Applications of stochastic analysis in finance and statistical inference

First: A continuous-time version of Kyle's model (Kyle 1985), known as the Back's model (Back 1992), of asset pricing with asymmetric information, is studied. A larger class of price processes and of noise traders' processes are studied. The price process, as in Kyle's model, is allowed to depend on the path of the market order. The process of the noise traders' is an inhomogeneous Lévy process. Solutions are found by the Hamilton-Jacobi-Bellman equations. With the insider being risk-neutral, the price pressure is constant, and there is no equilibirium in the presence of jumps. If the insider is risk-averse, there is no equilibirium in the presence of either jumps or drifts. Also, it is analised when the release time is unknown. A general relation is established between the problem of finding an equilibrium and of enlargement of filtrations. Random announcement time is random is also considered. In such a case the market is not fully efficient and there exists equilibrium if the sensitivity of prices with respect to the global demand is time decreasing according with the distribution of the random time. Second: Power variations. it is considered, the asymptotic behavior of the power variation of processes of the form _integral_0^t u(s-)dS(s), where S_ is an alpha-stable process with index of stability 0&alpha&2 and the integral is an Itô integral. Stable convergence of corresponding fluctuations is established. These results provide statistical tools to infer the process u from discrete observations. Third: A bond market is studied where short rates r(t) evolve as an integral of g(t-s)sigma(s) with respect to W(ds), where g and sigma are deterministic and W is the stochastic Wiener measure. Processes of this type are particular cases of ambit processes. These processes are in general not of the semimartingale kind.

KAM theory for conformally symplectic systems

We present a KAM theory for some dissipative systems (geometrically, these are conformally symplectic systems, i.e. systems that transform a symplectic form into a multiple of itself). For systems with n degrees of freedom depending on n parameters we show that it is possible to find solutions with n-dimensional (Diophantine) frequencies by adjusting the parameters. We do not assume that the system is close to integrable, but we use an a-posteriori format. Our unknowns are a parameterization of the solution and a parameter. We show that if there is a sufficiently approximate solution of the invariance equation, which also satisfies some explicit non–degeneracy conditions, then there is a true solution nearby. We present results both in Sobolev norms and in analytic norms. The a–posteriori format has several consequences: A) smooth dependence on the parameters, including the singular limit of zero dissipation; B) estimates on the measure of parameters covered by quasi–periodic solutions; C) convergence of perturbative expansions in analytic systems; D) bootstrap of regularity (i.e., that all tori which are smooth enough are analytic if the map is analytic); E) a numerically efficient criterion for the break–down of the quasi–periodic solutions. The proof is based on an iterative quadratically convergent method and on suitable estimates on the (analytical and Sobolev) norms of the approximate solution. The iterative step takes advantage of some geometric identities, which give a very useful coordinate system in the neighborhood of invariant (or approximately invariant) tori. This system of coordinates has several other uses: A) it shows that for dissipative conformally symplectic systems the quasi–periodic solutions are attractors, B) it leads to efficient algorithms, which have been implemented elsewhere. Details of the proof are given mainly for maps, but we also explain the slight modifications needed for flows and we devote the appendix to present explicit algorithms for flows.

Theory of mind and cognitive processes in aging and Alzheimer type dementia: a systematic review.

OBJECTIVES: Theory of mind (ToM) performance in aging and dementia of the Alzheimer type (DAT) has been a growing interest of researchers and recently, theoretical trends in ToM development have led to a focus on determining the cognitive skills involved in ToM performance. The aim of the present review is to answer three main questions: How is ToM assessed in aging and DAT? How does ToM performance evolve in aging and DAT? Do cognitive processes influence ToM performance in aging and DAT? METHOD: A systematic review was conducted to provide a targeted overview of recent studies relating ToM performance with cognitive processes in aging and DAT. RESULTS: RESULTS suggest a decrease in ToM performance, more pronounced in complex ToM tasks. Moreover, the review points up the strong involvement of executive functions, especially inhibition, and reasoning skills in ToM task achievement. CONCLUSION: Current data suggest that the structure of ToM tasks itself could lead to poor performance, especially in populations with reduced cognitive abilities.

