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Machine learning techniques in nested stochastic simulations for life insurance Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2021-01-14 Gilberto Castellani; Ugo Fiore; Zelda Marino; Luca Passalacqua; Francesca Perla; Salvatore Scognamiglio; Paolo Zanetti
The insurance regulatory regime introduced in the European Union by the “Solvency II” Directive 2009/138, that has become applicable on 1 January 2016, is aimed to safeguard policyholders and beneficiaries by requiring insurance undertakings to hold own funds able to cover losses, in excess to the expected ones, at the 99.5% confidence level, over a 1‐year period. In order to assess risks and evaluate
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Inference on errors in industrial parts: Kriging and variogram versus geometrical product specifications standard Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2021-01-14 Giacomo Maculotti; Giovanni Pistone; Grazia Vicario
This article focuses on the inference on the errors in manufactured parts controlled by using measurements devices. The characterization of the part surface topographies is core in several applications. A broad set of properties (tribological, optical, biological, mechanical, etc.) depends on the micro‐ and macrogeometry of the parts. Moreover, parts usually show typical deterministic geometric deviation
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Optimal burn‐in policy based on a set of cutoff points using mixture inverse Gaussian degradation process and copulas Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2021-01-10 Lia H. M. Morita; Vera L. Tomazella; Paulo H. Ferreira; Pedro L. Ramos; Narayanaswamy Balakrishnan; Francisco Louzada
Burn‐in tests have been discussed extensively in the reliability literature, wherein we operate items until high degradation values are observed, which could separate the weak units from the normal ones before they get to the market. This concept is often referred to as a screening procedure, and it involves misclassification errors. Commonly, the underlying degradation process is assumed to be a Wiener
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Fast calibration of two‐factor models for energy option pricing Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2021-01-10 Emanuele Fabbiani; Andrea Marziali; Giuseppe De Nicolao
Energy companies need efficient procedures to perform market calibration of stochastic models for commodities. If the Black framework is chosen for option pricing, the bottleneck of the market calibration is the computation of the variance of the asset. Energy commodities are commonly represented by multifactor linear models, whose variance obeys a matrix Lyapunov differential equation. In this article
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Foreign exchange rate volatility smiles and smirks Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2021-01-05 Sun‐Yong Choi; Jeong‐Hoon Kim; Ji‐Hun Yoon
We study the implied volatilities of three foreign exchange (FX) option markets: EUD/USD, GBP/USD, and AUD/USD. We find that they are distinct from each other. The implied volatilities of the EUD/USD market tend to be more U‐shaped than those of other markets. Local volatility models such as the constant elasticity of variance (CEV) model and stochastic volatility models, such as the Heston model,
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Model robust profile monitoring for the generalized linear mixed model for Phase I analysis Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-11-02 Keerthi Bandara; Abdel‐Salam G. Abdel‐Salam; Jeffrey B. Birch
The generalized linear mixed model (GLMM) becomes very popular in profile monitoring, especially when the production processes follow nonnormal distribution. In most of the real‐life applications in industry, medicine, biology…and so on researchers assume that the response variable follows a Bernoulli or Binomial distribution. The majority of previous studies in profile monitoring focused on parametric
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Modeling swine population dynamics at a finer temporal resolution Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-12-03 Luca Sartore; Yijun Wei; Emilola Abayomi; Seth Riggins; Gavin Corral; Valbona Bejleri; Clifford Spiegelman
The United States Department of Agriculture's National Agricultural Statistics Service (NASS) uses probability surveys of hog owners to estimate quarterly hog inventories in the United States at the national and state levels. NASS also receives data from external sources. A panel of commodity experts forms the Agricultural Statistics Board (ASB). The ASB establishes the NASS official estimates for
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A graphical diagnostic for heavy tailed data Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-11-05 John P. Nolan
Graphical diagnostics are described for general heavy tailed data. This tool allows for a model free assessment of the tails of a univariate dataset a transform on the tails of the data. In addition, one can add to the basic plots comparisons of a dataset to multiple models. Multivariate extensions are described using an ordering based on distance from a center.
