Threshold bipower variation and the impact of jumps on volatility forecasting

This study reconsiders the role of jumps for volatility forecasting by showing that jumps have a positive and mostly significant impact on future volatility. This result becomes apparent once volatility is separated into its continuous and discontinuous components using estimators which are not only consistent, but also scarcely plagued by small sample bias. With the aim of achieving this, we introduce the concept of threshold bipower variation, which is based on the joint use of bipower variation and threshold estimation. We show that its generalization (threshold multipower variation) admits a feasible central limit theorem in the presence of jumps and provides less biased estimates, with respect to the standard multipower variation, of the continuous quadratic variation in finite samples. We further provide a new test for jump detection which has substantially more power than tests based on multipower variation. Empirical analysis (on the S&P500 index, individual stocks and US bond yields) shows that the proposed techniques improve significantly the accuracy of volatility forecasts especially in periods following the occurrence of a jump

Measuring the propagation of financial distress with Granger-causality tail risk networks

Using the test of Granger-causality in tail of Hong et al. (2009), we define and construct Granger-causality tail risk networks between 33 systemically important banks (G-SIBs) and 36 sovereign bonds worldwide. Our purpose is to exploit the structure of the Granger-causality tail risk networks to identify periods of distress in financial markets and possible channels of systemic risk propagation. Combining measures of connectedness of these networks with the ratings of the sovereign bonds, we propose a flight-to-quality indicator to identify periods of turbulence in the market. Our measure clearly peaks at the onset of the European sovereign debt crisis, signaling the instability of the financial system. Finally, we use the connectedness measures of the networks to forecast the quality of sovereign bonds. We find that connectedness is a significant predictor of the cross-section of bond quality

Lancet

BACKGROUND: In 2015, the second cycle of the CONCORD programme established global surveillance of cancer survival as a metric of the effectiveness of health systems and to inform global policy on cancer control. CONCORD-3 updates the worldwide surveillance of cancer survival to 2014. METHODS: CONCORD-3 includes individual records for 37.5 million patients diagnosed with cancer during the 15-year period 2000-14. Data were provided by 322 population-based cancer registries in 71 countries and territories, 47 of which provided data with 100% population coverage. The study includes 18 cancers or groups of cancers: oesophagus, stomach, colon, rectum, liver, pancreas, lung, breast (women), cervix, ovary, prostate, and melanoma of the skin in adults, and brain tumours, leukaemias, and lymphomas in both adults and children. Standardised quality control procedures were applied; errors were rectified by the registry concerned. We estimated 5-year net survival. Estimates were age-standardised with the International Cancer Survival Standard weights. FINDINGS: For most cancers, 5-year net survival remains among the highest in the world in the USA and Canada, in Australia and New Zealand, and in Finland, Iceland, Norway, and Sweden. For many cancers, Denmark is closing the survival gap with the other Nordic countries. Survival trends are generally increasing, even for some of the more lethal cancers: in some countries, survival has increased by up to 5% for cancers of the liver, pancreas, and lung. For women diagnosed during 2010-14, 5-year survival for breast cancer is now 89.5% in Australia and 90.2% in the USA, but international differences remain very wide, with levels as low as 66.1% in India. For gastrointestinal cancers, the highest levels of 5-year survival are seen in southeast Asia: in South Korea for cancers of the stomach (68.9%), colon (71.8%), and rectum (71.1%); in Japan for oesophageal cancer (36.0%); and in Taiwan for liver cancer (27.9%). By contrast, in the same world region, survival is generally lower than elsewhere for melanoma of the skin (59.9% in South Korea, 52.1% in Taiwan, and 49.6% in China), and for both lymphoid malignancies (52.5%, 50.5%, and 38.3%) and myeloid malignancies (45.9%, 33.4%, and 24.8%). For children diagnosed during 2010-14, 5-year survival for acute lymphoblastic leukaemia ranged from 49.8% in Ecuador to 95.2% in Finland. 5-year survival from brain tumours in children is higher than for adults but the global range is very wide (from 28.9% in Brazil to nearly 80% in Sweden and Denmark). INTERPRETATION: The CONCORD programme enables timely comparisons of the overall effectiveness of health systems in providing care for 18 cancers that collectively represent 75% of all cancers diagnosed worldwide every year. It contributes to the evidence base for global policy on cancer control. Since 2017, the Organisation for Economic Co-operation and Development has used findings from the CONCORD programme as the official benchmark of cancer survival, among their indicators of the quality of health care in 48 countries worldwide. Governments must recognise population-based cancer registries as key policy tools that can be used to evaluate both the impact of cancer prevention strategies and the effectiveness of health systems for all patients diagnosed with cancer. FUNDING: American Cancer Society; Centers for Disease Control and Prevention; Swiss Re; Swiss Cancer Research foundation; Swiss Cancer League; Institut National du Cancer; La Ligue Contre le Cancer; Rossy Family Foundation; US National Cancer Institute; and the Susan G Komen Foundation

