Related papers: Statistical analysis and stochastic interest rate …
The well-known theorem of Dybvig, Ingersoll and Ross shows that the long zero-coupon rate can never fall. This result, which, although undoubtedly correct, has been regarded by many as surprising, stems from the implicit assumption that the…
Economic forecasting is concerned with the estimation of some variable like gross domestic product (GDP) in the next period given a set of variables that describes the current situation or state of the economy, including industrial…
Stochastic schemes, designed to represent unresolved sub-grid scale variability, are frequently used in short and medium-range weather forecasts, where they are found to improve several aspects of the model. In recent years, the impact of…
Here we propose two alternatives to Black 76 to value European option future contracts in which the underlying market prices can be negative or mean reverting. The two proposed models are Ornstein-Uhlenbeck (OU) and continuous time GARCH…
We develop a three-timescale framework for modelling climate change and introduce a space-heterogeneous one-dimensional energy balance model. This model, addressing temperature fluctuations from rising carbon dioxide levels and the…
In this study we consider the pricing of energy derivatives when the evolution of spot prices follows a tempered stable or a CGMY driven Ornstein- Uhlenbeck process. To this end, we first calculate the characteristic function of the…
Computing the stochastic entropy production associated with the evolution of a stochastic dynamical system is a well-established problem. In a small number of cases such as the Ornstein-Uhlenbeck process, of which we give a complete…
Klaus Hasselmann's revolutionary intuition in climate science was to take advantage of the stochasticity associated with fast weather processes to probe the slow dynamics of the climate system. This has led to fundamentally new ways to…
We conduct a preliminary analysis of a pairs trading strategy using the Ornstein-Uhlenbeck (OU) process to model stock price spreads. We compare this approach to a naive pairs trading strategy that uses a rolling window to calculate mean…
This paper constructs internationally consistent measures of macroeconomic uncertainty. Our econometric framework extracts uncertainty from revisions in data obtained from standardized national accounts. Applying our model to post-WWII…
Given uncertainties in physical theory and numerical climate simulations, the historical temperature record is often used as a source of empirical information about climate change. Many historical trend analyses appear to deemphasize…
This paper studies the problem of trading futures with transaction costs when the underlying spot price is mean-reverting. Specifically, we model the spot dynamics by the Ornstein-Uhlenbeck (OU), Cox-Ingersoll-Ross (CIR), or exponential…
Climate change is a reality of today. Paleoclimatic proxies and climate predictions based on coupled atmosphere-ocean general circulation models provide us with temperature data. Using Detrended Fluctuation Analysis, we are investigating…
We explore the dynamics of active elements performing persistent random motion with fluctuating active speed and in the presence of translational noise in a $d$-dimensional harmonic trap, modeling active speed generation through an…
This paper presents an information-theoretic approach for model reduction for finite time simulation. Although system models are typically used for simulation over a finite time, most of the metrics (and pseudo-metrics) used for model…
The intensification and increased frequency of weather extremes is emerging as one of the most important aspects of climate change. We use Monte Carlo simulation to understand and predict the consequences of variations in trends (i.e.,…
The rise in global mean temperature is an incomplete description of warming. For many purposes, including agriculture and human life, temperature extremes may be more important than temperature means and changes in local extremes may be…
In numerous papers, the behaviour of stochastic population models is investigated through the sign of a real quantity which is the growth rate of the population near the extinction set. In many cases, it is proven that when this growth rate…
We consider the steady-state behavior of pairs of active particles having different persistence times and diffusivities. To this purpose we employ the active Ornstein-Uhlenbeck model, where the particles are driven by colored noises with…
We build a statistical ensemble representation of two economic models describing respectively, in simplified terms, a payment system and a credit market. To this purpose we adopt the Boltzmann-Gibbs distribution where the role of the…