Limiting conditional distributions for birth-death processes

In a recent paper [16], one of us identified all of the quasi-stationary distributions for a non-explosive, evanescent birth-death process for which absorption is certain, and established conditions for the existence of the corresponding limiting conditional distributions. Our purpose is to extend these results in a number of directions. We shall consider separately two cases depending on whether or not the process is evanescent. In the former case we shall relax the condition that absorption is certain. Furthermore, we shall allow for the possibility that the minimal process might be explosive, so that the transition rates alone will not necessarily determine the birth-death process uniquely. Although we shall be concerned mainly with the minimal process, our most general results hold for any birth-death process whose transition probabilities satisfy both the backward and the forward Kolmogorov differential equations.

Empirical Analysis of Credit Risk Regime Switching and Temporal Conditional Default Correlation in Credit Default Swap Valuation: The Market liquidity effect

In this paper, we extend the debate concerning Credit Default Swap valuation to include time varying correlation and co-variances. Traditional multi-variate techniques treat the correlations between covariates as constant over time; however, this view is not supported by the data. Secondly, since financial data does not follow a normal distribution because of its heavy tails, modeling the data using a Generalized Linear model (GLM) incorporating copulas emerge as a more robust technique over traditional approaches. This paper also includes an empirical analysis of the regime switching dynamics of credit risk in the presence of liquidity by following the general practice of assuming that credit and market risk follow a Markov process. The study was based on Credit Default Swap data obtained from Bloomberg that spanned the period January 1st 2004 to August 08th 2006. The empirical examination of the regime switching tendencies provided quantitative support to the anecdotal view that liquidity decreases as credit quality deteriorates. The analysis also examined the joint probability distribution of the credit risk determinants across credit quality through the use of a copula function which disaggregates the behavior embedded in the marginal gamma distributions, so as to isolate the level of dependence which is captured in the copula function. The results suggest that the time varying joint correlation matrix performed far superior as compared to the constant correlation matrix; the centerpiece of linear regression models.

Successive nonparametric estimation of conditional distributions

Spatial characterization of non-Gaussian attributes in earth sciences and engineering commonly requires the estimation of their conditional distribution. The indicator and probability kriging approaches of current nonparametric geostatistics provide approximations for estimating conditional distributions. They do not, however, provide results similar to those in the cumbersome implementation of simultaneous cokriging of indicators. This paper presents a new formulation termed successive cokriging of indicators that avoids the classic simultaneous solution and related computational problems, while obtaining equivalent results to the impractical simultaneous solution of cokriging of indicators. A successive minimization of the estimation variance of probability estimates is performed, as additional data are successively included into the estimation process. In addition, the approach leads to an efficient nonparametric simulation algorithm for non-Gaussian random functions based on residual probabilities.

Robust control of nonlinear stochastic systems by modelling conditional distributions of control signals

We introduce a novel inversion-based neuro-controller for solving control problems involving uncertain nonlinear systems that could also compensate for multi-valued systems. The approach uses recent developments in neural networks, especially in the context of modelling statistical distributions, which are applied to forward and inverse plant models. Provided that certain conditions are met, an estimate of the intrinsic uncertainty for the outputs of neural networks can be obtained using the statistical properties of networks. More generally, multicomponent distributions can be modelled by the mixture density network. In this work a novel robust inverse control approach is obtained based on importance sampling from these distributions. This importance sampling provides a structured and principled approach to constrain the complexity of the search space for the ideal control law. The performance of the new algorithm is illustrated through simulations with example systems.

A note on quasi-stationary distributions of birth-death processes and the SIS logistic epidemic

For Markov processes on the positive integers with the origin as an absorbing state, Ferrari, Kesten, Martinez and Picco studied the existence of quasi-stationary and limiting conditional distributions by characterizing quasi-stationary distributions as fixed points of a transformation Phi on the space of probability distributions on {1, 2,.. }. In the case of a birth-death process, the components of Phi(nu) can be written down explicitly for any given distribution nu. Using this explicit representation, we will show that Phi preserves likelihood ratio ordering between distributions. A conjecture of Kryscio and Lefevre concerning the quasi-stationary distribution of the SIS logistic epidemic follows as a corollary.

