pwc-archive/papers-with-abstracts huggingface dataset:
A generalised sigmoid population growth model with energy dependence: application to quantify the tipping point for Antarctic shallow seabed algae
Authors: Elise Mills, Graeme F. Clark, Matthew J. Simpson, Mark Baird, Matthew P. Adams
Date: 2024-03-22 00:00:00

Sigmoid growth models are often used to study population dynamics. The size of a population at equilibrium commonly depends explicitly on the availability of resources, such as an energy or nutrient source, which is not explicit in standard sigmoid growth models. A simple generalised extension of sigmoid growth models is introduced that can explicitly account for this resource-dependence, demonstrated by three examples of this family of models of increasing mathematical complexity. Each model is calibrated and compared to observed data for algae under sea-ice in Antarctic coastal waters. It was found that through careful construction, models satisfying the proposed framework can estimate key properties of a sea-ice break-out controlled tipping point for the algae, which cannot be estimated using standard sigmoid growth models. The proposed broader family of energy-dependent sigmoid growth models likely has usage in many population growth contexts where resources limit population size.
Assessing the Utility of Large Language Models for Phenotype-Driven Gene Prioritization in Rare Genetic Disorder Diagnosis
Authors: Junyoung Kim, Jingye Yang, Kai Wang, Chunhua Weng, Cong Liu
Date: 2024-03-21 00:00:00
Tasks: Knowledge Graphs

Phenotype-driven gene prioritization is a critical process in the diagnosis of rare genetic disorders for identifying and ranking potential disease-causing genes based on observed physical traits or phenotypes. While traditional approaches rely on curated knowledge graphs with phenotype-gene relations, recent advancements in large language models have opened doors to the potential of AI predictions through extensive training on diverse corpora and complex models. This study conducted a comprehensive evaluation of five large language models, including two Generative Pre-trained Transformers series, and three Llama2 series, assessing their performance across three key metrics: task completeness, gene prediction accuracy, and adherence to required output structures. Various experiments explored combinations of models, prompts, input types, and task difficulty levels. Our findings reveal that even the best-performing LLM, GPT-4, achieved an accuracy of 16.0%, which still lags behind traditional bioinformatics tools. Prediction accuracy increased with the parameter/model size. A similar increasing trend was observed for the task completion rate, with complicated prompts more likely to increase task completeness in models smaller than GPT-4. However, complicated prompts are more likely to decrease the structure compliance rate, but no prompt effects on GPT-4. Compared to HPO term-based input, LLM was also able to achieve better than random prediction accuracy by taking free-text input, but slightly lower than with the HPO input. Bias analysis showed that certain genes, such as MECP2, CDKL5, and SCN1A, are more likely to be top-ranked, potentially explaining the variances observed across different datasets. This study provides valuable insights into the integration of LLMs within genomic analysis, contributing to the ongoing discussion on the utilization of advanced LLMs in clinical workflows.
Workplace sustainability or financial resilience? Composite-financial resilience index
Authors: Elham Daadmehr
Date: 2024-03-24 00:00:00

Due to the variety of corporate risks in turmoil markets and the consequent financial distress especially in COVID-19 time, this paper investigates corporate resilience and compares different types of resilience that can be potential sources of heterogeneity in firms' implied rate of return. Specifically, the novelty is not only to quantify firms' financial resilience but also to compare it with workplace resilience which matters more in the COVID-19 era. The study prepares several pieces of evidence of the necessity and insufficiency of these two main types of resilience by comparing earnings expectations and implied discount rates of high- and low-resilience firms. Particularly, results present evidence of the possible amplification of workplace resilience by the financial status of firms in the COVID-19 era. The paper proposes a novel composite-financial resilience index as a potential measure for disaster risk that significantly and persistently reveals low-resilience characteristics of firms and resilience-heterogeneity in implied discount rates.
On the Hull-White model with volatility smile for Valuation Adjustments
Authors: T. van der Zwaard, L. A. Grzelak, C. W. Oosterlee
Date: 2024-03-21 00:00:00

