pwc-archive/papers-with-abstracts huggingface dataset:
Intrinsic risk measures
Date: 2016-10-27 00:00:00
Tasks: Position

Monetary risk measures are usually interpreted as the smallest amount of
external capital that must be added to a financial position to make it
acceptable. We propose a new concept: intrinsic risk measures and argue that
this approach provides a direct path from unacceptable positions towards the
acceptance set. Intrinsic risk measures use only internal resources and return
the smallest percentage of the currently held financial position which has to
be sold and reinvested into an eligible asset such that the resulting position
becomes acceptable. While avoiding the problem of infinite values, intrinsic
risk measures allow a free choice of the eligible asset and they preserve
desired properties such as monotonicity and quasi-convexity. A dual
representation on convex acceptance sets is derived and the link of intrinsic
risk measures to their monetary counterparts on cones is detailed.
Agnostic Risk Parity: Taming Known and Unknown-Unknowns
Date: 2016-10-27 00:00:00

Markowitz' celebrated optimal portfolio theory generally fails to deliver
out-of-sample diversification. In this note, we propose a new portfolio
construction strategy based on symmetry arguments only, leading to "Eigenrisk
Parity" portfolios that achieve equal realized risk on all the principal
components of the covariance matrix. This holds true for any other definition
of uncorrelated factors. We then specialize our general formula to the most
agnostic case where the indicators of future returns are assumed to be
uncorrelated and of equal variance. This "Agnostic Risk Parity" (AGP) portfolio
minimizes unknown-unknown risks generated by over-optimistic hedging of the
different bets. AGP is shown to fare quite well when applied to standard
technical strategies such as trend following.
Asymptotics for rough stochastic volatility models
Authors: Martin Forde, Hongzhong Zhang
Date: 2016-10-27 00:00:00

Using the large deviation principle (LDP) for a re-scaled fractional Brownian motion $B^H_t$ where the rate function is defined via the reproducing kernel Hilbert space, we compute small-time asymptotics for a correlated fractional stochastic volatility model of the form $dS_t=S_t\sigma(Y_t) (\bar{\rho} dW_t +\rho dB_t), \,dY_t=dB^H_t$ where $\sigma$ is $\alpha$-H\"{o}lder continuous for some $\alpha\in(0,1]$; in particular, we show that $t^{H-\frac{1}{2}} \log S_t $ satisfies the LDP as $t\to0$ and the model has a well-defined implied volatility smile as $t \to 0$, when the log-moneyness $k(t)=x t^{\frac{1}{2}-H}$. Thus the smile steepens to infinity or flattens to zero depending on whether $H\in(0,\frac{1}{2})$ or $H\in(\frac{1}{2},1)$. We also compute large-time asymptotics for a fractional local-stochastic volatility model of the form: $dS_t= S_t^{\beta} |Y_t|^p dW_t,dY_t=dB^H_t$, and we generalize two identities in Matsumoto&Yor05 to show that $\frac{1}{t^{2H}}\log \frac{1}{t}\int_0^t e^{2 B^H_s} ds$ and $\frac{1}{t^{2H}}(\log \int_0^t e^{2(\mu s+B^H_s)} ds-2 \mu t)$ converge in law to $ 2\mathrm{max}_{0 \le s \le 1} B^H_{s}$ and $2B_1$ respectively for $H \in (0,\frac{1}{2})$ and $\mu>0$ as $t \to \infty$.
Income and wealth distribution of the richest Norwegian individuals: An inequality analysis
Date: 2016-10-27 00:00:00

Using the empirical data from the Norwegian tax office, we analyse the wealth
and income of the richest individuals in Norway during the period 2010--2013.
We find that both annual income and wealth level of the richest individuals are
describable using the Pareto law. We find that the robust mean Pareto exponent
over the four-year period to be $\approx 2.3$ for income and $\approx 1.5$ for
wealth.
Machine Learning Model Interpretability for Precision Medicine
Date: 2016-10-28 00:00:00
Tasks: BIG-bench Machine Learning, ICU Mortality, model

