A framework for valuing derivative securities

This paper develops a general framework for valuing a wide range of derivative securities. Rather than focusing on the stochastic process of the underlying security and developing an instantaneously-riskless hedge portfolio, we focus on the terminal distribution of the underlying security. This enables the derivative security to be valued as the weighted sum of a number of component pieces. The component pieces are simply the different payoffs that the security generates in different states of the world, and they are weighted by the probability of the particular state of the world occurring. A full set of derivations is provided. To illustrate its use, the valuation framework is applied to plain-vanilla call and put options, as well as a range of derivatives including caps, floors, collars, supershares, and digital options.

International market selection: Developing a model from Australian case studies

This paper develops a theory that firms seek out new country markets on the basis of expected commercial returns. These expectations depend on judgements about the attractiveness of the market and the firm's competitive position in it, which in turn are influenced by informants. It is the number and strengths of these informants that will underlie the probability of a country being identified and assessed as a new market by any firm.

Predictors of non-response to a questionnaire survey of a volunteer twin panel: Findings from the Australian 1989 twin cohort

Questionnaire surveys, while more economical, typically achieve poorer response rates than interview surveys. We used data from a national volunteer cohort of young adult twins, who were scheduled for assessment by questionnaire in 1989 and by interview in 1996-2000, to identify predictors of questionnaire non-response. Out of a total of 8536 twins, 5058 completed the questionnaire survey (59% response rate), and 6255 completed a telephone interview survey conducted a decade later (73% response rate). Multinomial logit models were fitted to the interview data to identify socioeconomic, psychiatric and health behavior correlates of non-response in the earlier questionnaire survey. Male gender, education below University level, and being a dizygotic rather than monozygotic twin, all predicted reduced likelihood of participating in the questionnaire survey. Associations between questionnaire response status and psychiatric history and health behavior variables were modest, with history of alcohol dependence and childhood conduct disorder predicting decreased probability of returning a questionnaire, and history of smoking and heavy drinking more weakly associated with non-response. Body-mass index showed no association with questionnaire non-response. Despite a poor response rate to the self-report questionnaire survey, we found only limited sampling biases for most variables. While not appropriate for studies where socioeconomic variables are critical, it appears that survey by questionnaire, with questionnaire administration by telephone to non-responders, will represent a viable strategy for gene-mapping studies requiring that large numbers of relatives be screened.

Stimulus competition in affective and relational learning

Evaluative learning theory states that affective learning, the acquisition of likes and dislikes, is qualitatively different from relational learning, the learning of predictive relationships among stimuli. Three experiments tested the prediction derived from evaluative learning theory that relational learning, but not affective learning, is affected by stimulus competition by comparing performance during two conditional stimuli, one trained in a superconditioning procedure and the other in a blocking procedure. Ratings of unconditional stimulus expectancy and electrodermal responses indicated stimulus competition in relational learning. Evidence for stimulus competition in affective learning was provided by verbal ratings of conditional stimulus pleasantness and by measures of blink startle modulation. Taken together, the present experiments demonstrate stimulus competition in relational and affective learning, a result inconsistent with evaluative learning theory. (C) 2001 Academic Press.

Does affective learning exist in the absence of contingency awareness?

The proposal that affective learning, the learning of likes and dislikes, can exist in the absence of contingency awareness, whereas signal learning, the learning of stimulus relationships, cannot, was investigated in a differential conditioning paradigm that was embedded in a visual masking task. Startle magnitude modulation and changes in verbal ratings served as measures of affective learning, whereas skin conductance was taken to reflect signal learning. Awareness was assessed online with an expectancy dial and in a postexperimental questionnaire. Both between-subject comparisons of verbalizers and nonverbalizers and within-subject comparisons of verbalizers before and after verbalization failed to reveal any evidence for learning, whether affective or otherwise, in the absence of knowledge of the stimulus contingencies. (C) 2001 Academic Press.