A new distribution on the simplex containing the Dirichlet family

The Dirichlet family owes its privileged status within simplex distributions to easyness of interpretation and good mathematical properties. In particular, we recall fundamental properties for the analysis of compositional data such as closure under amalgamation and subcomposition. From a probabilistic point of view, it is characterised (uniquely) by a variety of independence relationships which makes it indisputably the reference model for expressing the non trivial idea of substantial independence for compositions. Indeed, its well known inadequacy as a general model for compositional data stems from such an independence structure together with the poorness of its parametrisation. In this paper a new class of distributions (called Flexible Dirichlet) capable of handling various dependence structures and containing the Dirichlet as a special case is presented. The new model exhibits a considerably richer parametrisation which, for example, allows to model the means and (part of) the variance-covariance matrix separately. Moreover, such a model preserves some good mathematical properties of the Dirichlet, i.e. closure under amalgamation and subcomposition with new parameters simply related to the parent composition parameters. Furthermore, the joint and conditional distributions of subcompositions and relative totals can be expressed as simple mixtures of two Flexible Dirichlet distributions. The basis generating the Flexible Dirichlet, though keeping compositional invariance, shows a dependence structure which allows various forms of partitional dependence to be contemplated by the model (e.g. non-neutrality, subcompositional dependence and subcompositional non-invariance), independence cases being identified by suitable parameter configurations. In particular, within this model substantial independence among subsets of components of the composition naturally occurs when the subsets have a Dirichlet distribution

Equilibrium distributions of topological states in circular DNA: Interplay of supercoiling and knotting

Two variables define the topological state of closed double-stranded DNA: the knot type, K, and ΔLk, the linking number difference from relaxed DNA. The equilibrium distribution of probabilities of these states, P(ΔLk, K), is related to two conditional distributions: P(ΔLk|K), the distribution of ΔLk for a particular K, and P(K|ΔLk) and also to two simple distributions: P(ΔLk), the distribution of ΔLk irrespective of K, and P(K). We explored the relationships between these distributions. P(ΔLk, K), P(ΔLk), and P(K|ΔLk) were calculated from the simulated distributions of P(ΔLk|K) and of P(K). The calculated distributions agreed with previous experimental and theoretical results and greatly advanced on them. Our major focus was on P(K|ΔLk), the distribution of knot types for a particular value of ΔLk, which had not been evaluated previously. We found that unknotted circular DNA is not the most probable state beyond small values of ΔLk. Highly chiral knotted DNA has a lower free energy because it has less torsional deformation. Surprisingly, even at |ΔLk| > 12, only one or two knot types dominate the P(K|ΔLk) distribution despite the huge number of knots of comparable complexity. A large fraction of the knots found belong to the small family of torus knots. The relationship between supercoiling and knotting in vivo is discussed.

On the simultaneous use of clinical and microarray expression data in the cluster analysis of tissue samples

This paper considers a model-based approach to the clustering of tissue samples of a very large number of genes from microarray experiments. It is a nonstandard problem in parametric cluster analysis because the dimension of the feature space (the number of genes) is typically much greater than the number of tissues. Frequently in practice, there are also clinical data available on those cases on which the tissue samples have been obtained. Here we investigate how to use the clinical data in conjunction with the microarray gene expression data to cluster the tissue samples. We propose two mixture model-based approaches in which the number of components in the mixture model corresponds to the number of clusters to be imposed on the tissue samples. One approach specifies the components of the mixture model to be the conditional distributions of the microarray data given the clinical data with the mixing proportions also conditioned on the latter data. Another takes the components of the mixture model to represent the joint distributions of the clinical and microarray data. The approaches are demonstrated on some breast cancer data, as studied recently in van't Veer et al. (2002).

Quasistationarity of continuous-time Markov chains with positive drift

We shall study continuous-time Markov chains on the nonnegative integers which are both irreducible and transient, and which exhibit discernible stationarity before drift to infinity sets in. We will show how this 'quasi' stationary behaviour can be modelled using a limiting conditional distribution: specifically, the limiting state probabilities conditional on not having left 0 for the last time. By way of a dual chain, obtained by killing the original process on last exit from 0, we invoke the theory of quasistationarity for absorbing Markov chains. We prove that the conditioned state probabilities of the original chain are equal to the state probabilities of its dual conditioned on non-absorption, thus allowing us to establish the simultaneous existence and then equivalence, of their limiting conditional distributions. Although a limiting conditional distribution for the dual chain is always a quasistationary distribution in the usual sense, a similar statement is not possible for the original chain.

A copula-based method for synthetic microarray data generation

In this work, we propose a copula-based method to generate synthetic gene expression data that account for marginal and joint probability distributions features captured from real data. Our method allows us to implant significant genes in the synthetic dataset in a controlled manner, giving the possibility of testing new detection algorithms under more realistic environments.

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