Interpretability of machine learning models is critical for data-driven
precision medicine efforts. However, highly predictive models are generally
complex and are difficult to interpret. Here using Model-Agnostic Explanations
algorithm, we show that complex models such as random forest can be made
interpretable. Using MIMIC-II dataset, we successfully predicted ICU mortality
with 80% balanced accuracy and were also were able to interpret the relative
effect of the features on prediction at individual level.
On the difference between locally risk-minimizing and delta hedging strategies for exponential L\'evy models
Date: 2016-10-28 00:00:00

We discuss the difference between locally risk-minimizing and delta hedging
strategies for exponential L\'evy models, where delta hedging strategies in
this paper are defined under the minimal martingale measure. We give firstly
model-independent upper estimations for the difference. In addition we show
numerical examples for two typical exponential L\'evy models: Merton models and
variance gamma models.
Model-independent pricing with insider information: a Skorokhod embedding approach
Authors: Beatrice Acciaio, Alexander M. G. Cox, Martin Huesmann
Date: 2016-10-28 00:00:00

In this paper, we consider the pricing and hedging of a financial derivative for an insider trader, in a model-independent setting. In particular, we suppose that the insider wants to act in a way which is independent of any modelling assumptions, but that she observes market information in the form of the prices of vanilla call options on the asset. We also assume that both the insider's information, which takes the form of a set of impossible paths, and the payoff of the derivative are time-invariant. This setup allows us to adapt recent work of Beiglboeck, Cox and Huesmann (2016) to prove duality results and a monotonicity principle, which enables us to determine geometric properties of the optimal models. Moreover, we show that this setup is powerful, in that we are able to find analytic and numerical solutions to certain pricing and hedging problems.
Noise-induced interspike interval correlations and spike train regularization in spike-triggered adapting neurons
Date: 2016-10-28 00:00:00

Spike generation in neurons produces a temporal point process, whose
statistics is governed by intrinsic phenomena and the external incoming inputs
to be coded. In particular, spike-evoked adaptation currents support a slow
temporal process that conditions spiking probability at the present time
according to past activity. In this work, we study the statistics of interspike
interval correlations arising in such non-renewal spike trains, for a neuron
model that reproduces different spike modes in a small adaptation scenario. We
found that correlations are stronger as the neuron fires at a particular firing
rate, which is defined by the adaptation process. When set in a subthreshold
regime, the neuron may sustain this particular firing rate, and thus induce
correlations, by noise. Given that, in this regime, interspike intervals are
negatively correlated at any lag, this effect surprisingly implies a reduction
in the variability of the spike count statistics at a finite noise intensity.
Robust Utility Maximization in Discrete-Time Markets with Friction
Date: 2018-05-10 00:00:00
Tasks: Friction, Stochastic Optimization

We study a robust stochastic optimization problem in the quasi-sure setting
in discrete-time. We show that under a lineality-type condition the problem
admits a maximizer. This condition is implied by the no-arbitrage condition in
models of financial markets. As a corollary, we obtain existence of an utility
maximizer in the frictionless market model, markets with proportional
transaction costs and also more general convex costs, like in the case of
market impact.
Preliminary quantification of freely exploring Atta insularis
Date: 2016-10-26 00:00:00

In this paper, we study the "free exploration" of individual ants of the
species Atta insularis, i.e., their motion on a featureless flat, horizontal
surface. Two basic preliminary results emerge from our work (a) the free
exploration is super-diffusive and (b) ants tend to turn more frequently to the
left than to the right -so we call them "let-handed"-. More statistics is
needed, however, to confirm those findings.
Analysis of a growth model inspired by Gompertz and Korf laws, and an analogous birth-death process
Date: 2016-10-28 00:00:00

We propose a new deterministic growth model which captures certain features
of both the Gompertz and Korf laws. We investigate its main properties, with
special attention to the correction factor, the relative growth rate, the
inflection point, the maximum specific growth rate, the lag time and the
threshold crossing problem. Some data analytic examples and their performance
are also considered. Furthermore, we study a stochastic counterpart of the
proposed model, that is a linear time-inhomogeneous birth-death process whose
mean behaves as the deterministic one. We obtain the transition probabilities,
the moments and the population ultimate extinction probability for this
process. We finally treat the special case of a simple birth process, which
better mimics the proposed growth model.
Calls, zonoids, peacocks and log-concavity
Date: 2016-10-28 00:00:00

