Modeling Multivariate Interest Rates Using Time-Varying Copulas and Reducible Nonlinear Stochastic Differential Equations

We propose a new approach for modeling nonlinear multivariate interest rate processes based on time-varying copulas and reducible stochastic differential equations (SDEs). In the modeling of the marginal processes, we consider a class of nonlinear SDEs that are reducible to Ornstein--Uhlenbeck (OU) process or Cox, Ingersoll, and Ross (1985) (CIR) process. The reducibility is achieved via a nonlinear transformation function. The main advantage of this approach is that these SDEs can account for nonlinear features, observed in short-term interest rate series, while at the same time leading to exact discretization and closed-form likelihood functions. Although a rich set of specifications may be entertained, our exposition focuses on a couple of nonlinear constant elasticity volatility (CEV) processes, denoted as OU-CEV and CIR-CEV, respectively. These two processes encompass a number of existing models that have closed-form likelihood functions. The transition density, the conditional distribution function, and the steady-state density function are derived in closed form as well as the conditional and unconditional moments for both processes. In order to obtain a more flexible functional form over time, we allow the transformation function to be time varying. Results from our study of U.S. and UK short-term interest rates suggest that the new models outperform existing parametric models with closed-form likelihood functions. We also find the time-varying effects in the transformation functions statistically significant. To examine the joint behavior of interest rate series, we propose flexible nonlinear multivariate models by joining univariate nonlinear processes via appropriate copulas. We study the conditional dependence structure of the two rates using Patton (2006a) time-varying symmetrized Joe--Clayton copula. We find evidence of asymmetric dependence between the two rates, and that the level of dependence is positively related to the level of the two rates. (JEL: C13, C32, G12) Copyright The Author 2010. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org, Oxford University Press.

Linear and nonlinear properties of Rao-dust-Alfven waves in magnetized plasmas

The linear and nonlinear properties of the Rao-dust-magnetohydrodynamic (R-D-MHD) waves in a dusty magnetoplasma are studied. By employing the inertialess electron equation of motion, inertial ion equation of motion, Ampere's law, Faraday's law, and the continuity equation in a plasma with immobile charged dust grains, the linear and nonlinear propagation of two-dimensional R-D-MHD waves are investigated. In the linear regime, the existence of immobile dust grains produces the Rao cutoff frequency, which is proportional to the dust charge density and the ion gyrofrequency. On the other hand, the dynamics of amplitude modulated R-D-MHD waves is governed by the cubic nonlinear Schrodinger equation. The latter has been derived by using the reductive perturbation technique and the two-timescale analysis which accounts for the harmonic generation nonlinearity in plasmas. The stability of the modulated wave envelope against non-resonant perturbations is studied. Finally, the possibility of localized envelope excitations is discussed. (C) 2004 American Institute of Physics.

Nonlinear modulation of transverse dust lattice waves in complex plasma crystals

The occurrence of the modulational instability in transverse dust lattice waves propagating in a one-dimensional dusty plasma crystal is investigated. The amplitude modulation mechanism, which is related to the intrinsic nonlinearity of the sheath electric field, is shown to destabilize the carrier wave under certain conditions, possibly leading to the formation of localized envelope excitations. Explicit expressions for the instability growth rate and threshold are presented and discussed. (C) 2004 American Institute of Physics.

Nonlinear theory of solitary waves associated with longitudinal particle motion in lattices - Application to longitudinal grain oscillations in a dust crystal

The nonlinear aspects of longitudinal motion of interacting point masses in a lattice are revisited, with emphasis on the paradigm of charged dust grains in a dusty plasma (DP) crystal. Different types of localized excitations, predicted by nonlinear wave theories, are reviewed and conditions for their occurrence (and characteristics) in DP crystals are discussed. Making use of a general formulation, allowing for an arbitrary (e.g. the Debye electrostatic or else) analytic potential form phi(r) and arbitrarily long site-to-site range of interactions, it is shown that dust-crystals support nonlinear kink-shaped localized excitations propagating at velocities above the characteristic DP lattice sound speed v(0). Both compressive and rarefactive kink-type excitations are predicted, depending on the physical parameter values, which represent pulse- (shock-)like coherent structures for the dust grain relative displacement. Furthermore, the existence of breather-type localized oscillations, envelope-modulated wavepackets and shocks is established. The relation to previous results on atomic chains as well as to experimental results on strongly-coupled dust layers in gas discharge plasmas is discussed.

Weakly nonlinear vertical dust grain oscillations in dusty plasma crystals in the presence of a magnetic field

The weakly nonlinear regime of transverse paramagnetic dust grain oscillations in dusty (complex) plasma crystals is discussed. The nonlinearity, which is related to the sheath electric/magnetic field(s) and to the intergrain (electrostatic/magnetic dipole) interactions, is shown to lead to the generation of phase harmonics and, in the case of propagating transverse dust-lattice modes, to the modulational instability of the carrier wave due to self-interaction. The stability profile depends explicitly on the form of the electric and magnetic fields in the plasma sheath. The long term evolution of the modulated wave packet, which is described by a nonlinear Schrodinger-type equation, may lead to propagating localized envelope structures whose exact forms are presented and discussed. Explicit suggestions for experimental investigations are put forward. (C) 2004 American Institute of Physics.

