pwc-archive/papers-with-abstracts huggingface dataset:
Optimal Static Quadratic Hedging
Date: 2015-11-19 00:00:00

We propose a flexible framework for hedging a contingent claim by holding
static positions in vanilla European calls, puts, bonds, and forwards. A
model-free expression is derived for the optimal static hedging strategy that
minimizes the expected squared hedging error subject to a cost constraint. The
optimal hedge involves computing a number of expectations that reflect the
dependence among the contingent claim and the hedging assets. We provide a
general method for approximating these expectations analytically in a general
Markov diffusion market. To illustrate the versatility of our approach, we
present several numerical examples, including hedging path-dependent options
and options written on a correlated asset.
Perceptual similarity of visual patterns predicts the similarity of their dynamic neural activation patterns measured with MEG
Date: 2016-02-10 00:00:00

Perceptual similarity is a cognitive judgment that represents the end-stage
of a complex cascade of hierarchical processing throughout visual cortex.
Previous studies have shown a correspondence between the similarity of
coarse-scale fMRI activation patterns and the perceived similarity of visual
stimuli, suggesting that visual objects that appear similar also share similar
underlying patterns of neural activation. Here we explore the temporal
relationship between the human brain's time-varying representation of visual
patterns and behavioral judgments of perceptual similarity. The visual stimuli
were abstract patterns constructed from identical perceptual units (oriented
Gabor patches) so that each pattern had a unique global form or perceptual
'Gestalt'. The visual stimuli were decodable from evoked neural activation
patterns measured with magnetoencephalography (MEG), however, stimuli differed
in the similarity of their neural representation as estimated by differences in
decodability. Early after stimulus onset (from 50ms), a model based on
retinotopic organization predicted the representational similarity of the
visual stimuli. Following the peak correlation between the retinotopic model
and neural data at 80ms, the neural representations quickly evolved so that
retinotopy no longer provided a sufficient account of the brain's time-varying
representation of the stimuli. Overall the strongest predictor of the brain's
representation was a model based on human judgments of perceptual similarity,
which reached the limits of the maximum correlation with the neural data
defined by the 'noise ceiling'. Our results show that large-scale brain
activation patterns contain a neural signature for the perceptual Gestalt of
composite visual features, and demonstrate a strong correspondence between
perception and complex patterns of brain activity.
Inferring average generation via division-linked labeling
Date: 2017-04-27 00:00:00

For proliferating cells subject to both division and death, how can one
estimate the average generation number of the living population without
continuous observation or a division-diluting dye? In this paper we provide a
method for cell systems such that at each division there is an unlikely,
heritable one-way label change that has no impact other than to serve as a
distinguishing marker. If the probability of label change per cell generation
can be determined and the proportion of labeled cells at a given time point can
be measured, we establish that the average generation number of living cells
can be estimated. Crucially, the estimator does not depend on knowledge of the
statistics of cell cycle, death rates or total cell numbers. We validate the
estimator and illustrate its features through comparison with published data
and physiologically parameterized stochastic simulations, using it to suggest
new experimental designs.
Theoretical and Numerical Analysis of an Optimal Execution Problem with Uncertain Market Impact
Date: 2015-08-28 00:00:00

This paper is a continuation of Ishitani and Kato (2015), in which we derived
a continuous-time value function corresponding to an optimal execution problem
with uncertain market impact as the limit of a discrete-time value function.
Here, we investigate some properties of the derived value function. In
particular, we show that the function is continuous and has the semigroup
property, which is strongly related to the Hamilton-Jacobi-Bellman
quasi-variational inequality. Moreover, we show that noise in market impact
causes risk-neutral assessment to underestimate the impact cost. We also study
typical examples under a log-linear/quadratic market impact function with
Gamma-distributed noise.
The Limits of Leverage
Date: 2017-10-17 00:00:00

