Implementing Loss Distribution Approach for Operational Risk

To quantify the operational risk capital charge under the current regulatory framework for banking supervision, referred to as Basel II, many banks adopt the Loss Distribution Approach. There are many modeling issues that should be resolved to use the approach in practice. In this paper we review the quantitative methods suggested in literature for implementation of the approach. In particular, the use of the Bayesian inference method that allows to take expert judgement and parameter uncertainty into account, modeling dependence and inclusion of insurance are discussed

SPoT: Representing the Social, Spatial, and Temporal Dimensions of Human Mobility with a Unifying Framework

Modeling human mobility is crucial in the analysis and simulation of opportunistic networks, where contacts are exploited as opportunities for peer-topeer message forwarding. The current approach with human mobility modeling has been based on continuously modifying models, trying to embed in them the mobility properties (e.g., visiting patterns to locations or specific distributions of inter-contact times) as they came up from trace analysis. As a consequence, with these models it is difficult, if not impossible, to modify the features of mobility or to control the exact shape of mobility metrics (e.g., modifying the distribution of inter-contact times). For these reasons, in this paper we propose a mobility framework rather than a mobility model, with the explicit goal of providing a exible and controllable tool for modeling mathematically and generating simulatively different possible features of human mobility. Our framework, named SPoT, is able to incorporate the three dimensions - spatial, social, and temporal - of human mobility. The way SPoT does it is by mapping the different social communities of the network into different locations, whose members visit with a configurable temporal pattern. In order to characterize the temporal patterns of user visits to locations and the relative positioning of locations based on their shared users, we analyze the traces of real user movements extracted from three location-based online social networks (Gowalla, Foursquare, and Altergeo). We observe that a Bernoulli process effectively approximates user visits to locations in the majority of cases and that locations that share many common users visiting them frequently tend to be located close to each other. In addition, we use these traces to test the exibility of the framework, and we show that SPoT is able to accurately reproduce the mobility behavior observed in traces. Finally, relying on the Bernoulli assumption for arrival processes, we provide a throughout mathematical analysis of the controllability of the framework, deriving the conditions under which heavy-tailed and exponentially-tailed aggregate inter-contact times (often observed in real traces) emerge

From Packet to Power Switching: Digital Direct Load Scheduling

At present, the power grid has tight control over its dispatchable generation capacity but a very coarse control on the demand. Energy consumers are shielded from making price-aware decisions, which degrades the efficiency of the market. This state of affairs tends to favor fossil fuel generation over renewable sources. Because of the technological difficulties of storing electric energy, the quest for mechanisms that would make the demand for electricity controllable on a day-to-day basis is gaining prominence. The goal of this paper is to provide one such mechanisms, which we call Digital Direct Load Scheduling (DDLS). DDLS is a direct load control mechanism in which we unbundle individual requests for energy and digitize them so that they can be automatically scheduled in a cellular architecture. Specifically, rather than storing energy or interrupting the job of appliances, we choose to hold requests for energy in queues and optimize the service time of individual appliances belonging to a broad class which we refer to as "deferrable loads". The function of each neighborhood scheduler is to optimize the time at which these appliances start to function. This process is intended to shape the aggregate load profile of the neighborhood so as to optimize an objective function which incorporates the spot price of energy, and also allows distributed energy resources to supply part of the generation dynamically.Comment: Accepted by the IEEE journal of Selected Areas in Communications (JSAC): Smart Grid Communications series, to appea

An Agent-Based Approach to Self-Organized Production

The chapter describes the modeling of a material handling system with the production of individual units in a scheduled order. The units represent the agents in the model and are transported in the system which is abstracted as a directed graph. Since the hindrances of units on their path to the destination can lead to inefficiencies in the production, the blockages of units are to be reduced. Therefore, the units operate in the system by means of local interactions in the conveying elements and indirect interactions based on a measure of possible hindrances. If most of the units behave cooperatively ("socially"), the blockings in the system are reduced. A simulation based on the model shows the collective behavior of the units in the system. The transport processes in the simulation can be compared with the processes in a real plant, which gives conclusions about the consequencies for the production based on the superordinate planning.Comment: For related work see http://www.soms.ethz.c

Modelling Financial High Frequency Data Using Point Processes

In this paper, we give an overview of the state-of-the-art in the econometric literature on the modeling of so-called financial point processes. The latter are associated with the random arrival of specific financial trading events, such as transactions, quote updates, limit orders or price changes observable based on financial high-frequency data. After discussing fundamental statistical concepts of point process theory, we review durationbased and intensity-based models of financial point processes. Whereas duration-based approaches are mostly preferable for univariate time series, intensity-based models provide powerful frameworks to model multivariate point processes in continuous time. We illustrate the most important properties of the individual models and discuss major empirical applications.Financial point processes, dynamic duration models, dynamic intensity models.