Testing the Markov property with ultra high frequency financial data

This paper develops a framework to test whether discrete-valued irregularly-spaced financial transactions data follow a subordinated Markov process. For that purpose, we consider a specific optional sampling in which a continuous-time Markov process is observed only when it crosses some discrete level. This framework is convenient for it accommodates not only the irregular spacing of transactions data, but also price discreteness. Further, it turns out that, under such an observation rule, the current price duration is independent of previous price durations given the current price realization. A simple nonparametric test then follows by examining whether this conditional independence property holds. Finally, we investigate whether or not bid-ask spreads follow Markov processes using transactions data from the New York Stock Exchange. The motivation lies on the fact that asymmetric information models of market microstructures predict that the Markov property does not hold for the bid-ask spread. The results are mixed in the sense that the Markov assumption is rejected for three out of the five stocks we have analyzed.

On the Equality of Sharp and Germ - Fields for Gaussian Processes and Fields

2000 Mathematics Subject Classification: 60G15, 60G60; secondary 31B15, 31B25, 60H15

Identifying and correcting non-Markov states in peptide conformational dynamics

Conformational transitions in proteins define their biological activity and can be investigated in detail using the Markov state model. The fundamental assumption on the transitions between the states, their Markov property, is critical in this framework. We test this assumption by analyzing the transitions obtained directly from the dynamics of a molecular dynamics simulated peptide valine-proline-alanine-leucine and states defined phenomenologically using clustering in dihedral space. We find that the transitions are Markovian at the time scale of ˜ 50 ps and longer. However, at the time scale of 30–40 ps the dynamics loses its Markov property. Our methodology reveals the mechanism that leads to non-Markov behavior. It also provides a way of regrouping the conformations into new states that now possess the required Markov property of their dynamics.

Modelling data and voice traffic over IP networks using continuous-time Markov models

Common approaches to IP-traffic modelling have featured the use of stochastic models, based on the Markov property, which can be classified into black box and white box models based on the approach used for modelling traffic. White box models, are simple to understand, transparent and have a physical meaning attributed to each of the associated parameters. To exploit this key advantage, this thesis explores the use of simple classic continuous-time Markov models based on a white box approach, to model, not only the network traffic statistics but also the source behaviour with respect to the network and application. The thesis is divided into two parts: The first part focuses on the use of simple Markov and Semi-Markov traffic models, starting from the simplest two-state model moving upwards to n-state models with Poisson and non-Poisson statistics. The thesis then introduces the convenient to use, mathematically derived, Gaussian Markov models which are used to model the measured network IP traffic statistics. As one of the most significant contributions, the thesis establishes the significance of the second-order density statistics as it reveals that, in contrast to first-order density, they carry much more unique information on traffic sources and behaviour. The thesis then exploits the use of Gaussian Markov models to model these unique features and finally shows how the use of simple classic Markov models coupled with use of second-order density statistics provides an excellent tool for capturing maximum traffic detail, which in itself is the essence of good traffic modelling. The second part of the thesis, studies the ON-OFF characteristics of VoIP traffic with reference to accurate measurements of the ON and OFF periods, made from a large multi-lingual database of over 100 hours worth of VoIP call recordings. The impact of the language, prosodic structure and speech rate of the speaker on the statistics of the ON-OFF periods is analysed and relevant conclusions are presented. Finally, an ON-OFF VoIP source model with log-normal transitions is contributed as an ideal candidate to model VoIP traffic and the results of this model are compared with those of previously published work.

A general multiserver state-dependent queueing system

The work studies a general multiserver queue in which the service time of an arriving customer and the next interarrival period may depend on both the current waiting time and the server assigned to the arriving customer. Stability of the system is proved under general assumptions on the predetermined distributions describing the model. The proof exploits a combination of the Markov property of the workload process with a regenerative property of the process. The key idea leading to stability is a characterization of the limit behavior of the forward renewal process generated by regenerations. Extensions of the basic model are also studied.

Mutually catalytic branching at infinite rate

The purpose of this doctoral thesis is to prove existence for a mutually catalytic random walk with infinite branching rate on countably many sites. The process is defined as a weak limit of an approximating family of processes. An approximating process is constructed by adding jumps to a deterministic migration on an equidistant time grid. As law of jumps we need to choose the invariant probability measure of the mutually catalytic random walk with a finite branching rate in the recurrent regime. This model was introduced by Dawson and Perkins (1998) and this thesis relies heavily on their work. Due to the properties of this invariant distribution, which is in fact the exit distribution of planar Brownian motion from the first quadrant, it is possible to establish a martingale problem for the weak limit of any convergent sequence of approximating processes. We can prove a duality relation for the solution to the mentioned martingale problem, which goes back to Mytnik (1996) in the case of finite rate branching, and this duality gives rise to weak uniqueness for the solution to the martingale problem. Using standard arguments we can show that this solution is in fact a Feller process and it has the strong Markov property. For the case of only one site we prove that the model we have constructed is the limit of finite rate mutually catalytic branching processes as the branching rate approaches infinity. Therefore, it seems naturalto refer to the above model as an infinite rate branching process. However, a result for convergence on infinitely many sites remains open.