When trading incurs proportional costs, leverage can scale an asset's return
only up to a maximum multiple, which is sensitive to its volatility and
liquidity. In a model with one safe and one risky asset, with constant
investment opportunities and proportional costs, we find strategies that
maximize long term returns given average volatility. As leverage increases,
rising rebalancing costs imply declining Sharpe ratios. Beyond a critical
level, even returns decline. Holding the Sharpe ratio constant, higher asset
volatility leads to superior returns through lower costs.
The thermodynamics of protein aggregation reactions may underpin the enhanced metabolic efficiency associated with heterosis, some balancing selection, and the evolution of ploidy levels
Date: 2019-07-16 00:00:00

Identifying the physical basis of heterosis (or hybrid vigor) has remained
elusive despite over a hundred years of research on the subject. The three main
theories of heterosis are dominance theory, overdominance theory, and epistasis
theory. Kacser and Burns (1981) identified the molecular basis of dominance,
which has greatly enhanced our understanding of its importance to heterosis.
This paper aims to explain how overdominance, and some features of epistasis,
can similarly emerge from the molecular dynamics of proteins. Possessing
multiple alleles at a gene locus results in the synthesis of different
allozymes at reduced concentrations. This in turn reduces the rate at which
each allozyme forms soluble oligomers, which are toxic and must be degraded,
because allozymes co-aggregate at low efficiencies. The model developed in this
paper will be used to explain how heterozygosity can impact the metabolic
efficiency of an organism. It can also explain why the viabilities of some
inbred lines seem to decline rapidly at high inbreeding coefficients (F > 0.5),
which may provide a physical basis for truncation selection for heterozygosity.
Finally, the model has implications for the ploidy level of organisms. It can
explain why polyploids are frequently found in environments where severe
physical stresses promote the formation of soluble oligomers. The model can
also explain why complex organisms, which need to synthesize aggregation-prone
proteins that contain intrinsically unstructured regions (IURs) and multiple
domains because they facilitate complex protein interaction networks (PINs),
tend to be diploid while haploidy tends to be restricted to relatively simple
organisms.
Business cycle synchronization within the European Union: A wavelet cohesion approach
Date: 2016-02-13 00:00:00

In this paper, we map the process of business cycle synchronization across
the European Union. We study this synchronization by applying wavelet
techniques, particularly the cohesion measure with time-varying weights. This
novel approach allows us to study the dynamic relationship among selected
countries from a different perspective than the usual time-domain models.
Analyzing monthly data from 1990 to 2014, we show an increasing co-movement of
the Visegrad countries with the European Union after the countries began
preparing for the accession to the European Union. With particular focus on the
Visegrad countries we show that participation in a currency union possibly
increases the co-movement. Furthermore, we find a high degree of
synchronization in long-term horizons by analyzing the Visegrad Four and
Southern European countries' synchronization with the core countries of the
European Union.
Increasing loyalty using predictive modeling in Business-to-Business Telecommunication
Authors: Luciano Patrick, Rebai Ismail, Lemaire Vincent
Date: 2015-06-10 00:00:00
Tasks: Management, Marketing

Customer Relationship Management (CRM) is a key element of modern marketing
strategies. One of the most practical way to build useful knowledge on
customers in a CRM system to produce scores to forecast churn behavior,
propensity to subscribe to a new service... In AMEA zone (Asia, Middle East and
Africa zone), the context of fierce competition may represent a higher
percentage, and particularly in B2B market. But by contrast, to our knowledge,
no scientific papers were dedicated and published to detail the way to improve
loyalty in B2B Telco market. If we can assume at low segments similarities
between B2B and B2C, some research is required in order to model B2B user
behavior versus B2C behavior. This problematic stands actual as "Bring Your own
Device" (BYOD) becomes more and more trendy. Answering business requirements,
our team applied some B2C predictive tools with adapting them to B2B in an AMEA
country Orange affiliate.
Limiting energy dissipation induces glassy kinetics in single cell high precision responses
Date: 2016-01-29 00:00:00

