Early Detection Techniques for Market Risk Failure

The implementation of appropriate statistical techniques for monitoring conditional VaR models, i.e, backtesting, reported by institutions is fundamental to determine their exposure to market risk. Backtesting techniques are important since the severity of the departures of the VaR model from market results determine the penalties imposed for inadequate VaR models. In this paper we make six contributions to backtesting techniques. In particular, we show that the Kupiec test can be viewed as a combination of CUSUM change point tests; we detail the lack of power of CUSUM methods in detecting violations of VaR as soon as these occur; we develop an alternative technique based on weighted U-statistic type processes that have power against wrong specifications of the risk measure and early detection; we show these new backtesting techniques are robust to the presence of estimation risk; we construct a new class of weight functions that can be used to weight our processes; and our methods are applicable both under conditional and unconditional VaR settings

Brownian Polymers in Poissonian Environment: a survey

We consider a space-time continuous directed polymer in random environment. The path is Brownian and the medium is Poissonian. We review many results obtained in the last decade, and also we present new ones. In this fundamental setup, we can make use of fine formulas and strong tools from stochastic analysis for Gaussian or Poisson measure, together with martingale techniques. These notes cover the matter of a course presented during the Jean-Morlet chair 2017 of CIRM "Random Structures in Statistical Mechanics and Mathematical Physics" in Marseille.Comment: 64 pages. 4 figure

The Overlooked Potential of Generalized Linear Models in Astronomy - I: Binomial Regression

Revealing hidden patterns in astronomical data is often the path to fundamental scientific breakthroughs; meanwhile the complexity of scientific inquiry increases as more subtle relationships are sought. Contemporary data analysis problems often elude the capabilities of classical statistical techniques, suggesting the use of cutting edge statistical methods. In this light, astronomers have overlooked a whole family of statistical techniques for exploratory data analysis and robust regression, the so-called Generalized Linear Models (GLMs). In this paper -- the first in a series aimed at illustrating the power of these methods in astronomical applications -- we elucidate the potential of a particular class of GLMs for handling binary/binomial data, the so-called logit and probit regression techniques, from both a maximum likelihood and a Bayesian perspective. As a case in point, we present the use of these GLMs to explore the conditions of star formation activity and metal enrichment in primordial minihaloes from cosmological hydro-simulations including detailed chemistry, gas physics, and stellar feedback. We predict that for a dark mini-halo with metallicity $\approx 1.3 \times 10^{-4} Z_{\bigodot}$, an increase of $1.2 \times 10^{-2}$ in the gas molecular fraction, increases the probability of star formation occurrence by a factor of 75%. Finally, we highlight the use of receiver operating characteristic curves as a diagnostic for binary classifiers, and ultimately we use these to demonstrate the competitive predictive performance of GLMs against the popular technique of artificial neural networks.Comment: 20 pages, 10 figures, 3 tables, accepted for publication in Astronomy and Computin

On the Design of LIL Tests for (Pseudo) Random Generators and Some Experimental Results

NIST SP800-22 (2010) proposes the state of art testing suite for (pseudo) random generators to detect deviations of a binary sequence from randomness. On the one hand, as a counter example to NIST SP800-22 test suite, it is easy to construct functions that are considered as GOOD pseudorandom generators by NIST SP800-22 test suite though the output of these functions are easily distinguishable from the uniform distribution. Thus these functions are not pseudorandom generators by definition. On the other hand, NIST SP800-22 does not cover some of the important laws for randomness. Two fundamental limit theorems about random binary strings are the central limit theorem and the law of the iterated logarithm (LIL). Several frequency related tests in NIST SP800-22 cover the central limit theorem while no NIST SP800-22 test covers LIL. This paper proposes techniques to address the above challenges that NIST SP800-22 testing suite faces. Firstly, we propose statistical distance based testing techniques for (pseudo) random generators to reduce the above mentioned Type II errors in NIST SP800-22 test suite. Secondly, we propose LIL based statistical testing techniques, calculate the probabilities, and carry out experimental tests on widely used pseudorandom generators by generating around 30TB of pseudorandom sequences. The experimental results show that for a sample size of 1000 sequences (2TB), the statistical distance between the generated sequences and the uniform distribution is around 0.07 (with $0$ for statistically indistinguishable and $1$ for completely distinguishable) and the root-mean-square deviation is around 0.005