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Periodic point processes: Theory and application Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-11-03 Stephen D. Casey
We address the problems of extracting information generated by one dimensional periodic point processes. These problems arise in numerous situations, from astronomy and biomedical applications to reliability and quality control and signal processing. We divide our analysis into two cases, namely single and then multiple source(s). We wish to extract the fundamental period of the generator(s), and,
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Modeling multivariate degradation processes with time‐variant covariates and imperfect maintenance effects Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-12-10 Xiaolin Wang; Olivier Gaudoin; Laurent Doyen; Christophe Bérenguer; Min Xie
This article proposes two types of degradation models that are suitable for describing multivariate degrading systems subject to time‐variant covariates and imperfect maintenance activities. A multivariate Wiener process is constructed as a baseline model, on top of which two types of models are developed to meaningfully characterize the time‐variant covariates and imperfect maintenance effects. The
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An improved Hotelling's T2 chart for monitoring a finite horizon process based on run rules schemes: A Markov‐chain approach Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-12-02 XinYing Chew; Michael Boon Chong Khoo; Khai Wah Khaw; Ming Ha Lee
Quality improvement has been receiving great attention in industries. In recent years, the finite horizon process is commonly encountered in industries due to flexible manufacturing production. Past research works on finite horizon process monitoring are still limited. Because of this, three run rules Hotelling's T2 charts are proposed to monitor a finite horizon process. The performance measures of
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Optimal decision‐theoretic sampling plan for two exponential distributions under joint censoring scheme Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-11-20 Deepak Prajapati; Shuvashree Mondal; Debasis Kundu
In statistical quality control, decision‐theoretic approach draws a significant amount of attention due to its economic considerations. In reliability life testing, decision‐theoretic approach has been used quite extensively under different censoring schemes. All these implementations are based on single sample of products coming from a particular source. In this work we study decision‐theoretic approach
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Securing logistics system and supply chain using Blockchain Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-11-11 Ajay Kumar; Kumar Abhishek; Muhammad Rukunuddin Ghalib; Pranav Nerurkar; Sunil Bhirud; Waleed Alnumay; S. Ananda Kumar; Pushpita Chatterjee; Uttam Ghosh
Past international trade practices have been associated with opaque information flows that have hindered traceability and created hurdles in hassle‐free trade. Blockchain and allied technologies have been investigated as a panacea for the problems faced by supply chain and logistics industry. Network analysis also uncovered twenty types of legal and antisocial entities operating on bitcoin and provided
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Bayesian piecewise stochastic frontier model to estimate initial public offering pricing efficiency under issuance policy reforms Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-11-10 Shijie Jin; Xinyu Wang; Zhuqing Wang; Yan Xu
Previous studies measure the pricing efficiency of initial public offerings (IPOs) using stochastic frontier analysis, but it is conventionally assumed that all IPOs have the same stochastic frontier function. We study how to measure IPO pricing efficiency under successional issuance policy reforms such as China's Growth Enterprise Market (GEM), where IPOs issued in different time periods might have
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The competitive loss‐averse newsvendor problem with quantity‐oriented reference point Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-11-06 Kun Xie; Yongjiang Guo
We study a two‐newsvendor competition problem in which both newsvendors are loss‐averse and have adaptive quantity‐oriented reference points. Each newsvendor faces stochastic demand determined by some demand reallocation rule and aims to choose an optimal inventory level to maximize her expected utility. Since the demand reallocation rule indicates that one newsvendor's demand affects the inventory
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The journey to establish the discipline of statistical engineering Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-10-14 Roger W. Hoerl; G. Geoff Vining
Several journal articles, websites, and conferences have recently focused on the emerging discipline of statistical engineering. This discipline focuses on developing the theory and practice of how to address large, complex, unstructured problems, particularly those that require data and analysis. While good statisticians and engineers have always applied statistical engineering, they did not generally
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Reliability assessment for discrete time shock models via phase‐type distributions Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-10-08 Serkan Eryilmaz; Cihangir Kan
In this paper, particular shock models are studied for the case when the times between successive shocks and the magnitudes of shocks have discrete phase‐type distributions. The well‐known shock models such as delta shock model, extreme shock model, and the mixed shock model which is obtained by combining delta and extreme shock models are considered. The probability generating function and recursive
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A fundamental problem of hypothesis testing with finite inventory in e‐commerce Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-10-07 Dennis Bohle; Alexander Marynych; Matthias Meiners
We draw attention to a problem that is often overlooked or ignored by companies practicing hypothesis testing (A/B testing) in online environments. We show that conducting experiments on limited inventory that is shared between variants in the experiment can lead to high false‐positive rates since the core assumption of independence between the groups is violated. We provide a detailed analysis of
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Discussion of virtual age, is it real? Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-10-05 Lirong Cui
In this note, some point of views on virtual ages are presented in terms of the discussion paper written by Finkelstein and Cha, which include generalized stochastic order‐based virtual ages, system‐level virtual ages, virtual ages in Weibull distribution and repair degrees with virtual ages. Finally, some possible future researches on virtual ages are described.
