derive maps of higher resolution and estimate flooded fractional area for the individual 25×25 km cells. Several global and regional maps of flood return periods ranging from 2 to 500 yr are presented. The results compare reasonably to a benchmark data set of global flood hazard. The developed methodology can be applied to other datasets on a global or regional scale.

The potential inefficiency of using marketing margins in applied commodity price analysis, forecasting and risk management

This paper examines the implications of using marketing margins in applied commodity price analysis. The marketing-margin concept has a long and distinguished history, but it has caused considerable controversy. This is particularly the case in the context of analyzing the distribution of research gains in multi-stage production systems. We derive optimal tax schemes for raising revenues to finance research and promotion in a downstream market, derive the rules for efficient allocation of the funds, and compare the rules with an without the marketing-margin assumption. Applying the methodology to quarterly time series on the Australian beef-cattle sector and, with several caveats, we conclude that, during the period 1978:2 - 1988:4, the Australian Meat and Livestock Corporation optimally allocated research resources.

Characteristics of high-resolution versions of the Met Office unified model for forecasting convection over the United Kingdom

With many operational centers moving toward order 1-km-gridlength models for routine weather forecasting, this paper presents a systematic investigation of the properties of high-resolution versions of the Met Office Unified Model for short-range forecasting of convective rainfall events. The authors describe a suite of configurations of the Met Office Unified Model running with grid lengths of 12, 4, and 1 km and analyze results from these models for a number of convective cases from the summers of 2003, 2004, and 2005. The analysis includes subjective evaluation of the rainfall fields and comparisons of rainfall amounts, initiation, cell statistics, and a scale-selective verification technique. It is shown that the 4- and 1-km-gridlength models often give more realistic-looking precipitation fields because convection is represented explicitly rather than parameterized. However, the 4-km model representation suffers from large convective cells and delayed initiation because the grid length is too long to correctly reproduce the convection explicitly. These problems are not as evident in the 1-km model, although it does suffer from too numerous small cells in some situations. Both the 4- and 1-km models suffer from poor representation at the start of the forecast in the period when the high-resolution detail is spinning up from the lower-resolution (12 km) starting data used. A scale-selective precipitation verification technique implies that for later times in the forecasts (after the spinup period) the 1-km model performs better than the 12- and 4-km models for lower rainfall thresholds. For higher thresholds the 4-km model scores almost as well as the 1-km model, and both do better than the 12-km model.

Towards global drought early warning capability: expanding international cooperation for the development of a framework for global drought monitoring and forecasting

Drought is a global problem that has far-reaching impacts and especially 47 on vulnerable populations in developing regions. This paper highlights the need for a Global Drought Early Warning System (GDEWS), the elements that constitute its underlying framework (GDEWF) and the recent progress made towards its development. Many countries lack drought monitoring systems, as well as the capacity to respond via appropriate political, institutional and technological frameworks, and these have inhibited the development of integrated drought management plans or early warning systems. The GDEWS will provide a source of drought tools and products via the GDEWF for countries and regions to develop tailored drought early warning systems for their own users. A key goal of a GDEWS is to maximize the lead time for early warning, allowing drought managers and disaster coordinators more time to put mitigation measures in place to reduce the vulnerability to drought. To address this, the GDEWF will take both a top-down approach to provide global real-time drought monitoring and seasonal forecasting, and a bottom-up approach that builds upon existing national and regional systems to provide continental to global coverage. A number of challenges must be overcome, however, before a GDEWS can become a reality, including the lack of in-situ measurement networks and modest seasonal forecast skill in many regions, and the lack of infrastructure to translate data into useable information. A set of international partners, through a series of recent workshops and evolving collaborations, has made progress towards meeting these challenges and developing a global system.

Use of high-resolution NWP rainfall and river flow forecasts for advance warning of the Carlisle flood, north-west England

On the 8 January 2005 the city of Carlisle in north-west England was severely flooded following 2 days of almost continuous rain over the nearby hills. Orographic enhancement of the rain through the seeder–feeder mechanism led to the very high rainfall totals. This paper shows the impact of running the Met Office Unified Model (UM) with a grid spacing of 4 and 1 km compared to the 12 km available at the time of the event. These forecasts, and forecasts from the Nimrod nowcasting system, were fed into the Probability Distributed Model (PDM) to predict river flow at the outlets of two catchments important for flood warning. The results show the benefit of increased resolution in the UM, the benefit of coupling the high-resolution rainfall forecasts to the PDM and the improvement in timeliness of flood warning that might have been possible. Copyright © 2008 Royal Meteorological Society