The evolution of controlled multitasked gene networks: The role of introns and other noncoding RNAs in the development of complex organisms

Eukaryotic phenotypic diversity arises from multitasking of a core proteome of limited size. Multitasking is routine in computers, as well as in other sophisticated information systems, and requires multiple inputs and outputs to control and integrate network activity. Higher eukaryotes have a mosaic gene structure with a dual output, mRNA (protein-coding) sequences and introns, which are released from the pre-mRNA by posttranscriptional processing. Introns have been enormously successful as a class of sequences and comprise up to 95% of the primary transcripts of protein-coding genes in mammals. In addition, many other transcripts (perhaps more than half) do not encode proteins at all, but appear both to be developmentally regulated and to have genetic function. We suggest that these RNAs (eRNAs) have evolved to function as endogenous network control molecules which enable direct gene-gene communication and multitasking of eukaryotic genomes. Analysis of a range of complex genetic phenomena in which RNA is involved or implicated, including co-suppression, transgene silencing, RNA interference, imprinting, methylation, and transvection, suggests that a higher-order regulatory system based on RNA signals operates in the higher eukaryotes and involves chromatin remodeling as well as other RNA-DNA, RNA-RNA, and RNA-protein interactions. The evolution of densely connected gene networks would be expected to result in a relatively stable core proteome due to the multiple reuse of components, implying,that cellular differentiation and phenotypic variation in the higher eukaryotes results primarily from variation in the control architecture. Thus, network integration and multitasking using trans-acting RNA molecules produced in parallel with protein-coding sequences may underpin both the evolution of developmentally sophisticated multicellular organisms and the rapid expansion of phenotypic complexity into uncontested environments such as those initiated in the Cambrian radiation and those seen after major extinction events.

Cognitive behaviour therapy for the management of obsessive-compulsive disorder

Current research reflects conflict regarding best practice in the treatment of obsessive-compulsive disorder (OCD). The. present study reports on the psychological treatment of a 54-year-old woman diagnosed with OCD, and follows the implementation of pharmacological treatment. The study utilises both exposure and response prevention (ERP) and cognitive therapy (CT), although there was no attempt to compare these approaches in an experimental design. Measures of avoiding and neutralising behaviours were taken on three occasions across treatment. Measures were also taken of intrusive thoughts, appraisal of responsibility, and effective challenging, both across treatment and at follow-up. The results indicate that gains were made in addition to those reported following the implementation of medication. The results also suggest that the addition of CT to exposure and response prevention facilitates the extinction of neutralising behaviours.

Fitting mixtures of Kent distributions to aid in joint set identification

When examining a rock mass, joint sets and their orientations can play a significant role with regard to how the rock mass will behave. To identify joint sets present in the rock mass, the orientation of individual fracture planer can be measured on exposed rock faces and the resulting data can be examined for heterogeneity. In this article, the expectation-maximization algorithm is used to lit mixtures of Kent component distributions to the fracture data to aid in the identification of joint sets. An additional uniform component is also included in the model to accommodate the noise present in the data.

Postmenopausal Hormone Use, Screening, and Breast Cancer: Characterization and Control of a Bias

Previous investigators have suggested that screening-related biases may explain associations between postmenopausal hormone use and breast cancer. To investigate these biases, we studied postmenopausal women in the Nurses' Health Study from 1988 to 1994. Hormone use is associated with increased subsequent screening. Among women not screened in the previous 2 years, the probability difference, comparing current hormone users with others, for having mammography in the following 2 years is 19.5%; among women previously screened, the difference is 4.9%. These differences persist after control for other factors. If the increase in screening is causal, screening by mammogram could be intermediate in the causal pathway to breast cancer diagnosis. To deal with this problem, we restrict attention to a subset of the cohort in which the effect of postmenopausal hormone use on screening is small (women previously screened). In this subset, the rate ratio comparing breast cancer rates among current postmenopausal hormone users with others is 1.28. In a sensitivity analysis, the bias could not by itself plausibly account for the associations in our data. Our data provide evidence of an association between postmenopausal hormone use and breast cancer that is not solely the product of a detection bias.

