61,959 research outputs found
B-spline techniques for volatility modeling
This paper is devoted to the application of B-splines to volatility modeling,
specifically the calibration of the leverage function in stochastic local
volatility models and the parameterization of an arbitrage-free implied
volatility surface calibrated to sparse option data. We use an extension of
classical B-splines obtained by including basis functions with infinite
support. We first come back to the application of shape-constrained B-splines
to the estimation of conditional expectations, not merely from a scatter plot
but also from the given marginal distributions. An application is the Monte
Carlo calibration of stochastic local volatility models by Markov projection.
Then we present a new technique for the calibration of an implied volatility
surface to sparse option data. We use a B-spline parameterization of the
Radon-Nikodym derivative of the underlying's risk-neutral probability density
with respect to a roughly calibrated base model. We show that this method
provides smooth arbitrage-free implied volatility surfaces. Finally, we sketch
a Galerkin method with B-spline finite elements to the solution of the partial
differential equation satisfied by the Radon-Nikodym derivative.Comment: 25 page
A Unified Framework of Constrained Regression
Generalized additive models (GAMs) play an important role in modeling and
understanding complex relationships in modern applied statistics. They allow
for flexible, data-driven estimation of covariate effects. Yet researchers
often have a priori knowledge of certain effects, which might be monotonic or
periodic (cyclic) or should fulfill boundary conditions. We propose a unified
framework to incorporate these constraints for both univariate and bivariate
effect estimates and for varying coefficients. As the framework is based on
component-wise boosting methods, variables can be selected intrinsically, and
effects can be estimated for a wide range of different distributional
assumptions. Bootstrap confidence intervals for the effect estimates are
derived to assess the models. We present three case studies from environmental
sciences to illustrate the proposed seamless modeling framework. All discussed
constrained effect estimates are implemented in the comprehensive R package
mboost for model-based boosting.Comment: This is a preliminary version of the manuscript. The final
publication is available at
http://link.springer.com/article/10.1007/s11222-014-9520-
Evaluating the Variability of Urban Land Surface Temperatures Using Drone Observations
Urbanization and climate change are driving increases in urban land surface temperatures that pose a threat to human and environmental health. To address this challenge, we must be able to observe land surface temperatures within spatially complex urban environments. However, many existing remote sensing studies are based upon satellite or aerial imagery that capture temperature at coarse resolutions that fail to capture the spatial complexities of urban land surfaces that can change at a sub-meter resolution. This study seeks to fill this gap by evaluating the spatial variability of land surface temperatures through drone thermal imagery captured at high-resolutions (13 cm). In this study, flights were conducted using a quadcopter drone and thermal camera at two case study locations in Milwaukee, Wisconsin and El Paso, Texas. Results indicate that land use types exhibit significant variability in their surface temperatures (3.9–15.8 °C) and that this variability is influenced by surface material properties, traffic, weather and urban geometry. Air temperature and solar radiation were statistically significant predictors of land surface temperature (R2 0.37–0.84) but the predictive power of the models was lower for land use types that were heavily impacted by pedestrian or vehicular traffic. The findings from this study ultimately elucidate factors that contribute to land surface temperature variability in the urban environment, which can be applied to develop better temperature mitigation practices to protect human and environmental health
Modeling association between DNA copy number and gene expression with constrained piecewise linear regression splines
DNA copy number and mRNA expression are widely used data types in cancer
studies, which combined provide more insight than separately. Whereas in
existing literature the form of the relationship between these two types of
markers is fixed a priori, in this paper we model their association. We employ
piecewise linear regression splines (PLRS), which combine good interpretation
with sufficient flexibility to identify any plausible type of relationship. The
specification of the model leads to estimation and model selection in a
constrained, nonstandard setting. We provide methodology for testing the effect
of DNA on mRNA and choosing the appropriate model. Furthermore, we present a
novel approach to obtain reliable confidence bands for constrained PLRS, which
incorporates model uncertainty. The procedures are applied to colorectal and
breast cancer data. Common assumptions are found to be potentially misleading
for biologically relevant genes. More flexible models may bring more insight in
the interaction between the two markers.Comment: Published in at http://dx.doi.org/10.1214/12-AOAS605 the Annals of
Applied Statistics (http://www.imstat.org/aoas/) by the Institute of
Mathematical Statistics (http://www.imstat.org
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