Far Casting Cross-Validation

Cross-validation has long been used for choosing tuning parameters and other model selection tasks. It generally performs well provided the data are independent, or nearly so. Improvements have been suggested which address ordinary cross-validation’s (OCV) shortcomings in correlated data. Whereas these techniques have merit, they can still lead to poor model selection in correlated data or are not readily generalizable to high-dimensional data.

The proposed solution, far casting cross-validation (FCCV), addresses these problems. FCCV withholds correlated neighbors in every aspect of the cross-validation procedure. The result is a technique that stresses a fitted model’s ability to extrapolate rather than interpolate. This generally leads to better model selection in correlated datasets.

Whereas FCCV is less than optimal in the independence case, our improvement of OCV applies more generally to higher dimensional error processes and to both parametric and nonparametric model selection problems. To facilitate introduction, we consider only one application, namely estimating global bandwidths for curve estimation with local linear regression. We provide theoretical motivation and report some comparative results from a simulation experiment and on a time series of annual global temperature deviations. For such data, FCCV generally has lower average squared error when disturbances are correlated.

Supplementary materials are available online.     

The Lévy Swap Market Model

Models driven by Lévy processes are attractive since they allow for better statistical fitting than classical diffusion models. The dynamics of the forward swap rate process is derived in a semimartingale setting and a Lévy swap market model is introduced. In order to guarantee positive rates, the swap rates are modelled as ordinary exponentials. The model starts with the most distant rate, which is driven by a non‐homogeneous Lévy process. Via backward induction the remaining swap rates are constructed such that they become martingales under the corresponding forward swap measures. Finally it is shown how swaptions can be priced using bilateral Laplace transforms.     

Bonds and Options in Exponentially Affine Bond Models

Abstract

In this article we apply the Flesaker–Hughston approach to invert the yield curve and to price various options by letting the randomness in the economy be driven by a process closely related to the short rate, called the abstract short rate. This process is a pure deterministic translation of the short rate itself, and we use the deterministic shift to calibrate the models to the initial yield curve. We show that we can solve for the shift needed in closed form by transforming the problem to a new probability measure. Furthermore, when the abstract short rate follows a Cox–Ingersoll–Ross (CIR) process we compute bond option and swaption prices in closed form. We also propose a short-rate specification under the risk-neutral measure that allows the yield curve to be inverted and is consistent with the CIR dynamics for the abstract short rate, thus giving rise to closed form bond option and swaption prices.     

Local Volatility Pricing Models for Long-Dated FX Derivatives

Abstract

We study the local volatility function in the foreign exchange (FX) market, where both domestic and foreign interest rates are stochastic. This model is suitable to price long-dated FX derivatives. We derive the local volatility function and obtain several results that can be used for the calibration of this local volatility on the FX option's market. Then, we study an extension to obtain a more general volatility model and propose a calibration method for the local volatility associated with this model.     

A Lagrangian stochastic model for tetrad dispersion

We present results for tetrad (four-particle) dispersion in homogeneous isotropic turbulence by means of a simple Lagrangian stochastic model with a focus on the inertial subrange. We show that for appropriate values of C ₀, the constant of proportionality in the second-order Lagrangian velocity structure function, the shape statistics agree well with equivalent results from a direct numerical simulation (DNS) of turbulence. Moreover, we show that the shape statistics are independent of C ₀ for a wide range of C ₀-values. We also show that the parameters which characterise the shape of the tetrads can be approximately related to appropriate ratios of the growth rates of the mean square separation, the mean square area and the mean square volume of the tetrads. By means of exit times, we are able to estimate the equivalent values for the DNS data. We also consider the statistics of four-point velocity differences (via a diffusion tensor) which agree well with the DNS. We show that the nature of the velocity field experienced by the tetrad varies significantly with C ₀.     

Global Stability and Bounds for Coarsening Rates Within the Mean-Field Theory for Domain Coarsening