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Connecting copula properties with reliability properties of coherent systems Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-10-04 Jorge Navarro; Fabrizio Durante; Juan Fernández‐Sánchez
We connect copula properties with stochastic comparisons between order statistics (k‐out‐of‐n systems) and coherent systems with dependent components. The copula dependence properties lead to marginal distribution‐free ordering properties between systems. Conversely, ordering properties of systems lead to properties (or new proofs of properties) for the baseline copulas. These relationships can be
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Blockchain for supply chain performance and logistics management Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-10-01 Juanjuan Yang; Xiuming Ma; Rubén González Crespo; Oscar Sanjuán Martínez
The trend of digitalization uses modern relationship models across global supply chain (SC) management. The main objective of this article is to identify SC current problems with the help of the knowledge sharing aspect using blockchain technology. This article addresses selected problems for managing modern SCs with a view to shared knowledge based on information management, effects of product and
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Sequential detection of parameter changes in dynamic conditional correlation models Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-09-28 Katharina Pape; Pedro Galeano; Dominik Wied
A multivariate monitoring procedure is presented to detect changes in the parameter vector of the dynamic conditional correlation model. The procedure can be used to detect changes in both the conditional and unconditional variances as well as in the correlation structure of the model. The detector is based on the contributions of individual observations to the gradient of the quasi‐log‐likelihood
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The determinants of social promotion success: A case study of crowdfunding projects Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-09-25 Feifei Wang; Yang Yang; Geoffrey K. F. Tso; Yang Li
Crowdfunding has emerged as a major way to raise financial supports through collaborative contributions of the general public. In recent studies, promotional activities are found to be highly influential to the final outcome of crowdfunding projects. In order to conduct effective and efficient promotional campaigns, it is essential to contiguously monitor their progress status and investigate the determinants
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Inferential aspects for the optimal selection of the control parameters in Taguchi method Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-09-23 Silvia Facchinetti; Silvia Angela Osmetti; Umberto Magagnoli
This article focuses on the estimation of dispersion effects in off‐line quality control techniques. In this context, the Taguchi design for the optimal choice of process parameters is one of the most commonly used statistical methods. Starting from Taguchi methodology, we consider that an additive or a multiplicative model defines the relationship between the deterministic component and the variability
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On the new operational characteristic for degrading systems executing missions of fixed duration Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-09-20 Maxim Finkelstein; Gregory Levitin
In practice, it is often important to know how a system is performing as compared with initial, prior assessment of its reliability characteristics (black‐box scenario). For degrading systems, this comparison can be executed by observing degradation dynamically and then comparing the corresponding remaining lifetime of an operating system at each instant of time with that of the black‐box scenario
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Smart contract for electricity transactions and charge settlements using blockchain Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-09-11 Jing Lu; Shihong Wu; Hanlei Cheng; Bin Song; Zhiyu Xiang
In this article, aimed at the future “let go” electricity market, smart contracts for grid enterprises doing electricity transactions and charge settlements based on blockchain technology, as well as the trading model using the smart contracts, are proposed. Then the key technological difficulties are analyzed, and the solutions are given. The main goal of our research is to help developing the infrastructure
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Virtual age, is it real? ‐ Discussing virtual age in reliability context Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-09-07 Maxim Finkelstein; Ji Hwan Cha
Several settings, where the notion of virtual age is employed, are discussed. We argue that the age reduction imperfect repair modeling is often not sufficiently justified in practice, as it is not possible to execute repair in most of real situations that conforms with this model. On the other hand, a shock‐based virtual age model is suggested and justified via the probabilities of failures on shocks