Theory of mind and social functioning in first episode psychosis

There is evidence of associations between social functioning and theory of mind performance and between social functioning and negative symptoms in chronic psychosis. This study investigates these associations in those with first episode psychosis who are unaffected by factors related to long-term mental illness. Our first hypothesis states that there is an association between theory of mind and social functioning. The second hypothesis states that there is no association between symptoms of psychosis and social functioning. Methods. Fifty-two individuals with first episode psychosis were assessed for social functioning, theory of mind ability (using the Hinting test with verbal stimuli and the Visual Cartoon test with pictorial stimuli), and symptoms of psychosis. Multivariable logistic regression was used to examine associations. Results. Social functioning and theory of mind were associated when measured by the Hinting test (OR 1.70, 95% CI 1.08, 2.66), but not with the Visual Cartoon test (ToM jokes OR 0.61, 95% CI 0.15, 2.53). There was no association between social functioning and symptoms (psychotic symptoms; OR 0.95, 95% CI 0.81, 1.12; selected negative symptoms; OR 1.33, 95% CI 0.78, 2.25). Conclusions. Theory of mind assessed by verbal stimuli is associated with social functioning in a population with first episode psychosis. These findings may be related to language disorders in psychosis.

Use of DNA profiles for investigation using a simulated national DNA database: Part II. Statistical and ethical considerations on familial searching.

Familial searching consists of searching for a full profile left at a crime scene in a National DNA Database (NDNAD). In this paper we are interested in the circumstance where no full match is returned, but a partial match is found between a database member's profile and the crime stain. Because close relatives share more of their DNA than unrelated persons, this partial match may indicate that the crime stain was left by a close relative of the person with whom the partial match was found. This approach has successfully solved important crimes in the UK and the USA. In a previous paper, a model, which takes into account substructure and siblings, was used to simulate a NDNAD. In this paper, we have used this model to test the usefulness of familial searching and offer guidelines for pre-assessment of the cases based on the likelihood ratio. Siblings of "persons" present in the simulated Swiss NDNAD were created. These profiles (N=10,000) were used as traces and were then compared to the whole database (N=100,000). The statistical results obtained show that the technique has great potential confirming the findings of previous studies. However, effectiveness of the technique is only one part of the story. Familial searching has juridical and ethical aspects that should not be ignored. In Switzerland for example, there are no specific guidelines to the legality or otherwise of familial searching. This article both presents statistical results, and addresses criminological and civil liberties aspects to take into account risks and benefits of familial searching.

Probability distribution of the radionuclide half-lives

Power law distributions, a well-known model in the theory of real random variables, characterize a wide variety of natural and man made phenomena. The intensity of earthquakes, the word frequencies, the solar ares and the sizes of power outages are distributed according to a power law distribution. Recently, given the usage of power laws in the scientific community, several articles have been published criticizing the statistical methods used to estimate the power law behaviour and establishing new techniques to their estimation with proven reliability. The main object of the present study is to go in deep understanding of this kind of distribution and its analysis, and introduce the half-lives of the radioactive isotopes as a new candidate in the nature following a power law distribution, as well as a \canonical laboratory" to test statistical methods appropriate for long-tailed distributions.

Clustering algorithms for anti-money laundering using graph theory and social network analysis

HEMOLIA (a project under European community’s 7th framework programme) is a new generation Anti-Money Laundering (AML) intelligent multi-agent alert and investigation system which in addition to the traditional financial data makes extensive use of modern society’s huge telecom data source, thereby opening up a new dimension of capabilities to all Money Laundering fighters (FIUs, LEAs) and Financial Institutes (Banks, Insurance Companies, etc.). This Master-Thesis project is done at AIA, one of the partners for the HEMOLIA project in Barcelona. The objective of this thesis is to find the clusters in a network drawn by using the financial data. An extensive literature survey has been carried out and several standard algorithms related to networks have been studied and implemented. The clustering problem is a NP-hard problem and several algorithms like K-Means and Hierarchical clustering are being implemented for studying several problems relating to sociology, evolution, anthropology etc. However, these algorithms have certain drawbacks which make them very difficult to implement. The thesis suggests (a) a possible improvement to the K-Means algorithm, (b) a novel approach to the clustering problem using the Genetic Algorithms and (c) a new algorithm for finding the cluster of a node using the Genetic Algorithm.