Affine Diffusion dynamics are frequently used for Valuation Adjustments (xVA) calculations due to their analytic tractability. However, these models cannot capture the market-implied skew and smile, which are relevant when computing xVA metrics. Hence, additional degrees of freedom are required to capture these market features. In this paper, we address this through an SDE with state-dependent coefficients. The SDE is consistent with the convex combination of a finite number of different AD dynamics. We combine Hull-White one-factor models where one model parameter is varied. We use the Randomized AD (RAnD) technique to parameterize the combination of dynamics. We refer to our SDE with state-dependent coefficients and the RAnD parametrization of the original models as the rHW model. The rHW model allows for efficient semi-analytic calibration to European swaptions through the analytic tractability of the Hull-White dynamics. We use a regression-based Monte-Carlo simulation to calculate exposures. In this setting, we demonstrate the significant effect of skew and smile on exposures and xVAs of linear and early-exercise interest rate derivatives.
Measuring Name Concentrations through Deep Learning
Authors: Eva Lütkebohmert, Julian Sester
Date: 2024-03-25 00:00:00
Tasks: Deep Learning

We propose a new deep learning approach for the quantification of name concentration risk in loan portfolios. Our approach is tailored for small portfolios and allows for both an actuarial as well as a mark-to-market definition of loss. The training of our neural network relies on Monte Carlo simulations with importance sampling which we explicitly formulate for the CreditRisk${+}$ and the ratings-based CreditMetrics model. Numerical results based on simulated as well as real data demonstrate the accuracy of our new approach and its superior performance compared to existing analytical methods for assessing name concentration risk in small and concentrated portfolios.
Anticipatory Gains and Event-Driven Losses in Blockchain-Based Fan Tokens: Evidence from the FIFA World Cup
Authors: Aman Saggu, Lennart Ante, Ender Demir
Date: 2024-03-23 00:00:00

National football teams increasingly issue tradeable blockchain-based fan tokens to strategically enhance fan engagement. This study investigates the impact of 2022 World Cup matches on the dynamic performance of each team's fan token. The event study uncovers fan token returns surged six months before the World Cup, driven by positive anticipation effects. However, intraday analysis reveals a reversal of fan token returns consistently declining and trading volumes rising as matches unfold. To explain findings, we uncover asymmetries whereby defeats in high-stake matches caused a plunge in fan token returns, compared to low-stake matches, intensifying in magnitude for knockout matches. Contrarily, victories enhance trading volumes, reflecting increased market activity without a corresponding positive effect on returns. We align findings with the classic market adage "buy the rumor, sell the news," unveiling cognitive biases and nuances in investor sentiment, cautioning the dichotomy of pre-event optimism and subsequent performance declines.
Rank-Dependent Predictable Forward Performance Processes
Authors: Bahman Angoshtari, Shida Duan
Date: 2024-03-24 00:00:00

Predictable forward performance processes (PFPPs) are stochastic optimal control frameworks for an agent who controls a randomly evolving system but can only prescribe the system dynamics for a short period ahead. This is a common scenario in which a controlling agent frequently re-calibrates her model. We introduce a new class of PFPPs based on rank-dependent utility, generalizing existing models that are based on expected utility theory (EUT). We establish existence of rank-dependent PFPPs under a conditionally complete market and exogenous probability distortion functions which are updated periodically. We show that their construction reduces to solving an integral equation that generalizes the integral equation obtained under EUT in previous studies. We then propose a new approach for solving the integral equation via theory of Volterra equations. We illustrate our result in the special case of conditionally complete Black-Scholes model.
Crypto Inverse-Power Options and Fractional Stochastic Volatility
Authors: Boyi Li, Weixuan Xia
Date: 2024-03-24 00:00:00
Tasks: Computational Efficiency