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Bayesian hierarchical spatial regression models for spatial data in the presence of missing covariates with applications Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-09-07 Zhihua Ma; Guanyu Hu; Ming‐Hui Chen
In many applications, survey data are collected from different survey centers in different regions. It happens that in some circumstances, response variables are completely observed while the covariates have missing values. In this article, we propose a joint spatial regression model for the response variable and missing covariates via a sequence of one‐dimensional conditional spatial regression models
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On the information properties of working used systems using dynamic signature Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-08-31 Abdolsaeed Toomaj; Majid Chahkandi; Narayanaswamy Balakrishnan
Shannon entropy is a useful criterion for measuring the uncertainty (predictability) of lifetimes of engineering systems. In this work, we provide an explicit expression for the entropy of the residual lifetime of a working used system with exactly i failed components at time t, using dynamic signature. We also present additional results on bounds and ordering properties for the proposed entropy. We
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Preservation of some stochastic orders by distortion functions with application to coherent systems with exchangeable components Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-08-25 Antonio Arriaza; Miguel A. Sordo
The preservation of stochastic orders by distortion functions has become a topic of increasing interest in the reliability analysis of coherent systems. The reason of this interest is that the reliability function of a coherent system with identically distributed components can be represented as a distortion function of the common reliability function of the components. In this framework, we study
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Ordering properties of generalized aggregation with applications Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-08-06 Weiyong Ding; Chuchu Wang; Yiying Zhang
The generalized aggregation ∑ i = 1 n W i ϕ ( X i , a i ) arises in many research fields including applied probability, actuarial science, and reliability theory, where ϕ is a bivariate kernel function and a is a parameter vector. One of its remarkable features is that both X and W are dependent in many practical situations. Therefore, studying the stochastic properties of generalized aggregations
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Cost‐efficient monitoring of continuous‐time stochastic processes based on discrete observations Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-08-06 Hidekazu Yoshioka; Yuta Yaegashi; Motoh Tsujimura; Yumi Yoshioka
Planning a cost‐efficient monitoring policy of stochastic processes arises from many industrial problems. We formulate a simple discrete‐time monitoring problem of continuous‐time stochastic processes with its applications to several industrial problems. A key in our model is a doubling trick of the variables, with which we can construct an algorithm to solve the problem. The cost‐efficient monitoring
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Options on constant proportion portfolio insurance with guaranteed minimum equity exposure Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-08-04 Luca Di Persio; Immacolata Oliva; Kai Wallbaum
In the present paper we study a new exotic option offering participation in a dynamic asset allocation strategy, which is an extension of the well‐known Constant Proportion Portfolio Insurance (CPPI) strategy. Our novel approach consists in assuming that the percentage of wealth invested in stocks cannot go under a fixed level, called guaranteed minimum equity exposure (GMEE). In particular, our proposal
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Comparison of control charts for Poisson count data in health‐care monitoring Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-07-28 Michele Scagliarini; Nunzia Boccaforno; Marco Vandi
Statistical surveillance is a noteworthy endeavor in many health‐care areas such as epidemiology, hospital quality, infection control, and patient safety. For monitoring hospital adverse events, the Shewhart u ‐control chart is the most used methodology. One possible issue of the u ‐chart is that in health‐care applications the lower control limit (LCL) is often conventionally set to zero as the adverse
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Topological data analysis in digital marketing Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-07-28 Choudur Lakshminarayan; Mingzhang Yin
The ubiquitous internet is a multipurpose platform for finding information, an avenue for social interaction, and a primary customer touch‐point as a marketplace to conduct e‐commerce. The digital footprints of browsers are a rich source of data to drive sales. We use clickstreams (clicks) to track the evolution of session‐level customer browsing for modeling. We apply Markov chains (MC) to calculate
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Conjectures on optimal nested generalized group testing algorithm Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-07-22 Yaakov Malinovsky
