The benefit of modeling jumps in realized volatility for risk prediction : evidence from Chinese mainland stocks

Recent literature has focused on realized volatility models to predict financial risk. This paper studies the benefit of explicitly modeling jumps in this class of models for value at risk (VaR) prediction. Several popular realized volatility models are compared in terms of their VaR forecasting performances through a Monte Carlo study and an analysis based on empirical data of eight Chinese stocks. The results suggest that careful modeling of jumps in realized volatility models can largely improve VaR prediction, especially for emerging markets where jumps play a stronger role than those in developed markets.

Corporate credit risk prediction under stochastic volatility and jumps

This paper examines the impact of allowing for stochastic volatility and jumps (SVJ) in a structural model on corporate credit risk prediction. The results from a simulation study verify the better performance of the SVJ model compared with the commonly used Merton model, and three sources are provided to explain the superiority. The empirical analysis on two real samples further ascertains the importance of recognizing the stochastic volatility and jumps by showing that the SVJ model decreases bias in spread prediction from the Merton model, and better explains the time variation in actual CDS spreads. The improvements are found particularly apparent in small firms or when the market is turbulent such as the recent financial crisis.

Common Breast Cancer Susceptibility Alleles and the Risk of Breast Cancer for BRCA1 and BRCA2 Mutation Carriers: Implications for Risk Prediction

The known breast cancer susceptibility polymorphisms in FGFR2, TNRC9/TOX3, MAP3K1, LSP1, and 2q35 confer increased risks of breast cancer for BRCA1 or BRCA2 mutation carriers. We evaluated the associations of 3 additional single nucleotide polymorphisms (SNPs), rs4973768 in SLC4A7/NEK10, rs6504950 in STXBP4/COX11, and rs10941679 at 5p12, and reanalyzed the previous associations using additional carriers in a sample of 12,525 BRCA1 and 7,409 BRCA2 carriers. Additionally, we investigated potential interactions between SNPs and assessed the implications for risk prediction. The minor alleles of rs4973768 and rs10941679 were associated with increased breast cancer risk for BRCA2 carriers (per-allele HR - 1.10, 95% CI: 1.03-1.18, P - 0.006 and HR - 1.09, 95% CI: 1.01-1.19, P = 0.03, respectively). Neither SNP was associated with breast cancer risk for BRCA1 carriers, and rs6504950 was not associated with breast cancer for either BRCA1 or BRCA2 carriers. Of the 9 polymorphisms investigated, 7 were associated with breast cancer for BRCA2 carriers (FGFR2, TOX3, MAP3K1, LSP1, 2q35, SLC4A7, 5p12, P 7 = 10 x (11) - 0.03), but only TOX3 and 2q35 were associated with the risk for BRCA1 carriers (P = 0.0049, 0.03, respectively). All risk-associated polymorphisms appear to interact multiplicatively on breast cancer risk for mutation carriers. Based on the joint genotype distribution of the 7 risk-associated SNPs in BRCA2 mutation carriers, the 5% of BRCA2 carriers at highest risk (i.e., between 95th and 100th percentiles) were predicted to have a probability between 80% and 96% of developing breast cancer by age 80, compared with 42%

Genetic Markers Enhance Coronary Risk Prediction in Men: The MORGAM Prospective Cohorts

Background: More accurate coronary heart disease (CHD) prediction, specifically in middle-aged men, is needed to reduce the burden of disease more effectively. We hypothesised that a multilocus genetic risk score could refine CHD prediction beyond classic risk scores and obtain more precise risk estimates using a prospective cohort design.

Methods: Using data from nine prospective European cohorts, including 26,221 men, we selected in a case-cohort setting 4,818 healthy men at baseline, and used Cox proportional hazards models to examine associations between CHD and risk scores based on genetic variants representing 13 genomic regions. Over follow-up (range: 5-18 years), 1,736 incident CHD events occurred. Genetic risk scores were validated in men with at least 10 years of follow-up (632 cases, 1361 non-cases). Genetic risk score 1 (GRS1) combined 11 SNPs and two haplotypes, with effect estimates from previous genome-wide association studies. GRS2 combined 11 SNPs plus 4 SNPs from the haplotypes with coefficients estimated from these prospective cohorts using 10-fold cross-validation. Scores were added to a model adjusted for classic risk factors comprising the Framingham risk score and 10-year risks were derived.

Results: Both scores improved net reclassification (NRI) over the Framingham score (7.5%, p = 0.017 for GRS1, 6.5%, p = 0.044 for GRS2) but GRS2 also improved discrimination (c-index improvement 1.11%, p = 0.048). Subgroup analysis on men aged 50-59 (436 cases, 603 non-cases) improved net reclassification for GRS1 (13.8%) and GRS2 (12.5%). Net reclassification improvement remained significant for both scores when family history of CHD was added to the baseline model for this male subgroup improving prediction of early onset CHD events.

Conclusions: Genetic risk scores add precision to risk estimates for CHD and improve prediction beyond classic risk factors, particularly for middle aged men.