Interim analysis of clinical trials: Simulation studies of fractional Brownian motion

Interim clinical trial monitoring procedures were motivated by ethical and economic considerations. Classical Brownian motion (Bm) techniques for statistical monitoring of clinical trials were widely used. Conditional power argument and α-spending function based boundary crossing probabilities are popular statistical hypothesis testing procedures under the assumption of Brownian motion. However, it is not rare that the assumptions of Brownian motion are only partially met for trial data. Therefore, I used a more generalized form of stochastic process, called fractional Brownian motion (fBm), to model the test statistics. Fractional Brownian motion does not hold Markov property and future observations depend not only on the present observations but also on the past ones. In this dissertation, we simulated a wide range of fBm data, e.g., H = 0.5 (that is, classical Bm) vs. 0.5< H <1, with treatment effects vs. without treatment effects. Then the performance of conditional power and boundary-crossing based interim analyses were compared by assuming that the data follow Bm or fBm. Our simulation study suggested that the conditional power or boundaries under fBm assumptions are generally higher than those under Bm assumptions when H > 0.5 and also matches better with the empirical results. ^

On Limits to the Use of Linear Markov Strategies in Common Property Natural Resource Games

We derive conditions that must be satisfied by the primitives of the problem in order for an equilibrium in linear Markov strategies to exist in some common property natural resource differential games. These conditions impose restrictions on the admissible form of the natural growth function, given a benefit function, or on the admissible form of the benefit function, given a natural growth function.

The role of crystalline anisotropy in mechanical property extractions through Berkovich indentation

This work uses crystal plasticity finite element simulations to elucidate the role of elastoplastic anisotropy in instrumented indentation P-h(s) curve measurements in face-centered Cubic (fcc) crystals. It is shown that although the experimental fluctuations in the loading stage of the P-h(s) curves can be attributed to anisotropy, the variability in the unloading stage of the experiments Is much greater than that resulting from anisotropy alone. Moreover, it is found that the conventional procedure used to evaluate the contact variables ruling the unloading P-h(s) curve introduces all uncertainty that approximates to the more fundamental influence of anisotropy. In view of these results, a robust procedure is proposed that uses contact area measurements in addition to the P-h(s) curves to extract homogenized J(2)-Plasticity-equivalent mechanical properties from single crystals.

A critical reassessment of elastic unloading in sharp instrumented indentation experiments and the extraction of mechanical properties

This work examines the extraction of mechanical properties from instrumented indentation P-h(s) curves via extensive three-dimensional finite element analyses for pyramidal tips in a wide range of solids under frictional and frictionless contact conditions. Since the topography of the imprint changes with the level of pile-up or sink-in, a relationship is identified between correction factor beta in the elastic equation for the unloading indentation stage and the amount of surface deformation effects. It is shown that the presumption of a constant beta significantly affects mechanical property extractions. Consequently, a new best-fit function is found for the correlation between penetration depth ratios h(e)/h(max), h(r)/h(max) and n, circumventing the need for the assumption of a constant value for beta, made in our prior investigation [Acta Mater. 53 (2005) pp. 3545-3561]. Simulations under frictional contact conditions provide sensible boundaries for the influence of friction on both h(e)/h(max) and h(r)/h(max). Friction is essentially found to induce an overestimation in the inferred n. Instrumented indentation experiments are also performed in three archetypal metallic materials exhibiting distinctly different contact responses. Mechanical property extractions are finally demonstrated in each of these materials.