Single cells often generate precise responses by involving dissipative
out-of-thermodynamic equilibrium processes in signaling networks. The available
free energy to fuel these processes could become limited depending on the
metabolic state of an individual cell. How does limiting dissipation affect the
kinetics of high precision responses in single cells? I address this question
in the context of a kinetic proofreading scheme used in a simple model of early
time T cell signaling. I show using exact analytical calculations and numerical
simulations that limiting dissipation qualitatively changes the kinetics in
single cells marked by emergence of slow kinetics, large cell-to-cell
variations of copy numbers, temporally correlated stochastic events (dynamic
facilitation), and, ergodicity breaking. Thus, constraints in energy
dissipation, in addition to negatively affecting ligand discrimination in T
cells, can create a fundamental difficulty in interpreting single cell kinetics
from cell population level results.
Imperfect Testing of Individuals for Infectious Diseases: Mathematical Model and Analysis
Date: 2015-06-24 00:00:00
Tasks: Specificity

Testing symptomatic individuals for a disease can deliver treatment
resources, if tests' results turn positive, which speeds up their treatment and
might also decrease individuals' contacts to other ones. An imperfect test,
however, might incorrectly consider susceptible individuals to be infected
(false positives). In this case, testing reduces the epidemic in the expense of
potentially misclassifying individuals. We present a mathematical model that
describes the dynamics of an infectious disease and its testing. Susceptible
individuals turn to "susceptible but deemed infected" at rate $\theta$.
Infected individuals go to a state "infected and tested positive" at rate
$\alpha$. Both of these rates are functions of test's sensitivity and
specificity. Analysis of the model permits us to derive an expression for $R_0$
and to find the conditions for reaching $R_0<1$, i.e., when the disease--free
equilibrium is stable. We find that under certain conditions it is possible to
get $R_0<1$, when originally, i.e., without testing, we would have $R_0>1$. We
also present numerical results to cover interesting scenarios such as using
different tests and to compare these results.
Predicting catastrophic shifts
Date: 2015-06-10 00:00:00
Tasks: Diagnostic

Catastrophic transitions, where a system shifts abruptly between alternate
steady states, are a generic feature of many nonlinear systems. Recently these
regime shift were suggested as the mechanism underlies many ecological
catastrophes, such as desertification and coral reef collapses, which are
considered as a prominent threat to sustainability and to the well-being of
millions. Still, the methods proposed so far for the prediction of an imminent
transition are quite ineffective, and some empirical and theoretical studies
suggest that actual transitions may occur smoothly, without an abrupt shift.
Here we present a new diagnostic tool, based on monitoring the dynamics of
clusters through time. Our technique discriminates between systems with local
positive feedback, where the transition is abrupt, and systems with negative
density dependence, where the transition is smooth. Analyzing the spatial
dynamics of these two generic scenarios, we show that changes in the critical
cluster size provide a reliable early warning indicator for both transitions.
Our method may allow for the prediction, and thus hopefully the prevention of
such transitions, avoiding their destructive outcomes.
Time-scale analysis of co-movement in EU sovereign bond markets
Date: 2016-03-24 00:00:00

We study the co-movement of the 10-year sovereign bond yields of 11 EU
countries. Our analysis is focused mainly on changes in co-movement during the
financial crisis period, especially around two significant dates - the fall of
Lehman Brothers, September 15, 2008, and the announcement of the increase of
Greece's public deficit on October 20, 2009. We study co-movement dynamics
using wavelet analysis, which allows us to observe how co-movement changes
across frequencies and over time. We divide the countries into three groups:
the core of the Eurozone, the periphery of the Eurozone and the states outside
the Eurozone. The results indicate that co-movement decreased considerably
during the crisis period for all country pairs but that there are significant
differences among the groups. Furthermore, we demonstrate that the co-movement
of bond yields is frequency (scale) dependent.
DNA cyclization and looping in the wormlike limit: normal modes and the validity of the harmonic approximation
Date: 2015-07-28 00:00:00
Tasks: Computational Efficiency