Consider a finite population of N items, where item i has a probability pi to be defective. The goal is to identify all items by means of group testing. This is the generalized group testing problem (hereafter GGTP). In the case of p1 = … = pN = p, Yao and Hwang (1990) proved that the pairwise testing algorithm is the optimal nested algorithm, with respect to the expected number of tests, for all N
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Asymptotics for value at risk and conditional tail expectation of a portfolio loss Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-07-20 Xiaonan Su; Xinzhi Wang; Yang Yang
Consider a risk model in which X 1,…, X n are n potential losses from different risky assets at the terminal time, and θ 1 , … , θ n are n discount factors over the period. In this paper, we establish some asymptotic formulas for the value at risk and conditional tail expectation of the total discounted loss S n = ∑ i = 1 n θ i X i of an investment portfolio. We also demonstrate our obtained results
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The value of summary statistics for anomaly detection in temporally evolving networks: A performance evaluation study Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-07-09 Lata Kodali; Srijan Sengupta; Leanna House; William H. Woodall
Analysis of network data has emerged as an active research area in statistics. Much of the focus of ongoing research has been on static networks that represent a single snapshot or aggregated historical data unchanging over time. However, most networks result from temporally evolving systems that exhibit intrinsic dynamic behavior. Monitoring such temporally varying networks to detect anomalous changes
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Birnbaum‐Saunders quantile regression and its diagnostics with application to economic data Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-06-27 Luis Sánchez; Víctor Leiva; Manuel Galea; Helton Saulo
The Birnbaum‐Saunders (BS) distribution is a model that frequently appears in the statistical literature and has proved to be very versatile and efficient across a wide range of applications. However, despite the growing interest in the study of the BS distribution, quantile regression modeling has not been considered for this distribution. To fill this gap, we introduce a class of quantile regression
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Estimation of residential radon concentration in Pennsylvania counties by data fusion Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-06-26 Xuze Zhang; Saumyadipta Pyne; Benjamin Kedem
A data fusion method for the estimation of residential radon level distribution in any Pennsylvania county is proposed. The method is based on a multisample density ratio model with variable tilts and is applied to combined radon data from a reference county of interest and its neighboring counties. Beaver county and its four immediate neighbors are taken as a case in point. The distribution of radon
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Stratified two‐sample design: A review on nonparametric methods Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-06-25 Eleonora Carrozzo; Rosa Arboretti; Riccardo Ceccato; Luigi Salmaso
In this article, a comparison between the most promising nonparametric tests in a two‐sample stratified design for practical uses is performed. We compared methods that exhibit good small‐sample properties in order to be used with the most common stratum sizes. From the literature we identified as promising the following solutions: the aligned rank test, a small‐sample approximation for the ANOVA‐type
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A new distribution‐free adaptive sample size control chart for a finite production horizon and its application in monitoring fill volume of soft drink beverage bottles Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-06-17 Mahfuza Khatun; Michael B.C. Khoo; Sajal Saha; Philippe Castagliola
Nonparametric control charts have received increasing attention in process monitoring. In this article, a new nonparametric sign (SN) control chart with variable sample size (VSS) for a finite horizon process is developed. The novelty of this research lies in the incorporation of the VSS technique into the nonparametric SN chart for a finite horizon process, hence, resulting in the development of a
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Stress testing network reconstruction via graphical causal model Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-05-19 Helder Rojas; David Dias
An resilience optimal evaluation of financial portfolios implies having plausible hypotheses about the multiple interconnections between the macroeconomic variables and the risk parameters. In this article, we propose a graphical model for the reconstruction of the causal structure that links the multiple macroeconomic variables and the assessed risk parameters, it is this structure that we call stress
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Cross‐estimation for decision selection Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-05-14 Xinyue Gu; Bo Li