The main results are two characterisations of log-concave densities in terms
of the collection of lift zonoids corresponding to a peacock. These notions are
recalled and connected to arbitrage-free asset pricing in financial
mathematics.
South Korean degenerative spondylolisthesis patients had surgical treatment at earlier age than Japanese, American, and European patients: a published literature observation
Date: 2016-10-27 00:00:00
Tasks: Articles, Management

Physical therapy is the first line of treatment for adults with symptoms from
degenerative spondylolisthesis. Surgical management is offered when
nonoperative options have not adequately relieved symptoms. We performed PubMed
literature search with the word 'spondylolisthesis', and updated till September
18, 2016. We selected original research data involving surgical treatment of
degenerative spondylolisthesis, and in total there were n articles, including
data reported from Japan (n=37 series), South Korea (n=11 series), mainland
China (n=5 series), and ROC (Taiwan, n=3 series), America (n=20 series), Europe
(n=23 series). The mean age of each study were extracted and used a single
entry. We tried our best to filter out double/multiple reported data. Our
results showed the median age of degenerative spondylolisthesis patients
underwent surgical treatment was 66 years in Japan, 60 years in South Korea, 59
years in mainland China, 59 years in ROC (Taiwan), 65 years in USA, and 66
years in Europe. This study indicates Japan and South Korea may have different
surgical practice pattern. It will be of interested to investigate whether more
proportion of degenerative spondylolisthesis patients have been treated
surgically in South Korea than in Japan. The cost-effectiveness of different
approaches may warrant further analysis by professional spine surgeons.
Equitable retirement income tontines: Mixing cohorts without discriminating
Date: 2016-10-28 00:00:00

There is growing interest in the design of pension annuities that insure
against idiosyncratic longevity risk while pooling and sharing systematic risk.
This is partially motivated by the desire to reduce capital and reserve
requirements while retaining the value of mortality credits; see for example
Piggott, Valdez and Detzel (2005) or Donnelly, Guillen and Nielsen (2014). In
this paper we generalize the natural retirement income tontine introduced by
Milevsky and Salisbury (2015) by combining heterogeneous cohorts into one pool.
We engineer this scheme by allocating tontine shares at either a premium or a
discount to par based on both the age of the investor and the amount they
invest. For example, a 55 year-old allocating $\$10,000$ to the tontine might
be told to pay $\$$200 per share and receive 50 shares, while a 75 year-old
allocating $\$8,000$ might pay $\$$40 per share and receive 200 shares. They
would all be mixed together into the same tontine pool and each tontine share
would have equal income rights. The current paper addresses existence and
uniqueness issues and discusses the conditions under which this scheme can be
constructed equitably -- which is distinct from fairly -- even though it isn't
optimal for any cohort. As such, this also gives us the opportunity to compare
and contrast various pooling schemes that have been proposed in the literature
and to differentiate between arrangements that are socially equitable, vs.
actuarially fair vs. economically optimal.
Understanding the Non-Convergence of Agricultural Futures via Stochastic Storage Costs and Timing Options
Date: 2017-04-11 00:00:00

This paper studies the market phenomenon of non-convergence between futures
and spot prices in the grains market. We postulate that the positive basis
observed at maturity stems from the futures holder's timing options to exercise
the shipping certificate delivery item and subsequently liquidate the physical
grain. In our proposed approach, we incorporate stochastic spot price and
storage cost, and solve an optimal double stopping problem to give the optimal
strategies to exercise and liquidate the grain. Our new models for stochastic
storage rates lead to explicit no-arbitrage prices for the shipping certificate
and associated futures contract. We calibrate our models to empirical futures
data during the periods of observed non-convergence, and illustrate the premium
generated by the shipping certificate.
Understanding the Tracking Errors of Commodity Leveraged ETFs
Date: 2016-10-28 00:00:00