For much of the last three decades Monte Carlo-simulation methods have been
the standard approach for accurately calculating the cyclization probability,
$J$, or J factor, for DNA models having sequence-dependent bends or
inhomogeneous bending flexibility. Within the last ten years, however,
approaches based on harmonic analysis of semi-flexible polymer models have been
introduced, which offer much greater computational efficiency than Monte Carlo
techniques. These methods consider the ensemble of molecular conformations in
terms of harmonic fluctuations about a well-defined elastic-energy minimum.
However, the harmonic approximation is only applicable for small systems,
because the accessible conformation space of larger systems is increasingly
dominated by anharmonic contributions. In the case of computed values of the J
factor, deviations of the harmonic approximation from the exact value of $J$ as
a function of DNA length have not been characterized. Using a recent,
numerically exact method that accounts for both anharmonic and harmonic
contributions to $J$ for wormlike chains of arbitrary size, we report here the
apparent error that results from neglecting anharmonic behavior. For wormlike
chains having contour lengths less than four times the persistence length the
error in $J$ arising from the harmonic approximation is generally small,
amounting to free energies less than the thermal energy, $k_B T$. For larger
systems, however, the deviations between harmonic and exact $J$ values increase
approximately linearly with size.
Copula based hierarchical risk aggregation - Tree dependent sampling and the space of mild tree dependence
Date: 2015-06-19 00:00:00

The ability to adequately model risks is crucial for insurance companies. The
method of "Copula-based hierarchical risk aggregation" by Arbenz et al. offers
a flexible way in doing so and has attracted much attention recently. We
briefly introduce the aggregation tree model as well as the sampling algorithm
proposed by they authors.
  An important characteristic of the model is that the joint distribution of
all risk is not fully specified unless an additional assumption (known as
"conditional independence assumption") is added. We show that there is
numerical evidence that the sampling algorithm yields an approximation of the
distribution uniquely specified by the conditional independence assumption. We
propose a modified algorithm and provide a proof that under certain conditions
the said distribution is indeed approximated by our algorithm.
  We further determine the space of feasible distributions for a given
aggregation tree model in case we drop the conditional independence assumption.
We study the impact of the input parameters and the tree structure, which
allows conclusions of the way the aggregation tree should be designed.
How log-normal is your country? An analysis of the statistical distribution of the exported volumes of products
Date: 2015-06-11 00:00:00

We have considered the statistical distributions of the volumes of the
different products exported by 148 countries. We have found that the form of
these distributions is not unique but heavily depends on the level of
development of the nation, as expressed by macroeconomic indicators like GDP,
GDP per capita, total export and a recently introduced measure for countries'
economic complexity called fitness. We have identified three major classes: a)
an incomplete log-normal shape, truncated on the left side, for the less
developed countries, b) a complete log-normal, with a wider range of volumes,
for nations characterized by intermediate economy, and c) a strongly asymmetric
shape for countries with a high degree of development. The ranking curves of
the exported volumes from each country seldom cross each other, showing a clear
hierarchy of export volumes. Finally, the log-normality hypothesis has been
checked for the distributions of all the 148 countries through different tests,
Kolmogorov-Smirnov and Cramer-Von Mises, confirming that it cannot be rejected
only for the countries of intermediate economy.
Convergence of Estimated Option Price in a Regime switching Market
Date: 2016-03-29 00:00:00

In an observed generalized semi-Markov regime, estimation of transition rate
of regime switching leads towards calculation of locally risk minimizing option
price. Despite the uniform convergence of estimated step function of transition
rate, to meet the existence of classical solution of the modified price
equation, the estimator is approximated in the class of smooth functions and
furthermore, the convergence is established. Later, the existence of the
solution of the modified price equation is verified and the point-wise
convergence of such approximation of option price is proved to answer the
tractability of its application in Finance. To demonstrate the consistency in
result a numerical experiment has been reported.
Markets, herding and response to external information
Date: 2015-06-25 00:00:00