We propose a data‐driven procedure, cross‐estimation for decision selection (CrEDS), to choose from an abundance of off‐the‐shelf statistical models or computer algorithms at a decision‐maker's disposal. CrEDS combines the ideas of cross‐validation (CV) and local smoothing, a nonparametric statistical technique. We demonstrate the power of CrEDS with five numerical experiments in inventory and revenue
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Analysis of means approach in advanced designs Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-05-12 Kalanka P. Jayalath, Hon Keung Tony Ng
Analysis of means (ANOM), similar to Shewhart control chart that exhibits individual mean effects on a graphical display, is an attractive alternative mean testing procedure for the analysis of variance (ANOVA). The procedure is primarily used to analyze experimental data from designs with only fixed effects. Recently introduced, the ANOM procedure based on the q‐distribution (ANOMQ procedure) generalizes
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Machine learning applications in nonlife insurance Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-05-10 Yves‐Laurent Grize, Wolfram Fischer, Christian Lützelschwab
The literature on analytical applications in insurance tends to be either very general or rather technical, which may hold back the adoption of new important tools by industrial practitioners. Our goal is to stress that machine learning (ML) algorithms will play a significant role in the insurance industry in the near future and thus to encourage practitioners to learn and apply these techniques. After
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Nonlinear time series classification using bispectrum‐based deep convolutional neural networks Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-05-05 Paul A. Parker; Scott H. Holan; Nalini Ravishanker
Time series classification using novel techniques has experienced a recent resurgence and growing interest from statisticians, subject‐domain scientists, and decision makers in business and industry. This is primarily due to the ever increasing amount of big and complex data produced as a result of technological advances. A motivating example is that of Google trends data, which exhibit highly nonlinear
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Item response function in antagonistic situations Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-05-04 Vladimir Turetsky; David M. Steinberg; Emil Bashkansky
The main characteristic of a binary test is the item response function (IRF) expressing the probability P (d, a) of an object under test (OUT), possessing ability a, to successfully overcome the test item (TI) of difficulty d. Each specific test requires its own definitions of TI difficulty and OUT ability and has its own P (d, a) describing the probability of “success” mentioned above. This is demonstrated
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Evaluation methods for portfolio management Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-04-28 Keith K. F. Law; W. K. Li; Philip L. H. Yu
We distinguish the evaluation methods for two main kinds of investment strategies, namely, passive and active portfolio management. Passive portfolio management aims at tracking an underlying index as close as possible with the most important measure being the tracking error. To claim the tracking error not exceeding a certain threshold, we apply the concept of noninferiority test as opposed to the
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The mean‐reverting 4/2 stochastic volatility model: Properties and financial applications Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-04-25 Marcos Escobar‐Anel; Zhenxian Gong
This article defines and studies a stochastic process that combines two important stylized facts of financial data: reversion to the mean, and a flexible generalized stochastic volatility process: the 4/2 process. This work is motivated by the modeling of at least two financial asset classes: commodities and volatility indexes. We provide analytical expressions for the conditional characteristic functions
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Construction of the tetration distribution based on the continuous iteration of the exponential‐minus‐one function Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-04-25 Yann Dijoux
A new class of lifetime distributions, called tetration distribution, is presented based on the continuous iteration of the exponential‐minus‐one function. In particular, this distribution encompasses and extends the Weibull, Pareto, and Gompertz distributions. In addition, a characterization of the tail of the distribution is proposed through two indices, one of them encompassing the Pareto and Weibull
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A distribution‐based method to gauge market liquidity through scale invariance between investment horizons Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-04-11 Sergio Bianchi; Augusto Pianese; Massimiliano Frezza
A nonparametric method is developed to detect self‐similarity among the rescaled distributions of the log‐price variations over a number of time scales. The procedure allows to test the statistical significance of the scaling exponent that possibly characterizes each pair of time scales and to analyze the link between self‐similarity and liquidity, the core assumption of the fractal market hypothesis