Lagrangian description of nonlinear dust-ion acoustic waves in dusty plasmas

An analytical model is presented for the description of nonlinear dust-ion-acoustic waves propagating in an unmagnetized, collisionless, three component plasma composed of electrons, ions and inertial dust grains. The formulation relies on a Lagrangian approach of the plasma fluid model. The modulational stability of the wave amplitude is investigated. Different types of localized envelope electrostatic excitations are shown to exist.

Nonlinear Lagrangian theory of envelope electrostatic plasma waves in a two-electron-temperature plasma

An analytical model based on Lagrangian variables is presented for the description of ion-acoustic waves propagating in an unmagnetized, collisionless, three-component plasma composed of inertial positive ions and two thermalized electron populations, characterized by different temperatures. The wave's amplitude is shown to be modulationally unstable. Different types of localized envelope electrostatic excitations are shown to exist, and their forms are analytically and numerically investigated in terms of the plasma dispersion and nonlinearity laws. These results are in qualitative agreement with satellite observations in the magnetosphere. (C) 2004 American Institute of Physics.

Complete nonlinear theory of longitudinal-to-transverse dust lattice mode coupling in a single-layer dusty plasma crystal

A comprehensive nonlinear model is put forward for coupled longitudinal to transverse displacements in a horizontal dust mono-layer, levitated under the combined influence of gravity and an electric and/or magnetic sheath field. A set of coupled nonlinear evolution equations are obtained in a discrete description, and a pair of coupled (Boussinesq-like) PDEs are obtained in the continuum approximation. Finally, the amplitude modulation of the coupled modes is discussed, pointing out the importance of the coupling. All these results are generic, i.e. valid for any assumed form of the inter-grain interaction potential U and the sheath potential Phi.

Weakly nonlinear effects associated with transverse oscillations in dusty plasma crystals

We study the amplitude modulation of transverse dust lattice waves (TDLW) propagating in a single- and double-layer dusty plasma (DP) crystal. It is shown that a modulational instability mechanism, which is related to an intrinsic nonlinearity of the sheath electric field, may occur under certain conditions. Possibility of the formation of localized excitations (envelope solitons) in the dusty plasma crystal is discussed.

Nonlinear propagation of electromagnetic waves in negative-refraction-index composite materials

We investigate the nonlinear propagation of electromagnetic waves in left-handed materials. For this purpose, we consider a set of coupled nonlinear Schrodinger (CNLS) equations, which govern the dynamics of coupled electric and magnetic field envelopes. The CNLS equations are used to obtain a nonlinear dispersion, which depicts the modulational stability profile of the coupled plane-wave solutions in left-handed materials. An exact (in)stability criterion for modulational interactions is derived, and analytical expressions for the instability growth rate are obtained.

Nonlinear compressional electromagnetic ion-cyclotron wavepackets in space plasmas

The parametric coupling between large amplitude magnetic field-aligned circularly polarized electromagnetic ion-cyclotron (EMIC) waves and ponderomotively driven ion-acoustic perturbations in magnetized space plasmas is considered. A cubic nonlinear Schrodinger equation for the modulated EMIC wave envelope is derived, and then solved analytically. The modulated EMIC waves are found to be stable (unstable) against ion-acoustic density perturbations, in the subsonic (supersonic, respectively) case, and they may propagate as "supersonic bright" ("subsonic dark", i.e. "black" or "grey") type envelope solitons, i.e. electric field pulses (holes, voids), associated with (co-propagating) density humps. Explicit bright and dark (black/grey) envelope excitation profiles are presented, and the relevance of our investigation to space plasmas is discussed.

Linear and nonlinear dynamics of a dust bicrystal consisting of positive and negative dust particles

A dusty plasma crystalline configuration consisting of charged dust grains of alternating charge sign (.../+/-/+/-/+/...) and mass is considered. Both charge and mass of each dust species are taken to be constant. Considering the equations of longitudinal motion, a dispersion relation for linear longitudinal vibrations is derived from first principles and then analyzed. Two harmonic modes are obtained, namely, an acoustic mode and an inverse-dispersive optic-like one. The nonlinear aspects of acoustic longitudinal dust grain motion are addressed via a generalized Boussinesq (and, alternatively, a generalized Korteweg-de Vries) description. (C) 2005 American Institute of Physics.

Nonlinear propagation of modulated ion-acoustic plasma waves in the presence of an electron beam

Theoretical and numerical studies are presented of the amplitude modulation of ion-acoustic waves (IAWs) in a plasma consisting of warm ions, Maxwellian electrons, and a cold electron beam. Perturbations parallel to the carrier IAW propagation direction have been investigated. The existence of four distinct linear ion acoustic modes is shown, each of which possesses a different behavior from the modulational stability point of view. The stability analysis, based on a nonlinear Schrodinger equation (NLSE) reveals that the IAW may become unstable. The stability criteria depend on the IAW carrier wave number, and also on the ion temperature, the beam velocity and the beam electron density. Furthermore, the occurrence of localized envelope structures (solitons) is investigated, from first principles. The numerical analysis shows that the two first modes (essentially IAWs, modified due to the beam) present a complex behavior, essentially characterized by modulational stability for large wavelengths and instability for shorter ones. Dark-type envelope excitations (voids, holes) occur in the former case, while bright-type ones (pulses) appear in the latter. The latter two modes are characterized by an intrinsic instability, as the frequency develops a finite imaginary part for small ionic temperature values. At intermediate temperatures, both bright- and dark-type excitations may exist, although the numerical landscape is intertwined between stability and instability regions.(c) 2006 American Institute of Physics.