We focus on the influence of external sources of information upon financial
markets. In particular, we develop a stochastic agent-based market model
characterized by a certain herding behavior as well as allowing traders to be
influenced by an external dynamic signal of information. This signal can be
interpreted as a time-varying advertising, public perception or rumor, in favor
or against one of two possible trading behaviors, thus breaking the symmetry of
the system and acting as a continuously varying exogenous shock. As an
illustration, we use a well-known German Indicator of Economic Sentiment as
information input and compare our results with Germany's leading stock market
index, the DAX, in order to calibrate some of the model parameters. We study
the conditions for the ensemble of agents to more accurately follow the
information input signal. The response of the system to the external
information is maximal for an intermediate range of values of a market
parameter, suggesting the existence of three different market regimes:
amplification, precise assimilation and undervaluation of incoming information.
From Walras' auctioneer to continuous time double auctions: A general dynamic theory of supply and demand
Date: 2015-06-11 00:00:00

In standard Walrasian auctions, the price of a good is defined as the point
where the supply and demand curves intersect. Since both curves are generically
regular, the response to small perturbations is linearly small. However, a
crucial ingredient is absent of the theory, namely transactions themselves.
What happens after they occur? To answer the question, we develop a dynamic
theory for supply and demand based on agents with heterogeneous beliefs. When
the inter-auction time is infinitely long, the Walrasian mechanism is
recovered. When transactions are allowed to happen in continuous time, a
peculiar property emerges: close to the price, supply and demand vanish
quadratically, which we empirically confirm on the Bitcoin. This explains why
price impact in financial markets is universally observed to behave as the
square root of the excess volume. The consequences are important, as they imply
that the very fact of clearing the market makes prices hypersensitive to small
fluctuations.
Theory and associated phenomenology for intrinsic mortality arising from natural selection
Date: 2015-06-12 00:00:00

Standard evolutionary theories of aging and mortality, implicitly based on
assumptions of spatial averaging, hold that natural selection cannot favor
shorter lifespan without direct compensating benefit to individual reproductive
success. Here we show that both theory and phenomenology are consistent with
programmed death. Spatial evolutionary models show that self-limited lifespan
robustly results in long-term benefit to a lineage; longer-lived variants may
have a reproductive advantage for many generations, but shorter lifespan
ultimately confers long-term reproductive advantage through environmental
feedback acting on much longer time scales. Numerous model variations produce
the same qualitative result, demonstrating insensitivity to detailed
assumptions; the key conditions under which self-limited lifespan is favored
are spatial extent and locally exhaustible resources. Numerous empirical
observations can parsimoniously be explained in terms of long-term selective
advantage for intrinsic mortality. Classically anomalous empirical data on
natural lifespans and intrinsic mortality, including observations of longer
lifespan associated with increased predation, and evidence of programmed death
in both unicellular and multicellular organisms, are consistent with specific
model predictions. The generic nature of the spatial model conditions under
which intrinsic mortality is favored suggests a firm theoretical basis for the
idea that evolution can quite generally select for shorter lifespan directly.
On the Characteristics of the Free Market in a Cooperative Society
Authors: Norbert Agbeko
Date: 2015-06-12 00:00:00

The key characteristic of a true free market economy is that exchanges are entirely voluntary. When there is a monopoly in the creation of currency as we have in today's markets, you no longer have a true free market. Features of the current economic system such as central banking and taxation would be nonexistent in a free market. This paper examines how currency monopoly leads to the instabilities and imbalances that we see in today's economy. It also proposes that currencies should emerge from the voluntary exchange of goods and services, and studies economic interaction across all scales, by considering economic action in cases where the self-interests of individuals are coincident. By examining the voluntary exchange of goods and services at the scale of an entire society, it is shown that a new currency system, which resolves a lot of the problems caused by the current fiat currency system, emerges naturally from the free market. The new currency system is robust and efficient, and provides a way for public goods and services to be provided, and its providers compensated, without the need for direct taxation.