Improving California brush ranges /

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On worst-case investment with applications in finance and insurance mathematics

We review recent results on the new concept of worst-case portfolio optimization, i.e. we consider the determination of portfolio processes which yield the highest worst-case expected utility bound if the stock price may have uncertain (down) jumps. The optimal portfolios are derived as solutions of non-linear differential equations which itself are consequences of a Bellman principle for worst-case bounds. They are by construction non-constant ones and thus differ from the usual constant optimal portfolios in the classical examples of the Merton problem. A particular application of such strategies is to model crash possibilities where both the number and the height of the crash is uncertain but bounded. We further solve optimal investment problems in the presence of an additional risk process which is the typical situation of an insurer

Option pricing in affine generalized Merton models

In this article we consider affine generalizations of the Merton jump diffusion model [Merton, J. Fin. Econ., 1976] and the respective pricing of European options. On the one hand, the Brownian motion part in the Merton model may be generalized to a log-Heston model, and on the other hand, the jump part may be generalized to an affine process with possibly state dependent jumps. While the characteristic function of the log-Heston component is known in closed form, the characteristic function of the second component may be unknown explicitly. For the latter component we propose an approximation procedure based on the method introduced in [Belomestny et al., J. Func. Anal., 2009]. We conclude with some numerical examples

Evolutionary estimation of a Coupled Markov Chain credit risk model

There exists a range of different models for estimating and simulating credit risk transitions to optimally manage credit risk portfolios and products. In this chapter we present a Coupled Markov Chain approach to model rating transitions and thereby default probabilities of companies. As the likelihood of the model turns out to be a non-convex function of the parameters to be estimated, we apply heuristics to find the ML estimators. To this extent, we outline the model and its likelihood function, and present both a Particle Swarm Optimization algorithm, as well as an Evolutionary Optimization algorithm to maximize the likelihood function. Numerical results are shown which suggest a further application of evolutionary optimization techniques for credit risk management

Citation Statistics from 110 Years of Physical Review

Publicly available data reveal long-term systematic features about citation statistics and how papers are referenced. The data also tell fascinating citation histories of individual articles.Comment: This is esssentially identical to the article that appeared in the June 2005 issue of Physics Toda

Organizational Chart Inference

Nowadays, to facilitate the communication and cooperation among employees, a new family of online social networks has been adopted in many companies, which are called the "enterprise social networks" (ESNs). ESNs can provide employees with various professional services to help them deal with daily work issues. Meanwhile, employees in companies are usually organized into different hierarchies according to the relative ranks of their positions. The company internal management structure can be outlined with the organizational chart visually, which is normally confidential to the public out of the privacy and security concerns. In this paper, we want to study the IOC (Inference of Organizational Chart) problem to identify company internal organizational chart based on the heterogeneous online ESN launched in it. IOC is very challenging to address as, to guarantee smooth operations, the internal organizational charts of companies need to meet certain structural requirements (about its depth and width). To solve the IOC problem, a novel unsupervised method Create (ChArT REcovEr) is proposed in this paper, which consists of 3 steps: (1) social stratification of ESN users into different social classes, (2) supervision link inference from managers to subordinates, and (3) consecutive social classes matching to prune the redundant supervision links. Extensive experiments conducted on real-world online ESN dataset demonstrate that Create can perform very well in addressing the IOC problem.Comment: 10 pages, 9 figures, 1 table. The paper is accepted by KDD 201

The fractional volatility model: An agent-based interpretation

Based on criteria of mathematical simplicity and consistency with empirical market data, a model with volatility driven by fractional noise has been constructed which provides a fairly accurate mathematical parametrization of the data. Here, some features of the model are discussed and, using agent-based models, one tries to find which agent strategies and (or) properties of the financial institutions might be responsible for the features of the fractional volatility model.Comment: 23 pages, 11 figure