We investigate the long-time behavior of solutions to the classical mean-field model for coarsening by Lifshitz–Slyozov and Wagner (LSW). In the original work (Lifshitz and Slyozov, 1961 Lifshitz , I. M. , Slyozov , V. V. ( 1961 ). The kinetics of precipitation from supersaturated solid solutions . J. Phys. Chem. Solids 19 : 35 – 50 . [CSA] [CROSSREF] [Crossref], [Web of Science ®] , [Google Scholar]; Wagner 1961 Wagner , C. ( 1961 ). Theorie der Alterung von Niederschlägen durch Umlösen . Z. Elektrochemie 65 : 581 – 594 . [CSA]  [Google Scholar]) convergence of solutions to a uniquely determined self-similar solution was predicted. However, it is by now well known (Giron et al., 1998 Giron , B. , Meerson , B. , Sasorov , V. P. ( 1998 ). Weak selection and stability of localized distributions in Ostwald ripening . Phys. Rev. E 58 : 4213 – 4216 . [CSA] [CROSSREF] [Crossref], [Web of Science ®] , [Google Scholar]; Niethammer and Pego 1999 Niethammer , B. , Pego , R. L. ( 1999 ). Non-self-similar behavior in the LSW theory of Ostwald ripening . J. Stat. Phys. 95 ( 5/6 ): 867 – 902 . [CSA] [CROSSREF] [Crossref], [Web of Science ®] , [Google Scholar] 2001 Niethammer , B. , Pego , R. L. ( 2001 ). The LSW model for domain coarsening: Asymptotic behavior for total conserved mass . J. Stat. Phys. 104 ( 5/6 ): 1113 – 1144 . [CSA] [CROSSREF] [Crossref], [Web of Science ®] , [Google Scholar]) that the long-time behavior of solutions depends sensitively on the initial data. In Niethammer and Pego (1999 Niethammer , B. , Pego , R. L. ( 1999 ). Non-self-similar behavior in the LSW theory of Ostwald ripening . J. Stat. Phys. 95 ( 5/6 ): 867 – 902 . [CSA] [CROSSREF] [Crossref], [Web of Science ®] , [Google Scholar] 2001 Niethammer , B. , Pego , R. L. ( 2001 ). The LSW model for domain coarsening: Asymptotic behavior for total conserved mass . J. Stat. Phys. 104 ( 5/6 ): 1113 – 1144 . [CSA] [CROSSREF] [Crossref], [Web of Science ®] , [Google Scholar]) a necessary criterion for convergence to any self-similar solution which behaves like a finite power at the end of its (compact) support is given. It says that the data have to be regularly varying at the end of their support with the same power. This criterion is also shown to be sufficient if the power is sufficiently small and for data which are close to self-similar.

In this article we extend the local stability result to the whole range of self-similar solutions with compact support. Our first main result establishes global stability of self-similar solutions with not too large power. The proof relies on a global contraction argument for the spreading of characteristics. In addition, we also establish upper and lower bounds for the coarsening rates of the system for a suitable class of initial data whose variation is bounded at the end of the support but not necessarily regular.     

A New Approach to Source Conditions in Regularization with General Residual Term

This article addresses Tikhonov-like regularization methods with convex penalty functionals for solving nonlinear ill-posed operator equations formulated in Banach or, more general, topological spaces. We present an approach for proving convergence rates that combines advantages of approximate source conditions and variational inequalities. Precisely, our technique provides both a wide range of convergence rates and the capability to handle general and not necessarily convex residual terms as well as nonsmooth operators. Initially formulated for topological spaces, the approach is extensively discussed for Banach and Hilbert space situations, showing that it generalizes some well-known convergence rates results.     

Substitution reactions of gaseous ions in a three‐dimensional quadrupole ion trap

Substitution reactions between gaseous ions and neutral substrate molecules are of ongoing high interest. To investigate these processes in a qualitative and quantitative manner, we have constructed a device, with which a defined amount of a volatile substrate can be mixed with a defined amount of helium gas and added into a three‐dimensional quadrupole ion trap. From the known inner volume of the device, the known ratio n_substrate:n_He of the mixture, and the determined absolute partial pressure of helium in the ion trap, we can derive the partial pressure of the substrate in the ion trap and, thus, convert the directly observable pseudo–first‐order rate constants of the substitution reactions into absolute bimolecular rate constants. We have tested the device by investigating a series of S_N2 reactions of Br ^? and CF₃CH₂O ^? anions as well as ligand exchange reactions of ligated Na⁺ cations. As the obtained results suggest, the described device makes it possible to determine the bimolecular rate constants of substitution reactions as well as other ion‐molecule reactions with satisfactory accuracy and reliability.     

Loading‐Dependent Structural Model of Polymeric Micelles Encapsulating Curcumin by Solid‐State NMR Spectroscopy

Detailed insight into the internal structure of drug‐loaded polymeric micelles is scarce, but important for developing optimized delivery systems. We observed that an increase in the curcumin loading of triblock copolymers based on poly(2‐oxazolines) and poly(2‐oxazines) results in poorer dissolution properties. Using solid‐state NMR spectroscopy and complementary tools we propose a loading‐dependent structural model on the molecular level that provides an explanation for these pronounced differences. Changes in the chemical shifts and cross‐peaks in 2D NMR experiments give evidence for the involvement of the hydrophobic polymer block in the curcumin coordination at low loadings, while at higher loadings an increase in the interaction with the hydrophilic polymer blocks is observed. The involvement of the hydrophilic compartment may be critical for ultrahigh‐loaded polymer micelles and can help to rationalize specific polymer modifications to improve the performance of similar drug delivery systems.     

Linearization of radiative heating and cooling rates for the case of non-scattering planetary atmospheres

Rates of radiative heating and cooling of the non-scattering planetary atmosphere and scattering underlying surface are analytically linearized with respect to the atmospheric and surface parameters. Resulting expressions for sensitivities of radiative heating and cooling rates are used to formulate the linearized 1D radiative model of atmospheric dynamics which directly incorporates the relevant linearized atmospheric and surface parameters. Applications to more sophisticated models of atmospheric dynamics, as well as extension to the case of presence of atmospheric scattering, are briefly discussed.