Recent empirical evidence has highlighted the crucial role of jumps in both price and volatility within the cryptocurrency market. In this paper, we integrate price--volatility co-jumps and volatility short-term dependency into a coherent model framework, featuring fractional stochastic volatility. We particularly focus on inverse options, including the emerging Quanto inverse options and their power-type generalizations, aiming at mitigating cryptocurrency exchange rate risk and adjusting inherent risk exposure. Characteristic function-based pricing--hedging formulas are derived for these inverse options. The model framework is applied to asymmetric Laplace jump-diffusions and Gaussian-mixed tempered stable-type processes, employing three types of fractional kernels, for an extensive empirical analysis involving model calibration on two independent Bitcoin options data sets, during and after the COVID-19 pandemic. Key insights from our theoretical analysis and empirical findings include: (1) the superior performance of fractional stochastic-volatility models compared to various benchmark models, including those incorporating jumps and stochastic volatility, along with high computational efficiency when utilizing a piecewise kernel, (2) the practical necessity of considering jumps in both price and volatility, along with rough volatility, in pricing and hedging cryptocurrency options, (3) stability of calibrated parameter values in line with stylized facts.
On Merton's Optimal Portfolio Problem with Sporadic Bankruptcy for Isoelastic Utility
Authors: Yaacov Kopeliovich, Michael Pokojovy, Julia Bernatska
Date: 2024-03-23 00:00:00

We consider a stock that follows a geometric Brownian motion (GBM) and a riskless asset continuously compounded at a constant rate. We assume that the stock can go bankrupt, i.e., lose all of its value, at some exogenous random time (independent of the stock price) modeled as the first arrival time of a homogeneous Poisson process. For this setup, we study Merton's optimal portfolio problem consisting in maximizing the expected isoelastic utility of the total wealth at a given finite maturity time. We obtain an analytical solution using coupled Hamilton-Jacobi-Bellman (HJB) equations. The optimal strategy bans borrowing and never allocates more wealth into the stock than the classical Merton ratio recommends. For non-logarithmic isoelastic utilities, the optimal weights are non-myopic. This is an example where a realistic problem, being merely a slight modification of the usual GBM model, leads to non-myopic weights. For logarithmic utility, we additionally present an alternative derivation using a stochastic integral and verify that the weights obtained are identical to our first approach. We also present an example for our strategy applied to a stock with non-zero bankruptcy probability.
Nonlinear shifts and dislocations in financial market structure and composition
Authors: Nick James, Max Menzies
Date: 2024-03-22 00:00:00

This paper develops new mathematical techniques to identify temporal shifts among a collection of US equities partitioned into a new and more detailed set of market sectors. Although conceptually related, our three analyses reveal distinct insights about financial markets, with meaningful implications for investment managers. First, we explore a variety of methods to identify nonlinear shifts in market sector structure and describe the mathematical connection between the measure used and the captured phenomena. Second, we study network structure with respect to our new market sectors and identify meaningfully connected sector-to-sector mappings. Finally, we conduct a series of sampling experiments over different sample spaces and contrast the distribution of Sharpe ratios produced by long-only, long-short and short-only investment portfolios. In addition, we examine the sector composition of the top-performing portfolios for each of these portfolio styles. In practice, the methods proposed in this paper could be used to identify regime shifts, optimally structured portfolios, and better communities of equities.
Emotion Detection with Transformers: A Comparative Study
Authors: Mahdi Rezapour
Date: 2024-03-18 00:00:00
Tasks: Emotion Classification

In this study, we explore the application of transformer-based models for emotion classification on text data. We train and evaluate several pre-trained transformer models, on the Emotion dataset using different variants of transformers. The paper also analyzes some factors that in-fluence the performance of the model, such as the fine-tuning of the transformer layer, the trainability of the layer, and the preprocessing of the text data. Our analysis reveals that commonly applied techniques like removing punctuation and stop words can hinder model performance. This might be because transformers strength lies in understanding contextual relationships within text. Elements like punctuation and stop words can still convey sentiment or emphasis and removing them might disrupt this context.
GloSIS: The Global Soil Information System Web Ontology
Authors: Raul Palma, Bogusz Janiak, Luís Moreira de Sousa, Kathi Schleidt, Tomáš Řezník, Fenny van Egmond, Johan Leenaars, Dimitrios Moshou, Abdul Mouazen, Peter Wilson, David Medyckyj-Scott, Alistair Ritchie, Yusuf Yigini, Ronald Vargas
Date: 2024-03-25 00:00:00
Tasks: Management