ITALIAN CANCER FIGURES - REPORT 2015: The burden of rare cancers in Italy = I TUMORI IN ITALIA - RAPPORTO 2015: I tumori rari in Italia

OBJECTIVES: This collaborative study, based on data collected by the network of Italian Cancer Registries (AIRTUM), describes the burden of rare cancers in Italy. Estimated number of new rare cancer cases yearly diagnosed (incidence), proportion of patients alive after diagnosis (survival), and estimated number of people still alive after a new cancer diagnosis (prevalence) are provided for about 200 different cancer entities. MATERIALS AND METHODS: Data herein presented were provided by AIRTUM population- based cancer registries (CRs), covering nowadays 52% of the Italian population. This monograph uses the AIRTUM database (January 2015), which includes all malignant cancer cases diagnosed between 1976 and 2010. All cases are coded according to the International Classification of Diseases for Oncology (ICD-O-3). Data underwent standard quality checks (described in the AIRTUM data management protocol) and were checked against rare-cancer specific quality indicators proposed and published by RARECARE and HAEMACARE (www.rarecarenet.eu; www.haemacare.eu). The definition and list of rare cancers proposed by the RARECAREnet "Information Network on Rare Cancers" project were adopted: rare cancers are entities (defined as a combination of topographical and morphological codes of the ICD-O-3) having an incidence rate of less than 6 per 100,000 per year in the European population. This monograph presents 198 rare cancers grouped in 14 major groups. Crude incidence rates were estimated as the number of all new cancers occurring in 2000-2010 divided by the overall population at risk, for males and females (also for gender-specific tumours).The proportion of rare cancers out of the total cancers (rare and common) by site was also calculated. Incidence rates by sex and age are reported. The expected number of new cases in 2015 in Italy was estimated assuming the incidence in Italy to be the same as in the AIRTUM area. One- and 5-year relative survival estimates of cases aged 0-99 years diagnosed between 2000 and 2008 in the AIRTUM database, and followed up to 31 December 2009, were calculated using complete cohort survival analysis. To estimate the observed prevalence in Italy, incidence and follow-up data from 11 CRs for the period 1992-2006 were used, with a prevalence index date of 1 January 2007. Observed prevalence in the general population was disentangled by time prior to the reference date (≤2 years, 2-5 years, ≤15 years). To calculate the complete prevalence proportion at 1 January 2007 in Italy, the 15-year observed prevalence was corrected by the completeness index, in order to account for those cancer survivors diagnosed before the cancer registry activity started. The completeness index by cancer and age was obtained by means of statistical regression models, using incidence and survival data available in the European RARECAREnet data. RESULTS: In total, 339,403 tumours were included in the incidence analysis. The annual incidence rate (IR) of all 198 rare cancers in the period 2000-2010 was 147 per 100,000 per year, corresponding to about 89,000 new diagnoses in Italy each year, accounting for 25% of all cancer. Five cancers, rare at European level, were not rare in Italy because their IR was higher than 6 per 100,000; these tumours were: diffuse large B-cell lymphoma and squamous cell carcinoma of larynx (whose IRs in Italy were 7 per 100,000), multiple myeloma (IR: 8 per 100,000), hepatocellular carcinoma (IR: 9 per 100,000) and carcinoma of thyroid gland (IR: 14 per 100,000). Among the remaining 193 rare cancers, more than two thirds (No. 139) had an annual IR <0.5 per 100,000, accounting for about 7,100 new cancers cases; for 25 cancer types, the IR ranged between 0.5 and 1 per 100,000, accounting for about 10,000 new diagnoses; while for 29 cancer types the IR was between 1 and 6 per 100,000, accounting for about 41,000 new cancer cases. Among all rare cancers diagnosed in Italy, 7% were rare haematological diseases (IR: 41 per 100,000), 18% were solid rare cancers. Among the latter, the rare epithelial tumours of the digestive system were the most common (23%, IR: 26 per 100,000), followed by epithelial tumours of head and neck (17%, IR: 19) and rare cancers of the female genital system (17%, IR: 17), endocrine tumours (13% including thyroid carcinomas and less than 1% with an IR of 0.4 excluding thyroid carcinomas), sarcomas (8%, IR: 9 per 100,000), central nervous system tumours and rare epithelial tumours of the thoracic cavity (5%with an IR equal to 6 and 5 per 100,000, respectively). The