Commodity exchange-traded funds (ETFs) are a significant part of the rapidly
growing ETF market. They have become popular in recent years as they provide
investors access to a great variety of commodities, ranging from precious
metals to building materials, and from oil and gas to agricultural products. In
this article, we analyze the tracking performance of commodity leveraged ETFs
and discuss the associated trading strategies. It is known that leveraged ETF
returns typically deviate from their tracking target over longer holding
horizons due to the so-called volatility decay. This motivates us to construct
a benchmark process that accounts for the volatility decay, and use it to
examine the tracking performance of commodity leveraged ETFs. From empirical
data, we find that many commodity leveraged ETFs underperform significantly
against the benchmark, and we quantify such a discrepancy via the novel idea of
\emph{realized effective fee}. Finally, we consider a number of trading
strategies and examine their performance by backtesting with historical price
data.
Biophysical comparison of ATP-driven proton pumping mechanisms suggests a kinetic advantage for the rotary process depending on coupling ratio
Date: 2016-10-28 00:00:00

ATP-driven proton pumps, which are critical to the operation of a cell,
maintain cytosolic and organellar pH levels within a narrow functional range.
These pumps employ two very different mechanisms: an elaborate rotary mechanism
used by V-ATPase H+ pumps, and a simpler alternating access mechanism used by
P-ATPase H+ pumps. Why are two different mechanisms used to perform the same
function? Systematic analysis, without parameter fitting, of kinetic models of
the rotary, alternating access and other possible mechanisms suggest that, when
the ratio of protons transported per ATP hydrolyzed exceeds one, the
one-at-a-time proton transport by the rotary mechanism is faster than other
possible mechanisms across a wide range of driving conditions. When the ratio
is one, there is no intrinsic difference in the free energy landscape between
mechanisms, and therefore all mechanisms can exhibit the same kinetic
performance. To our knowledge all known rotary pumps have an H+:ATP ratio
greater than one, and all known alternating access ATP-driven proton pumps have
a ratio of one. Our analysis suggests a possible explanation for this apparent
relationship between coupling ratio and mechanism. When the conditions under
which the pump must operate permit a coupling ratio greater than one, the
rotary mechanism may have been selected for its kinetic advantage. On the other
hand, when conditions require a coupling ratio of one or less, the alternating
access mechanism may have been selected for other possible advantages resulting
from its structural and functional simplicity.
Impact of germline susceptibility variants in cancer genetic studies
Date: 2016-10-28 00:00:00

Although somatic mutations are the main contributor to cancer, underlying
germline alterations may increase the risk of cancer, mold the somatic
alteration landscape and cooperate with acquired mutations to promote the tumor
onset and/or maintenance. Therefore, both tumor genome and germline sequence
data have to be analyzed to have a more complete picture of the overall genetic
foundation of the disease. To reinforce such notion we quantitatively assess
the bias of restricting the analysis to somatic mutation data using mutational
data from well-known cancer genes which displays both types of alterations,
inherited and somatically acquired mutations.
Attention acts to suppress goal-based conflict under high competition
Date: 2016-10-29 00:00:00
Tasks: Vocal Bursts Intensity Prediction

It is known that when multiple stimuli are present, top-down attention
selectively enhances the neural signal in the visual cortex for task-relevant
stimuli, but this has been tested only under conditions of minimal competition
of visual attention. Here we show during high competition, that is, two stimuli
in a shared receptive field possessing opposing modulatory goals, top-down
attention suppresses both task-relevant and irrelevant neural signals within
100 ms of stimuli onset. This non-selective engagement of top-down attentional
resources serves to reduce the feedforward signal representing irrelevant
stimuli.
Multifractal cross wavelet analysis
Date: 2018-02-25 00:00:00