Separable states are more disordered globally than locally

A remarkable feature of quantum entanglement is that an entangled state of two parties, Alice (A) and Bob (B), may be more disordered locally than globally. That is, S(A) > S(A, B), where S() is the von Neumann entropy. It is known that satisfaction of this inequality implies that a state is nonseparable. In this paper we prove the stronger result that for separable states the vector of eigenvalues of the density matrix of system AB is majorized by the vector of eigenvalues of the density matrix of system A alone. This gives a strong sense in which a separable state is more disordered globally than locally and a new necessary condition for separability of bipartite states in arbitrary dimensions.

Briefing: Factored material properties and limit state loads-unlikely extreme or impossible pretense

In the limit state design (LSD) method each design criterion is formally stated and assessed using a performance function. The performance function defines the relationship between the design parameters and the design criterion. In practice, LSD involves factoring up loads and factoring down calculated strengths and material parameters. This provides a convenient way to carry out routine probabilistic-based design. The factors are statistically calculated to produce a design with an acceptably low probability of failure. Hence the ultimate load and the design material properties are mathematical concepts that have no physical interpretation. They may be physically impossible. Similarly, the appropriate analysis model is also defined by the performance function and may not describe the real behaviour at the perceived physical equivalent limit condition. These points must be understood to avoid confusion in the discussion and application of partial factor LSD methods.

Using clusters of computers for large QU-GENE simulation experiments

The QU-GENE Computing Cluster (QCC) is a hardware and software solution to the automation and speedup of large QU-GENE (QUantitative GENEtics) simulation experiments that are designed to examine the properties of genetic models, particularly those that involve factorial combinations of treatment levels. QCC automates the management of the distribution of components of the simulation experiments among the networked single-processor computers to achieve the speedup.

A for stage III and IV squamous carcinoma of the head and neck: a Trans-Tasman Radiation Oncology Group Study

Purpose: The aims of this randomized controlled trial were to determine whether there were differences in the disease-free survival (DFS) and toxicity between conventional radiotherapy (CRT) and a continuous 3 week accelerated radiotherapy regimen (ART) in stage III and IV squamous cell carcinoma of the oral cavity, oropharynx, larynx and hypopharynx. Patients and methods: Patients from 14 centres throughout Australia and New Zealand were randomly assigned to either CRT, using a single 2 Gy/day to a dose of 70 Gy in 35 fractions in 49 days or to ART, using 1.8 Gy twice a day to a dose of 59.4 Gy in 33 fractions in 24 days. Treatment allocation was stratified for site and stage. The accrual began in 1991 and the trial was closed in 1998 when the target of 350 patients was reached. Results: The median potential follow-up time was 53 months (range, 14-101). The DFS at 5 years was 41% (95% CI, 33-50%) for ART and 35% (95% CI, 27-43%) for CRT (P = 0.323) and the hazard ratio was 0.87 in favour of ART (95% CI, 0.66-1.15). The 5-year disease-specific survival rates were 40% for CRT and 46% for ART (P = 0.398) and the loco-regional control was 47% for CRT vs. 52% for ART (P = 0.300). The respective hazard ratios were 0.88 (95% CI, 0.65-1.2) and 0.85 (0.62-1.16), favouring the accelerated arm. In the ART arm, confluent mucositis was more severe (94 vs. 71%; P < 0.001) and peaked about 3 weeks earlier than in the CRT arm, but healing appeared complete in all cases. There were statistically significant reductions in the probability of grade 2 or greater late soft tissue effects over time in the ART arm (P < 0.05), except for the mucous membrane where late effects were similar in both arms. Conclusions: Differences in DFS, disease-specific survival and loco-regional control have not been demonstrated. ART resulted in more acute mucosal toxicity, but this did not result in greater prolongation of the treatment time compared with the CRT arm. There were less late effects in the ART arm, with the exception of late mucosal effects. This trial has confirmed that tumour cell repopulation occurs during conventionally fractionated radiotherapy for head and neck cancer. However, it has also provided additional evidence that overall improvements in the therapeutic ratio using accelerated fractionation strategies are seriously constrained by the need to limit total doses to levels that do not exceed acute mucosal tolerance. The accelerated schedule tested has been shown in this trial to be an acceptable alternative to conventionally fractionated irradiation to 70 Gy. (C) 2001 Elsevier Science Ireland Ltd. All rights reserved.