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Stochastic differential equations harvesting policies: Allee effects, logistic‐like growth and profit optimization Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-03-31 Nuno M. Brites; Carlos A. Braumann
In this article, stochastic differential equations are used to model the dynamics of a harvested population in the presence of weak Allee effects. Two optimal harvesting policies are presented, one with variable effort based on optimal control theory, which is for practical reasons inapplicable in a random environment, and the other with constant effort and easily applicable. For a logistic‐like model
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Covariate‐dependent control limits for the detection of abnormal price changes in scanner data Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-03-31 Youngrae Kim; Sangkyun Kim; Johan Lim; Sungim Lee; Won Son; Heejin Hwang
Currently, large‐scale data for consumer goods, called scanner data, are obtained by scanning the bar codes of individual products at the points of sale of retail outlets. Many national statistical offices use scanner data to build consumer price statistics. In this process, as in other statistical procedures, the detection of abnormal transactions in sales prices is an important step in the analysis
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Multivariate generalized hyperbolic laws for modeling financial log‐returns: Empirical and theoretical considerations Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-03-24 Stergios B. Fotopoulos; Alex Paparas; Venkata K. Jandhyala
The aim of this study is to consider the multivariate generalized hyperbolic (MGH) distribution for modeling financial log‐returns. Beginning with the multivariate geometric subordinated Brownian motion for asset prices, we first demonstrate that the mean‐variance mixing model of the multivariate normal law is natural for log‐returns of financial assets. This multivariate mean‐variance mixing model
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Improved techniques for parametric and nonparametric evaluations of the first‐passage time for degradation processes Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-03-20 Lochana K. Palayangoda, Hon Keung Tony Ng, Ronald W. Butler
For degradation data in reliability analysis, estimation of the first‐passage time (FPT) distribution to a threshold provides valuable information on reliability characteristics. Recently, Balakrishnan and Qin (2019; Applied Stochastic Models in Business and Industry, 35:571–590) studied a nonparametric method to approximate the FPT distribution of such degradation processes if the underlying process
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Dynamics of energy technology diffusion under uncertainty Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-03-19 Li Li; Junqi Liu; Lei Zhu
The carbon emissions trading scheme combined with feed‐in tariff policy is viewed as a feasible policy mix to promote the energy system transferring to low or near‐ zero‐carbon emissions. To investigate the interaction between such policy mix and the diffusion of energy technologies, we establish a stochastic programming model to describe the technology choice between renewable and fossil energy technologies
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Wilcoxon‐type rank‐sum statistics for selecting the best population: Some advances Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-03-18 Markos V. Koutras, Ioannis S. Triantafyllou
In this article, we introduce three new nonparametric procedures for testing the equality of two lifetime distributions. The proposed testing processes are based on appropriately modified Wilcoxon‐type rank‐sum statistics. The exact null distribution of these statistics is studied and closed formulae for the corresponding exact probability of correct selection of the best population are derived for
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Control charts based on randomized quantile residuals Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-03-09 Kayoung Park, Dongmin Jung, Jong‐Min Kim
In practice, quality characteristics do not always follow a normal distribution, and quality control processes sometimes generate non‐normal response outcomes, including continuous non‐normal data and discrete count data. Thus, achieving better results in such situations requires a new control chart derived from various types of response variables. This study proposes a procedure for monitoring response
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Nonparametric universal copula modeling Appl. Stoch. Models Bus.Ind. (IF 1.175) Pub Date : 2020-03-08 Subhadeep Mukhopadhyay, Emanuel Parzen
To handle the ubiquitous problem of “dependence learning,” copulas are quickly becoming a pervasive tool across a wide range of data‐driven disciplines encompassing neuroscience, finance, econometrics, genomics, social science, machine learning, healthcare, and many more. At the same time, despite their practical value, the empirical methods of “learning copula from data” have been unsystematic with