Established in 2012 by members of the Food and Agriculture Organisation (FAO), the Global Soil Partnership (GSP) is a global network of stakeholders promoting sound land and soil management practices towards a sustainable world food system. However, soil survey largely remains a local or regional activity, bound to heterogeneous methods and conventions. Recognising the relevance of global and trans-national policies towards sustainable land management practices, the GSP elected data harmonisation and exchange as one of its key lines of action. Building upon international standards and previous work towards a global soil data ontology, an improved domain model was eventually developed within the GSP [54], the basis for a Global Soil Information System (GloSIS). This work also identified the Semantic Web as a possible avenue to operationalise the domain model. This article presents the GloSIS web ontology, an implementation of the GloSIS domain model with the Web Ontology Language (OWL). Thoroughly employing a host of Semantic Web standards (SOSA, SKOS, GeoSPARQL, QUDT), GloSIS lays out not only a soil data ontology but also an extensive set of ready-to-use code-lists for soil description and physio-chemical analysis. Various examples are provided on the provision and use of GloSIS-compliant linked data, showcasing the contribution of this ontology to the discovery, exploration, integration and access of soil data.
Reinforcement Learning-based Recommender Systems with Large Language Models for State Reward and Action Modeling
Authors: Jie Wang, Alexandros Karatzoglou, Ioannis Arapakis, Joemon M. Jose
Date: 2024-03-25 00:00:00
Tasks: Offline RL, Recommendation Systems, Reinforcement Learning (RL), Sequential Recommendation

Reinforcement Learning (RL)-based recommender systems have demonstrated promising performance in meeting user expectations by learning to make accurate next-item recommendations from historical user-item interactions. However, existing offline RL-based sequential recommendation methods face the challenge of obtaining effective user feedback from the environment. Effectively modeling the user state and shaping an appropriate reward for recommendation remains a challenge. In this paper, we leverage language understanding capabilities and adapt large language models (LLMs) as an environment (LE) to enhance RL-based recommenders. The LE is learned from a subset of user-item interaction data, thus reducing the need for large training data, and can synthesise user feedback for offline data by: (i) acting as a state model that produces high quality states that enrich the user representation, and (ii) functioning as a reward model to accurately capture nuanced user preferences on actions. Moreover, the LE allows to generate positive actions that augment the limited offline training data. We propose a LE Augmentation (LEA) method to further improve recommendation performance by optimising jointly the supervised component and the RL policy, using the augmented actions and historical user signals. We use LEA, the state and reward models in conjunction with state-of-the-art RL recommenders and report experimental results on two publicly available datasets.
Apriori Knowledge in an Era of Computational Opacity: The Role of AI in Mathematical Discovery
Authors: Eamon Duede, Kevin Davey
Date: 2024-03-15 00:00:00
Tasks: Mathematical Reasoning

Can we acquire apriori knowledge of mathematical facts from the outputs of computer programs? People like Burge have argued (correctly in our opinion) that, for example, Appel and Haken acquired apriori knowledge of the Four Color Theorem from their computer program insofar as their program simply automated human forms of mathematical reasoning. However, unlike such programs, we argue that the opacity of modern LLMs and DNNs creates obstacles in obtaining apriori mathematical knowledge from them in similar ways. We claim though that if a proof-checker automating human forms of proof-checking is attached to such machines, then we can obtain apriori mathematical knowledge from them after all, even though the original machines are entirely opaque to us and the proofs they output may not, themselves, be human-surveyable.
WoLF: Wide-scope Large Language Model Framework for CXR Understanding
Authors: Seil Kang, Donghyun Kim, Junhyeok Kim, Hyo Kyung Lee, Seong Jae Hwang
Date: 2024-03-19 00:00:00
Tasks: Anatomy, Instruction Following, Language Modeling, Language Modelling, Large Language Model, Question Answering, Visual Question Answering, Visual Question Answering (VQA)