Complex systems are composed of mutually interacting components and the
output values of these components are usually long-range cross-correlated. We
propose a method to characterize the joint multifractal nature of such
long-range cross correlations based on wavelet analysis, termed multifractal
cross wavelet analysis (MFXWT). We assess the performance of the MFXWT method
by performing extensive numerical experiments on the dual binomial measures
with multifractal cross correlations and the bivariate fractional Brownian
motions (bFBMs) with monofractal cross correlations. For binomial multifractal
measures, the empirical joint multifractality of MFXWT is found to be in
approximate agreement with the theoretical formula. For bFBMs, MFXWT may
provide spurious multifractality because of the wide spanning range of the
multifractal spectrum. We also apply the MFXWT method to stock market indexes
and uncover intriguing joint multifractal nature in pairs of index returns and
volatilities.
Managing Default Contagion in Inhomogeneous Financial Networks
Authors: Nils Detering, Thilo Meyer-Brandis, Konstantinos Panagiotou, Daniel Ritter
Date: 2016-10-29 00:00:00

The aim of this paper is to quantify and manage systemic risk caused by default contagion in the interbank market. We model the market as a random directed network, where the vertices represent financial institutions and the weighted edges monetary exposures between them. Our model captures the strong degree of heterogeneity observed in empirical data and the parameters can easily be fitted to real data sets. One of our main results allows us to determine the impact of local shocks, where initially some banks default, to the entire system and the wider economy. Here the impact is measured by some index of total systemic importance of all eventually defaulted institutions. As a central application, we characterize resilient and non-resilient cases. In particular, for the prominent case where the network has a degree sequence without second moment, we show that a small number of initially defaulted banks can trigger a substantial default cascade. Our results complement and extend significantly earlier findings derived in the configuration model where the existence of a second moment of the degree distribution is assumed. As a second main contribution, paralleling regulatory discussions, we determine minimal capital requirements for financial institutions sufficient to make the network resilient to small shocks. An appealing feature of these capital requirements is that they can be determined locally by each institution without knowing the complete network structure as they basically only depend on the institution's exposures to its counterparties.
Nonequilibrium and nonlinear kinetics as key determinants for bistability in fission yeast G2-M transition
Authors: De Zhao, Teng Wang, Jian Zhao, Dianjie Li, Zhili Lin, Zeyan Chen, Qi Ouyang, Hong Qian, Yu V. Fu, Fangting Li
Date: 2016-10-30 00:00:00
Tasks: Decision Making

A living cell is an open, nonequilibrium biochemical system where ATP hydrolysis serves as the energy source for a wide range of intracellular processes, possibly including the assurance for decision-making. In the fission yeast cell cycle, the transition from G2 to M phase is driven by the activation of Cdc13/Cdc2 and Cdc25 and the deactivation of Wee1 through phosphorylation-dephosphorylation cycles with feedback loops. Here, we present a kinetic description of the G2-M circuit which reveals that both cellular ATP level and ATP hydrolysis free energy critically control Cdc2 activation. Using fission yeast nucleoplasmic extract (YNPE), we experimentally verify that increased ATP level drives the activation of Cdc2 which exhibits bistability and hysteresis in response to changes in cellular ATP level and ATP hydrolysis energy. These findings suggest that cellular ATP level and ATP hydrolysis energy are determinants of the bistability and robustness of Cdc2 activation during G2-M transition.
All-atom Molecular Dynamics Simulations of the Projection Domain of the Intrinsically Disordered htau40 Protein
Date: 2016-10-30 00:00:00
Tasks: All, Time Series, Time Series Analysis

We have performed all atom molecular dynamics simulations on the projection
domain of the intrinsically disordered htau40 protein. After generating a
suitable ensemble of starting conformations at high temperatures, at room
temperature in an adaptive box algorithm we have generated histograms for the
radius of gyration, secondary structure time series, generated model small
angle x-ray scattering intensities, and model chemical shift plots for
comparison to nuclear magnetic resonance data for solvated and filamentous tau.
Significantly, we find that the chemical shift spectrum is more consistent with
filamentous tau than full length solution based tau. We have also carried out
principle component analysis and find three basics groups: compact globules,
tadpoles, and extended hinging structures. To validate the adaptive box and our
force field choice, we have run limited simulations in a large conventional box
with varying force fields and find that our essential results are unchanged. We
also performed two simulations with the TIP4P-D water model, the effects of
which depended on whether the initial configuration was compact or extended.