85 research outputs found
Blackouts, risk, and fat-tailed distributions
We analyze a 19-year time series of North American electric power transmission system blackouts. Contrary to previously reported results we find a fatter than exponential decay in the distribution of inter- occurrence times and evidence of seasonal dependence in the number of events. Our findings question the use of self-organized criticality, and in particular the sandpile model, as a paradigm of blackout dynamics in power transmission systems. Hopefully, though, they will provide guidelines to more accurate models for evaluation of blackout risk.blackout, risk, fat-tailed distribution, power grid
Replacement of ensemble averaging by the use of a broadband source in scattering of light from a one-dimensional randomly rough interface between two dielectric media
By the use of phase perturbation theory we show that if a single realization
of a one-dimensional randomly rough interface between two dielectric media is
illuminated at normal incidence from either medium by a broadband Gaussian
beam, it produces a scattered field whose differential reflection coefficient
closely matches the result produced by averaging the differential reflection
coefficient produced by a monochromatic incident beam over the ensemble of
realizations of the interface profile function.Comment: 10 pages, 7 figure
Optimal Investment Horizons
In stochastic finance, one traditionally considers the return as a
competitive measure of an asset, {\it i.e.}, the profit generated by that asset
after some fixed time span , say one week or one year. This measures
how well (or how bad) the asset performs over that given period of time. It has
been established that the distribution of returns exhibits ``fat tails''
indicating that large returns occur more frequently than what is expected from
standard Gaussian stochastic processes (Mandelbrot-1967,Stanley1,Doyne).
Instead of estimating this ``fat tail'' distribution of returns, we propose
here an alternative approach, which is outlined by addressing the following
question: What is the smallest time interval needed for an asset to cross a
fixed return level of say 10%? For a particular asset, we refer to this time as
the {\it investment horizon} and the corresponding distribution as the {\it
investment horizon distribution}. This latter distribution complements that of
returns and provides new and possibly crucial information for portfolio design
and risk-management, as well as for pricing of more exotic options. By
considering historical financial data, exemplified by the Dow Jones Industrial
Average, we obtain a novel set of probability distributions for the investment
horizons which can be used to estimate the optimal investment horizon for a
stock or a future contract.Comment: Latex, 5 pages including 4 figur
Modeling highly volatile and seasonal markets: evidence from the Nord Pool electricity market
In this paper we address the issue of modeling spot electricity prices. After analyzing factors leading to the unobservable in other financial or commodity markets price dynamics we propose a mean reverting jump diffusion model. We fit the model to data from the Nord Pool power exchange and find that it nearly duplicates the spot price's main characteristics. The model can thus be used for risk management and pricing derivatives written on the spot electricity price.electricity price, mean reversion, wavelet transform, jump diffusion model
Inverse Statistics in Economics : The gain-loss asymmetry
Inverse statistics in economics is considered. We argue that the natural
candidate for such statistics is the investment horizons distribution. This
distribution of waiting times needed to achieve a predefined level of return is
obtained from (often detrended) historic asset prices. Such a distribution
typically goes through a maximum at a time called the {\em optimal investment
horizon}, , since this defines the most likely waiting time for
obtaining a given return . By considering equal positive and negative
levels of return, we report on a quantitative gain-loss asymmetry most
pronounced for short horizons. It is argued that this asymmetry reflects the
market dynamics and we speculate over the origin of this asymmetry.Comment: Latex, 6 pages, 3 figure
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