Ligand Design for Dual Property Single Molecule Magnets

This thesis describes two different approaches for the preparation of polynuclear clusters with interesting structural, magnetic and optical properties. Firstly, exploiting p-tert-butylcalix[4]arene (TBC4) macrocycles together with selected Ln(III) ions for the assembly of emissive single molecule magnets, and secondly the preparation and coordination of a chiral mpmH ligand with selected 3d transition metal ions, working towards the discovery of chiral polynuclear clusters. In Project 1, the coordination chemistry of the TBC4 macrocycle together with Dy(III) and Tb(III) afforded two Ln6[TBC4]2 complexes that have been structurally, magnetically and optically characterized. X-ray diffraction studies reveal that both complexes contain an octahedral core of Ln6 ions capped by two fully deprotonated TBC4 macrocycles. Although the unit cells of the two complexes are very similar, the coordination geometries of their Ln(III) ions are subtly different. Variable temperature ac magnetic susceptibility studies reveal that both complexes display single molecule magnet (SMM) behaviour in zero dc field and the energy barriers and associated pre-exponential factors for each relaxation process have been determined. Low temperature solid state photoluminescence studies reveal that both complexes are emissive; however, the f-f transitions within the Dy6 complex were masked by broad emissions from the TBC4 ligand. In contrast, the Tb(III) complex displayed green emission with the spectrum comprising four sharp bands corresponding to 5D4 → 7FJ transitions (where J = 3, 4, 5 and 6), highlighting that energy transfer from the TBC4 macrocycle to the Tb(III) ion is more effective than to Dy. Examples of zero field Tb(III) SMMs are scarce in the chemical literature and the Tb6[TBC4]2 complex represents the first example of a Tb(III) dual property SMM assembled from a p-tert-butylcalix[4]arene macrocycle with two magnetically derived energy barriers, Ueff of 79 and 63 K. In Project 2, the coordination of both enantiomers of the chiral ligand, α-methyl-2-pyridinemethanol (mpmH) to Ni(II) and Co(II) afforded three polynuclear clusters that have been structurally and magnetically characterized. The first complex, a Ni4 cluster of stoichiometry [Ni4(O2CCMe3)4(mpm)4]·H2O crystallizes in a distorted cubane topology that is well known in Ni(II) cluster chemistry. The final two Co(II) complexes crystallize as a linear mixed valence trimer with stoichiometry [Co3(mpm)6]·(ClO4)2, and a Co4 mixed valence complex [Co(II)¬2Co(III)2(NO3)2(μ-mpm)4(ONO2)2], whose structural topology resembles that of a defective double cubane. All three complexes crystallize in chiral space groups and circular dichroism experiments further confirm that the chirality of the ligand has been transferred to the respective coordination complex. Magnetic susceptibility studies reveal that for all three complexes, there are competing ferro- and antiferromagnetic exchange interactions. The [Co(II)¬2Co(III)2(NO3)2(μ-mpm)4(ONO2)2] complex represents the first example of a chiral mixed valence Co4 cluster with a defective double cubane topology.

On the Effects of Mergers on Equilibrium Outcomes in a Common Property Renewable Asset Oligopoly

This paper examines a dynamic game of exploitation of a common pool of some renewable asset by agents that sell the result of their exploitation on an oligopolistic market. A Markov Perfect Nash Equilibrium of the game is used to analyze the effects of a merger of a subset of the agents. We study the impact of the merger on the equilibrium production strategies, on the steady states, and on the profitability of the merger for its members. We show that there exists an interval of the asset's stock such that any merger is profitable if the stock at the time the merger is formed falls within that interval. That includes mergers that are known to be unprofitable in the corresponding static equilibrium framework.

Threshold autoregressive and Markov switching models: an application to commercial real estate

Although financial theory rests heavily upon the assumption that asset returns are normally distributed, value indices of commercial real estate display significant departures from normality. In this paper, we apply and compare the properties of two recently proposed regime switching models for value indices of commercial real estate in the US and the UK, both of which relax the assumption that observations are drawn from a single distribution with constant mean and variance. Statistical tests of the models' specification indicate that the Markov switching model is better able to capture the non-stationary features of the data than the threshold autoregressive model, although both represent superior descriptions of the data than the models that allow for only one state. Our results have several implications for theoretical models and empirical research in finance.

Stochastic exponential stability of singular linear systems with Markov jump parameters

This paper deals with exponential stability of discrete-time singular systems with Markov jump parameters. We propose a set of coupled generalized Lyapunov equations (CGLE) that provides sufficient conditions to check this property for this class of systems. A method for solving the obtained CGLE is also presented, based on iterations of standard singular Lyapunov equations. We present also a numerical example to illustrate the effectiveness of the approach we are proposing.

The reduced modulus in the analysis of sharp instrumented indentation tests

In the analysis of instrumented indentation data, it is common practice to incorporate the combined moduli of the indenter (E-i) and the specimen (E) in the so-called reduced modulus (E-r) to account for indenter deformation. Although indenter systems with rigid or elastic tips are considered as equivalent if E-r is the same, the validity of this practice has been questioned over the years. The present work uses systematic finite element simulations to examine the role of the elastic deformation of the indenter tip in instrumented indentation measurements and the validity of the concept of the reduced modulus in conical and pyramidal (Berkovich) indentations. It is found that the apical angle increases as a result of the indenter deformation, which influences in the analysis of the results. Based upon the inaccuracies introduced by the reduced modulus approximation in the analysis of the unloading segment of instrumented indentation applied load (P)-penetration depth (delta) curves, a detailed examination is then conducted on the role of indenter deformation upon the dimensionless functions describing the loading stages of such curves. Consequences of the present results in the extraction of the uniaxial stress-strain characteristics of the indented material through such dimensional analyses are finally illustrated. It is found that large overestimations in the assessment of the strain hardening behavior result by neglecting tip compliance. Guidelines are given in the paper to reduce such overestimations.