Risk prediction of prevalent diabetes in a Swiss population using a weighted genetic score--the CoLaus Study.

AIMS/HYPOTHESIS: Several susceptibility genes for type 2 diabetes have been discovered recently. Individually, these genes increase the disease risk only minimally. The goals of the present study were to determine, at the population level, the risk of diabetes in individuals who carry risk alleles within several susceptibility genes for the disease and the added value of this genetic information over the clinical predictors. METHODS: We constructed an additive genetic score using the most replicated single-nucleotide polymorphisms (SNPs) within 15 type 2 diabetes-susceptibility genes, weighting each SNP with its reported effect. We tested this score in the extensively phenotyped population-based cross-sectional CoLaus Study in Lausanne, Switzerland (n = 5,360), involving 356 diabetic individuals. RESULTS: The clinical predictors of prevalent diabetes were age, BMI, family history of diabetes, WHR, and triacylglycerol/HDL-cholesterol ratio. After adjustment for these variables, the risk of diabetes was 2.7 (95% CI 1.8-4.0, p = 0.000006) for individuals with a genetic score within the top quintile, compared with the bottom quintile. Adding the genetic score to the clinical covariates improved the area under the receiver operating characteristic curve slightly (from 0.86 to 0.87), yet significantly (p = 0.002). BMI was similar in these two extreme quintiles. CONCLUSIONS/INTERPRETATION: In this population, a simple weighted 15 SNP-based genetic score provides additional information over clinical predictors of prevalent diabetes. At this stage, however, the clinical benefit of this genetic information is limited.

A Meta-Analysis of Trabecular Bone Score in Fracture Risk Prediction and Its Relationship to FRAX.

Trabecular bone score (TBS) is a gray-level textural index of bone microarchitecture derived from lumbar spine dual-energy X-ray absorptiometry (DXA) images. TBS is a bone mineral density (BMD)-independent predictor of fracture risk. The objective of this meta-analysis was to determine whether TBS predicted fracture risk independently of FRAX probability and to examine their combined performance by adjusting the FRAX probability for TBS. We utilized individual-level data from 17,809 men and women in 14 prospective population-based cohorts. Baseline evaluation included TBS and the FRAX risk variables, and outcomes during follow-up (mean 6.7 years) comprised major osteoporotic fractures. The association between TBS, FRAX probabilities, and the risk of fracture was examined using an extension of the Poisson regression model in each cohort and for each sex and expressed as the gradient of risk (GR; hazard ratio per 1 SD change in risk variable in direction of increased risk). FRAX probabilities were adjusted for TBS using an adjustment factor derived from an independent cohort (the Manitoba Bone Density Cohort). Overall, the GR of TBS for major osteoporotic fracture was 1.44 (95% confidence interval [CI] 1.35-1.53) when adjusted for age and time since baseline and was similar in men and women (p > 0.10). When additionally adjusted for FRAX 10-year probability of major osteoporotic fracture, TBS remained a significant, independent predictor for fracture (GR = 1.32, 95% CI 1.24-1.41). The adjustment of FRAX probability for TBS resulted in a small increase in the GR (1.76, 95% CI 1.65-1.87 versus 1.70, 95% CI 1.60-1.81). A smaller change in GR for hip fracture was observed (FRAX hip fracture probability GR 2.25 vs. 2.22). TBS is a significant predictor of fracture risk independently of FRAX. The findings support the use of TBS as a potential adjustment for FRAX probability, though the impact of the adjustment remains to be determined in the context of clinical assessment guidelines. © 2015 American Society for Bone and Mineral Research.

Cardiovascular risk prediction model development and assessment

The aim of this article is to review the development and assessment of cardiovascular risk prediction models and to discuss the predictive value of a risk factor as well as to introduce new assessment methods to evaluate a risk prediction model. Many cardiovascular risk prediction models have been developed during the past three decades. However, there has not been consistent agreement regarding how to appropriately assess a risk prediction model, especially when new markers are added to an existing model. The area under the receiver operating characteristic (ROC) curve has traditionally been used to assess the discriminatory ability of a risk prediction model. However, recent studies suggest that this method has its limitations and cannot be the sole approach to evaluate the usefulness of a new marker. New assessment methods are being developed to appropriately assess a risk prediction model and they will be gradually used in clinical and epidemiological studies.

Overview of risk prediction models in cardiovascular disease research

Many risk prediction models have been developed for cardiovascular diseases in different countries during the past three decades. However, there has not been consistent agreement regarding how to appropriately assess a risk prediction model, especially when new markers are added to an established risk prediction model. Researchers often use the area under the receiver operating characteristic curve (ROC) to assess the discriminatory ability of a risk prediction model. However, recent studies suggest that this method has serious limitations and cannot be the sole approach to evaluate the usefulness of a new marker in clinical and epidemiological studies. To overcome the shortcomings of this traditional method, new assessment methods have been proposed. The aim of this article is to overview various risk prediction models for cardiovascular diseases, to describe the receiver operating characteristic curve method and discuss some new assessment methods proposed recently. Some of the methods were illustrated with figures from a cardiovascular disease study in Australia.