remaining (rare male genital tumours, IR: 4 per 100,000; tumours of eye, IR: 0.7 per 100,000; neuroendocrine tumours, IR: 4 per 100,000; embryonal tumours, IR: 0.4 per 100,000; rare skin tumours and malignant melanoma of mucosae, IR: 0.8 per 100,000) each constituted <4% of all solid rare cancers. Patients with rare cancers were on average younger than those with common cancers. Essentially, all childhood cancers were rare, while after age 40 years, the common cancers (breast, prostate, colon, rectum, and lung) became increasingly more frequent. For 254,821 rare cancers diagnosed in 2000-2008, 5-year RS was on average 55%, lower than the corresponding figures for patients with common cancers (68%). RS was lower for rare cancers than for common cancers at 1 year and continued to diverge up to 3 years, while the gap remained constant from 3 to 5 years after diagnosis. For rare and common cancers, survival decreased with increasing age. Five-year RS was similar and high for both rare and common cancers up to 54 years; it decreased with age, especially after 54 years, with the elderly (75+ years) having a 37% and 20% lower survival than those aged 55-64 years for rare and common cancers, respectively. We estimated that about 900,000 people were alive in Italy with a previous diagnosis of a rare cancer in 2010 (prevalence). The highest prevalence was observed for rare haematological diseases (278 per 100,000) and rare tumours of the female genital system (265 per 100,000). Very low prevalence (<10 prt 100,000) was observed for rare epithelial skin cancers, for rare epithelial tumours of the digestive system and rare epithelial tumours of the thoracic cavity. COMMENTS: One in four cancers cases diagnosed in Italy is a rare cancer, in agreement with estimates of 24% calculated in Europe overall. In Italy, the group of all rare cancers combined, include 5 cancer types with an IR>6 per 100,000 in Italy, in particular thyroid cancer (IR: 14 per 100,000).The exclusion of thyroid carcinoma from rare cancers reduces the proportion of them in Italy in 2010 to 22%. Differences in incidence across population can be due to the different distribution of risk factors (whether environmental, lifestyle, occupational, or genetic), heterogeneous diagnostic intensity activity, as well as different diagnostic capacity; moreover heterogeneity in accuracy of registration may determine some minor differences in the account of rare cancers. Rare cancers had worse prognosis than common cancers at 1, 3, and 5 years from diagnosis. Differences between rare and common cancers were small 1 year after diagnosis, but survival for rare cancers declined more markedly thereafter, consistent with the idea that treatments for rare cancers are less effective than those for common cancers. However, differences in stage at diagnosis could not be excluded, as 1- and 3-year RS for rare cancers was lower than the corresponding figures for common cancers. Moreover, rare cancers include many cancer entities with a bad prognosis (5-year RS <50%): cancer of head and neck, oesophagus, small intestine, ovary, brain, biliary tract, liver, pleura, multiple myeloma, acute myeloid and lymphatic leukaemia; in contrast, most common cancer cases are breast, prostate, and colorectal cancers, which have a good prognosis. The high prevalence observed for rare haematological diseases and rare tumours of the female genital system is due to their high incidence (the majority of haematological diseases are rare and gynaecological cancers added up to fairly high incidence rates) and relatively good prognosis. The low prevalence of rare epithelial tumours of the digestive system was due to the low survival rates of the majority of tumours included in this group (oesophagus, stomach, small intestine, pancreas, and liver), regardless of the high incidence rate of rare epithelial cancers of these sites. This AIRTUM study confirms that rare cancers are a major public health problem in Italy and provides quantitative estimations, for the first time in Italy, to a problem long known to exist. This monograph provides detailed epidemiologic indicators for almost 200 rare cancers, the majority of which (72%) are very rare (IR<0.5 per 100,000). These data are of major interest for different stakeholders. Health care planners can find useful information herein to properly plan and think of how to reorganise health care services. Researchers now have numbers to design clinical trials considering alternative study designs and statistical approaches. Population-based cancer registries with good quality data are the best source of information to describe the rare cancer burden in a population