Significant methodological strides have been made toward Chest X-ray (CXR) understanding via modern vision-language models (VLMs), demonstrating impressive Visual Question Answering (VQA) and CXR report generation abilities. However, existing CXR understanding frameworks still possess several procedural caveats. (1) Previous methods solely use CXR reports, which are insufficient for comprehensive Visual Question Answering (VQA), especially when additional health-related data like medication history and prior diagnoses are needed. (2) Previous methods use raw CXR reports, which are often arbitrarily structured. While modern language models can understand various text formats, restructuring reports for clearer, organized anatomy-based information could enhance their usefulness. (3) Current evaluation methods for CXR-VQA primarily emphasize linguistic correctness, lacking the capability to offer nuanced assessments of the generated answers. In this work, to address the aforementioned caveats, we introduce WoLF, a Wide-scope Large Language Model Framework for CXR understanding. To resolve (1), we capture multi-faceted records of patients, which are utilized for accurate diagnoses in real-world clinical scenarios. Specifically, we adopt the Electronic Health Records (EHR) to generate instruction-following data suited for CXR understanding. Regarding (2), we enhance report generation performance by decoupling knowledge in CXR reports based on anatomical structure even within the attention step via masked attention. To address (3), we introduce an AI-evaluation protocol optimized for assessing the capabilities of LLM. Through extensive experimental validations, WoLF demonstrates superior performance over other models on MIMIC-CXR in the AI-evaluation arena about VQA (up to +9.47%p mean score) and by metrics about report generation (+7.3%p BLEU-1).
All Artificial, Less Intelligence: GenAI through the Lens of Formal Verification
Authors: Deepak Narayan Gadde, Aman Kumar, Thomas Nalapat, Evgenii Rezunov, Fabio Cappellini
Date: 2024-03-25 00:00:00
Tasks: All

Modern hardware designs have grown increasingly efficient and complex. However, they are often susceptible to Common Weakness Enumerations (CWEs). This paper is focused on the formal verification of CWEs in a dataset of hardware designs written in SystemVerilog from Regenerative Artificial Intelligence (AI) powered by Large Language Models (LLMs). We applied formal verification to categorize each hardware design as vulnerable or CWE-free. This dataset was generated by 4 different LLMs and features a unique set of designs for each of the 10 CWEs we target in our paper. We have associated the identified vulnerabilities with CWE numbers for a dataset of 60,000 generated SystemVerilog Register Transfer Level (RTL) code. It was also found that most LLMs are not aware of any hardware CWEs; hence they are usually not considered when generating the hardware code. Our study reveals that approximately 60% of the hardware designs generated by LLMs are prone to CWEs, posing potential safety and security risks. The dataset could be ideal for training LLMs and Machine Learning (ML) algorithms to abstain from generating CWE-prone hardware designs.
Navigating the EU AI Act: A Methodological Approach to Compliance for Safety-critical Products
Authors: J. Kelly, S. Zafar, L. Heidemann, J. Zacchi, D. Espinoza, N. Mata
Date: 2024-03-25 00:00:00

In December 2023, the European Parliament provisionally agreed on the EU AI Act. This unprecedented regulatory framework for AI systems lays out guidelines to ensure the safety, legality, and trustworthiness of AI products. This paper presents a methodology for interpreting the EU AI Act requirements for high-risk AI systems by leveraging product quality models. We first propose an extended product quality model for AI systems, incorporating attributes relevant to the Act not covered by current quality models. We map the Act requirements to relevant quality attributes with the goal of refining them into measurable characteristics. We then propose a contract-based approach to derive technical requirements at the stakeholder level. This facilitates the development and assessment of AI systems that not only adhere to established quality standards, but also comply with the regulatory requirements outlined in the Act for high-risk (including safety-critical) AI systems. We demonstrate the applicability of this methodology on an exemplary automotive supply chain use case, where several stakeholders interact to achieve EU AI Act compliance.