Outcomes of transient evoked otoacoustic emission testing in 6-year-old school children: A comparison with pure tone screening and tympanometry

Objectives: (1) To establish test performance measures for Transient Evoked Otoacoustic Emission testing of 6-year-old children in a school setting; (2) To investigate whether Transient Evoked Otoacoustic Emission testing provides a more accurate and effective alternative to a pure tone screening plus tympanometry protocol. Methods: Pure tone screening, tympanometry and transient evoked otoacoustic emission data were collected from 940 subjects (1880 ears), with a mean age of 6.2 years. Subjects were tested in non-sound-treated rooms within 22 schools. Receiver operating characteristics curves along with specificity, sensitivity, accuracy and efficiency values were determined for a variety of transient evoked otoacoustic emission/pure tone screening/tympanometry comparisons. Results: The Transient Evoked Otoacoustic Emission failure rate for the group was 20.3%. The failure rate for pure tone screening was found to be 8.9%, whilst 18.6% of subjects failed a protocol consisting of combined pure tone screening and tympanometry results. In essence, findings from the comparison of overall Transient Evoked Otoacoustic Emission pass/fail with overall pure tone screening pass/fail suggested that use of a modified Rhode Island Hearing Assessment Project criterion would result in a very high probability that a child with a pass result has normal hearing (true negative). However, the hit rate was only moderate. Selection of a signal-to-noise ratio (SNR) criterion set at greater than or equal to 1 dB appeared to provide the best test performance measures for the range of SNR values investigated. Test performance measures generally declined when tympanometry results were included, with the exception of lower false alarm rates and higher positive predictive values. The exclusion of low frequency data from the Transient Evoked Otoacoustic Emission SNR versus pure tone screening analysis resulted in improved performance measures. Conclusions: The present study poses several implications for the clinical implementation of Transient Evoked Otoacoustic Emission screening for entry level school children. Transient Evoked Otoacoustic Emission pass/fail criteria will require revision. The findings of the current investigation offer support to the possible replacement of pure tone screening with Transient Evoked Otoacoustic Emission testing for 6-year-old children. However, they do not suggest the replacement of the pure tone screening plus tympanometry battery. (C) 2001 Elsevier Science Ireland Ltd. All rights reserved.

Can long-distance dispersal be inferred from the New Zealand plant fossil record?

New Zealand is generally thought to have been physically isolated from the rest of the world for over 60 million years. But physical isolation may not mean biotic isolation, at least on the time scale of millions of years. Are New Zealand's present complement of plants the direct descendants of what originally rafted from Gondwana? Or has there been total extinction of this initial flora with replacement through long-distance dispersal (a complete biotic turnover)? These are two possible extremes which have come under recent discussion. Can the fossil record be used to decide the relative importance of the two endpoints, or is it simply too incomplete and too dependent on factors of chance? This paper suggests two approaches to the problem-the use of statistics to apply levels of confidence to first appearances in the fossil record and the analysis of trends based on the entire palynorecord. Statistics can suggest that the first appearance of a taxon was after New Zealand broke away from Gondwana-as long as the first appearance in the record was not due to an increase in biomass from an initially rare state. Two observations can be drawn from the overall palynorecord that are independent of changes in biomass: (1) The first appearance of palynotaxa common to both Australia and New Zealand is decidedly non-random. Most taxa occur first in Australia. This suggests a bias in air or water transport from west to east. (2) The percentage of endemic palynospecies in New Zealand shows no simple correlation with the time New Zealand drifted into isolation. The conifer macrorecord also hints at complete turnover since the Cretaceous.