Electricity prices: a nonparametric approach

We propose a simple univariate model for the dynamics of spot electricity prices. The model is nonparametric in the sense that it is free from parametric model assumptions and flexible in capturing the dynamics of the data. The estimation is performed in two steps. Preliminarily, spikes are identified by means of an iterative filtering technique. The series of spikes is used to estimate a seasonal spike intensity function and fitted with an exponential law. We then implement Nadaraya-Watson estimators for the drift and the diffusion coefficients on the filtered series. Monte Carlo simulations are used to evaluate estimation errors. We fit the model on European and American time series of spot day-ahead electricity prices; in spite of the simplicity of the proposed model, our specification tests indicate successful goodness-of-fit. We provide evidence for mean-reversion, nonlinear volatility and seasonal spike intensity; moreover we find that American markets show a very low level of mean reversion and a lower volatility with respect to their European counterparts

The extraction of natural resources: The role of thermodynamic efficiency

The modelling of production in microeconomics has been the subject of heated debate. The controversial issues include the substitutability between production inputs, the role of time and the economic consequences of irreversibility in the production process. A case in point is the use of Cobb–Douglas type production functions, which completely ignore the physical process underlying the production of a good.We examine these issues in the context of the production of a basic commodity (such as copper or aluminium). We model the extraction and the refinement of a valuable substance which is mixed with waste material, in a way which is fully consistent with the physical constraints of the process. The resulting analytical description of production unambiguously reveals that perfect substitutability between production inputs fails if a corrected thermodynamic approach is used. We analyze the equilibrium pricing of a commodity extracted in an irreversible way. We force consumers to purchase goods using energy as the means of payment and force the firm to account in terms of energy. The resulting market provides the firm with a form of reversibility of its use of energy. Under an energy numeraire, energy resources will naturally be used in a more parsimonious way

The impact of systemic and illiquidity risk on financing with risky collateral

Repurchase agreements (repos) are one of the most important sources of funding liquidity for many financial investors and intermediaries. In a repo, some assets are given by a borrower as collateral in exchange of funding. The capital given to the borrower is the market value of the collateral, reduced by an amount termed as haircut (or margin). The haircut protects the capital lender from loss of value of the collateral contingent on the borrower's default. For this reason, the haircut is typically calculated with a simple Value at Risk estimation of the collateral for the purpose of preventing the risk associated to volatility. However, other risk factors should be included in the haircut and a severe undervaluation of them could result in a significant loss of value of the collateral if the borrower defaults. In this paper we present a stylized model of the financial system, which allows us to compute the haircut incorporating the liquidity risk of the collateral and, most important, possible systemic effects. These are mainly due to the similarity of bank portfolios, excessive leverage of financial institutions, and illiquidity of assets. The model is analytically solvable under some simplifying assumptions and robust to the relaxation of these assumptions, as shown through Monte Carlo simulations. We also show which are the most critical model parameters for the determination of haircuts. (C) 2014 Elsevier B.V. All rights reserved