JULIDE: a software tool for 3D reconstruction and statistical analysis of autoradiographic mouse brain sections.

In this article we introduce JULIDE, a software toolkit developed to perform the 3D reconstruction, intensity normalization, volume standardization by 3D image registration and voxel-wise statistical analysis of autoradiographs of mouse brain sections. This software tool has been developed in the open-source ITK software framework and is freely available under a GPL license. The article presents the complete image processing chain from raw data acquisition to 3D statistical group analysis. Results of the group comparison in the context of a study on spatial learning are shown as an illustration of the data that can be obtained with this tool.

Statistical discrimination of steroid profiles in doping control with support vector machines.

Due to their performance enhancing properties, use of anabolic steroids (e.g. testosterone, nandrolone, etc.) is banned in elite sports. Therefore, doping control laboratories accredited by the World Anti-Doping Agency (WADA) screen among others for these prohibited substances in urine. It is particularly challenging to detect misuse with naturally occurring anabolic steroids such as testosterone (T), which is a popular ergogenic agent in sports and society. To screen for misuse with these compounds, drug testing laboratories monitor the urinary concentrations of endogenous steroid metabolites and their ratios, which constitute the steroid profile and compare them with reference ranges to detect unnaturally high values. However, the interpretation of the steroid profile is difficult due to large inter-individual variances, various confounding factors and different endogenous steroids marketed that influence the steroid profile in various ways. A support vector machine (SVM) algorithm was developed to statistically evaluate urinary steroid profiles composed of an extended range of steroid profile metabolites. This model makes the interpretation of the analytical data in the quest for deviating steroid profiles feasible and shows its versatility towards different kinds of misused endogenous steroids. The SVM model outperforms the current biomarkers with respect to detection sensitivity and accuracy, particularly when it is coupled to individual data as stored in the Athlete Biological Passport.

Luck and the control theory of knowledge

The dissertation accomplishes two aims: 1) to diagnose what prevents true beliefs from being knowledge; 2) to give an positive account of knowledge. Concerning the first aim, it offers an account of the notion of luck. It defends the view that luck is a form of risk and distinguishes two types of luck. Then, it applies the account to the problem of epistemic luck and distinguishes, accordingly, two types of epistemic luck. It is argued that these two types of epistemic luck explain the whole range of cases of not-known true belief. Concerning the second aim, the dissertation advances an account of knowledge in terms of the notion of cognitive control that deals with the two forms of epistemic luck distinguished.

What makes articles highly cited?

We examined drivers of article citations using 776 articles that were published from 1990-2012 in a broad-based and high-impact social sciences journal, The Leadership Quarterly. These articles had 1,191 unique authors having published and received in total (at the time of their most recent article published in our dataset) 16,817 articles and 284,777 citations, respectively. Our models explained 66.6% of the variance in citations and showed that quantitative, review, method, and theory articles were significantly more cited than were qualitative articles or agent-based simulations. As concerns quantitative articles, which constituted the majority of the sample, our model explained 80.3% of the variance in citations; some methods (e.g., use of SEM) and designs (e.g., meta-analysis), as well as theoretical approaches (e.g., use of transformational, charismatic, or visionary type-leadership theories) predicted higher article citations. Regarding the statistical conclusion validity of quantitative articles, articles having endogeneity threats received significantly fewer citations than did those using a more robust design or an estimation procedure that ensured correct causal estimation. We make several general recommendations on how to improve research practice and article citations.