Looking for a psychology for the inner rational agent

Research in psychology and behavioural economics shows that individuals’ choices often depend on ‘irrelevant’ contextual factors. This presents problems for normative economics, which has traditionally used preference-satisfaction as its criterion. A common response is to claim that individuals have context-independent latent preferences which are ‘distorted’ by psychological factors, and that latent preferences should be respected. This response implicitly uses a model of human action in which each human being has an ‘inner rational agent’. I argue that this model is psychologically ungrounded. Although references to latent preferences appear in psychologically-based explanations of context-dependent choice, latent preferences serve no explanatory purpose

Thinking by analogy, systematic risk, and option prices

People tend to think by analogies and comparisons. Such way of thinking, termed coarse thinking by Mullainathan et al [Quarterly Journal of Economics, May 2008] is intuitively very appealing. We develop a new option pricing model based on the idea that the market consists of coarse thinkers as well as rational investors when limits to arbitrage (transaction costs) prevent rational investors from profiting at the expense of coarse thinkers. The new formula, which is a closed form solution to the model, is a generalization of the Black-Scholes formula. The new formula potentially provides a unified explanation for various implied volatility puzzles.Coarse Thinking, Option Pricing, Implied Volatility, Implied Volatility Skew, Systematic Risk, Investor Sentiment, Implied Volatility Term Structure

Investigation of sequence features of hinge-bending regions in proteins with domain movements using kernel logistic regression

Background: Hinge-bending movements in proteins comprising two or more domains form a large class of functional movements. Hinge-bending regions demarcate protein domains and collectively control the domain movement. Consequently, the ability to recognise sequence features of hinge-bending regions and to be able to predict them from sequence alone would benefit various areas of protein research. For example, an understanding of how the sequence features of these regions relate to dynamic properties in multi-domain proteins would aid in the rational design of linkers in therapeutic fusion proteins. Results: The DynDom database of protein domain movements comprises sequences annotated to indicate whether the amino acid residue is located within a hinge-bending region or within an intradomain region. Using statistical methods and Kernel Logistic Regression (KLR) models, this data was used to determine sequence features that favour or disfavour hinge-bending regions. This is a difficult classification problem as the number of negative cases (intradomain residues) is much larger than the number of positive cases (hinge residues). The statistical methods and the KLR models both show that cysteine has the lowest propensity for hinge-bending regions and proline has the highest, even though it is the most rigid amino acid. As hinge-bending regions have been previously shown to occur frequently at the terminal regions of the secondary structures, the propensity for proline at these regions is likely due to its tendency to break secondary structures. The KLR models also indicate that isoleucine may act as a domain-capping residue. We have found that a quadratic KLR model outperforms a linear KLR model and that improvement in performance occurs up to very long window lengths (eighty residues) indicating long-range correlations. Conclusion: In contrast to the only other approach that focused solely on interdomain hinge-bending regions, the method provides a modest and statistically significant improvement over a random classifier. An explanation of the KLR results is that in the prediction of hinge-bending regions a long-range correlation is at play between a small number amino acids that either favour or disfavour hinge-bending regions. The resulting sequence-based prediction tool, HingeSeek, is available to run through a webserver at hingeseek.cmp.uea.ac.uk

Microscopic analysis of K^+-nucleus elastic scattering based on K^+N phase shifts

We investigate $K^{+}$-nucleus elastic scattering at intermediate energies within a microscopic optical model approach. To this effect we use the current $K^{+}$-nucleon {\it (KN)} phase shifts from the Center for Nuclear Studies of the George Washington University as primary input. First, the {\it KN} phase shifts are used to generate Gel'fand-Levitan-Marchenko real and local inversion potentials. Secondly, these potentials are supplemented with a short range complex separable term in such a way that the corresponding unitary and non-unitary {\it KN} $S$ matrices are exactly reproduced. These {\it KN} potentials allow to calculate all needed on- and off-shell contributions of the $t$ matrix,the driving effective interaction in the full-folding $K^{+}$-nucleus optical model potentials reported here. Elastic scattering of positive kaons from $^{6}$Li, $^{12}$C, $^{28}$Si and $^{40}$Ca are studied at beam momenta in the range 400-1000 MeV/{$c$}, leading to a fair description of most differential and total cross section data. To complete the analysis the full-folding model, three kinds of simpler $t\rho$ calculations are considered and results discussed. We conclude that conventional medium effects, in conjunction with a proper representation of the basic {\it KN} interaction are essential for the description of $K^{+}$-nucleus phenomena.Comment: 11 pages, 1 table, 12 figures, submitted to PR

Multicountry Modeling of Financial Markets

After a survey of alternative theoretical approaches to modeling financial markets, the domestic and international financial linkages of major multicountry models are examined and assessed. The properties of these models are compared by calculating the slopes of their UI and BP curves for the United States, Germany, and Japan. The BP curves (horizontal by assumption in several models) are almost always found to be flatter than the estimated UN curves. International differences in UI slopes are not generally greater than inter-model differences in the estimated slopes of LN curves for any given country. Models with rational or model-consistent expectations in their financial markers tend to show mere appreciation of the U.S. dollar, in response to fiscal expansion, than do models with adaptive expectations, although in both types of model the induced nominal exchange rate changes play a modest role in the transmission linking domestic spending to the current account. Suggestions are made for modeling the increasing globalization of financial markets, and for more explicit treatment of learning behaviour in the modeling of expectations.

A Framework for SAR-Optical Stereogrammetry over Urban Areas

Currently, numerous remote sensing satellites provide a huge volume of diverse earth observation data. As these data show different features regarding resolution, accuracy, coverage, and spectral imaging ability, fusion techniques are required to integrate the different properties of each sensor and produce useful information. For example, synthetic aperture radar (SAR) data can be fused with optical imagery to produce 3D information using stereogrammetric methods. The main focus of this study is to investigate the possibility of applying a stereogrammetry pipeline to very-high-resolution (VHR) SAR-optical image pairs. For this purpose, the applicability of semi-global matching is investigated in this unconventional multi-sensor setting. To support the image matching by reducing the search space and accelerating the identification of correct, reliable matches, the possibility of establishing an epipolarity constraint for VHR SAR-optical image pairs is investigated as well. In addition, it is shown that the absolute geolocation accuracy of VHR optical imagery with respect to VHR SAR imagery such as provided by TerraSAR-X can be improved by a multi-sensor block adjustment formulation based on rational polynomial coefficients. Finally, the feasibility of generating point clouds with a median accuracy of about 2m is demonstrated and confirms the potential of 3D reconstruction from SAR-optical image pairs over urban areas.Comment: This is the pre-acceptance version, to read the final version, please go to ISPRS Journal of Photogrammetry and Remote Sensing on ScienceDirec

Super rogue waves in simulations based on weakly nonlinear and fully nonlinear hydrodynamic equations

The rogue wave solutions (rational multi-breathers) of the nonlinear Schrodinger equation (NLS) are tested in numerical simulations of weakly nonlinear and fully nonlinear hydrodynamic equations. Only the lowest order solutions from 1 to 5 are considered. A higher accuracy of wave propagation in space is reached using the modified NLS equation (MNLS) also known as the Dysthe equation. This numerical modelling allowed us to directly compare simulations with recent results of laboratory measurements in \cite{Chabchoub2012c}. In order to achieve even higher physical accuracy, we employed fully nonlinear simulations of potential Euler equations. These simulations provided us with basic characteristics of long time evolution of rational solutions of the NLS equation in the case of near breaking conditions. The analytic NLS solutions are found to describe the actual wave dynamics of steep waves reasonably well.Comment: under revision in Physical Review