Fitting Weibull ACD Models to High Frequency Transactions Data: A Semi-parametric Approach based on Estimating Functions

Autoregressive conditional duration (ACD) models play an important role in financial modeling. This paper considers the estimation of the Weibull ACD model using a semi-parametric approach based on the theory of estimating functions (EF). We apply the EF and the maximum likelihood (ML) methods to a data set given in Tsay (2003, p203) to compare these two methods. It is shown that the EF approach is easier to apply in practice and gives better estimates than the MLE. Results show that the EF approach is compatible with the ML method in parameter estimation. Furthermore, the computation speed for the EF approach is much faster than for the MLE and therefore offers a significant reduction of the completion time.Volatility, Option pricing, Volatility of volatility, Forecasting

KWM: Knowledge-based Workflow Model for agile organization

The workflow management system (WFMS) in an agile organization should be highly adaptable to the frequent organizational changes. To increase the adaptability of contemporary WFMSs, a mechanism for managing changes within the organizational structure and changes in business rules needs to be reinforced. In this paper, a knowledge-based approach for workflow modeling is proposed, in which a workflow is defined as a set of business rules. Knowledge on the organizational structure and special workflow, such as role/actor mappings and complex routing rules, can be explicitly modeled in KWM (Knowledge-based Workflow Model). Using knowledge representation scheme and dependency management facility, a change propagation mechanism is provided to adapt to the frequent changes in the organizational structure, business rules, and procedures

A Model of the Cellular Iron Homeostasis Network Using Semi-Formal Methods for Parameter Space Exploration

This paper presents a novel framework for the modeling of biological networks. It makes use of recent tools analyzing the robust satisfaction of properties of (hybrid) dynamical systems. The main challenge of this approach as applied to biological systems is to get access to the relevant parameter sets despite gaps in the available knowledge. An initial estimate of useful parameters was sought by formalizing the known behavior of the biological network in the STL logic using the tool Breach. Then, once a set of parameter values consistent with known biological properties was found, we tried to locally expand it into the largest possible valid region. We applied this methodology in an effort to model and better understand the complex network regulating iron homeostasis in mammalian cells. This system plays an important role in many biological functions, including erythropoiesis, resistance against infections, and proliferation of cancer cells.Comment: In Proceedings HSB 2012, arXiv:1208.315

Modeling Support for Role-Based Delegation in Process-Aware Information Systems

In the paper, an integrated approach for the modeling and enforcement of delegation policies in process-aware information systems is presented. In particular, a delegation extension for process-related role-based access control (RBAC) models is specified. The extension is generic in the sense that it can be used to extend process-aware information systems or process modeling languages with support for processrelated RBAC delegationmodels.Moreover, the detection of delegation-related conflicts is discussed and a set of pre-defined resolution strategies for each potential conflict is provided. Thereby, the design-time and runtime consistency of corresponding RBAC delegation models can be ensured. Based on a formal metamodel, UML2 modeling support for the delegation of roles, tasks, and duties is provided. A corresponding case study evaluates the practical applicability of the approach with real-world business processes. Moreover, the approach is implemented as an extension to the BusinessActivity library and runtime engine

Inclusion of Enclosed Hydration Effects in the Binding Free Energy Estimation of Dopamine D3 Receptor Complexes

Confined hydration and conformational flexibility are some of the challenges encountered for the rational design of selective antagonists of G-protein coupled receptors. We present a set of C3-substituted (-)-stepholidine derivatives as potent binders of the dopamine D3 receptor. The compounds are characterized biochemically, as well as by computer modeling using a novel molecular dynamics-based alchemical binding free energy approach which incorporates the effect of the displacement of enclosed water molecules from the binding site. The free energy of displacement of specific hydration sites is obtained using the Hydration Site Analysis method with explicit solvation. This work underscores the critical role of confined hydration and conformational reorganization in the molecular recognition mechanism of dopamine receptors and illustrates the potential of binding free energy models to represent these key phenomena.Comment: This is the first report of using enclosed hydration in estimating binding free energies of protein-ligand complexes using implicit solvatio

Pitfalls in modeling loss given default of bank loans

The parameter loss given default (LGD) of loans plays a crucial role for risk-based decision making of banks including risk-adjusted pricing. Depending on the quality of the estimation of LGDs, banks can gain significant competitive advantage. For bank loans, the estimation is usually based on discounted recovery cash flows, leading to workout LGDs. In this paper, we reveal several problems that may occur when modeling workout LGDs, leading to LGD estimates which are biased or have low explanatory power. Based on a data set of 71,463 defaulted bank loans, we analyze these issues and derive recommendations for action in order to avoid these problems. Due to the restricted observation period of recovery cash flows the problem of length-biased sampling occurs, where long workout processes are underrepresented in the sample, leading to an underestimation of LGDs. Write-offs and recoveries are often driven by different influencing factors, which is ignored by the empirical literature on LGD modeling. We propose a two-step approach for modeling LGDs of non-defaulted loans which accounts for these differences leading to an improved explanatory power. For LGDs of defaulted loans, the type of default and the length of the default period have high explanatory power, but estimates relying on these variables can lead to a significant underestimation of LGDs. We propose a model for defaulted loans which makes use of these influence factors and leads to consistent LGD estimates. --Credit risk,Bank loans,Loss given default,Forecasting

Goodness-of-fit Tests for Linear and Non-linear Time Series Models

In this article we study a general class of goodness-of-fit tests for the conditional mean of a linear or nonlinear time series model. Among the properties of the proposed tests are that they are suitable when the conditioning set is infinite-dimensional; are consistent against a broad class of alternatives including Pitman's local alternatives converging at the parametric rate; and do not need to choose a lag order depending on the sample size or to smooth the data. It turns out that the asymptotic null distributions of the tests depend on the data generating process, so a new bootstrap procedure is proposed and theoretically justified. The proposed bootstrap tests are robust to higher order dependence, in particular to conditional heteroskedasticity of unknown form. A simulation study compares the finite sample performance of the proposed and competing tests and shows that our tests can play a valuable role in time series modeling. Finally, an application to an economic price series highlights the merits of our approach.