Applied Stochastic Models in Business and Industry最新文献

{"title":"Stock market bubbles and the forecastability of gold returns and volatility","authors":"David Gabauer, Rangan Gupta, Sayar Karmakar, Joshua Nielsen","doi":"10.1002/asmb.2887","DOIUrl":"https://doi.org/10.1002/asmb.2887","url":null,"abstract":"In this article, multi‐scale LPPLS confidence indicator approach is used to detect both positive and negative bubbles at short‐, medium‐, and long‐term horizons for the stock markets of the G7 and the BRICS countries. This enables detecting major crashes and rallies in the 12 stock markets over the period of the 1st week of January, 1973 to the 2nd week of September, 2020. Similar timing of strong (positive and negative) LPPLS indicator values across both G7 and BRICS countries was also observed, suggesting interconnectedness of the extreme movements in these stock markets. Next, these indicators were utilized to forecast gold returns and its volatility, using a method involving block means of residuals obtained from the popular LASSO routine, given that the number of covariates ranged between 42 and 72, and gold returns demonstrated a heavy upper tail. The finding was, these bubbles indicators, particularly when both positive and negative bubbles are considered simultaneously, can accurately forecast gold returns at short‐ to medium‐term, and also time‐varying estimates of gold returns volatility to a lesser extent. The results of this paper have important implications for the portfolio decisions of investors who seek a safe haven during boom‐bust cycles of major global stock markets.","PeriodicalId":55495,"journal":{"name":"Applied Stochastic Models in Business and Industry","volume":"99 1","pages":""},"PeriodicalIF":1.4,"publicationDate":"2024-08-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142205755","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"An EM‐based likelihood inference for degradation data analysis using gamma process","authors":"Lochana Palayangoda, N. Balakrishnan","doi":"10.1002/asmb.2886","DOIUrl":"https://doi.org/10.1002/asmb.2886","url":null,"abstract":"The gamma process is widely used for the lifetime estimation of highly reliable products that degrade over time. Typically, incomplete likelihood is used to estimate the model parameters and the reliability estimates for the first passage time distribution of the gamma process; however, it (i.e., pseudo method) does not consider interval censoring and right censoring information of the degradation data. In this work, the expectation‐maximization algorithm‐based method (EM method) is developed for the estimation of the gamma process model parameters and the reliability estimates incorporating interval censoring and right censoring. The asymptotic variance–covariance matrix and the asymptotic confidence intervals for the parameters are constructed, and then a comparison between the pseudo method and the EM method is made. Monte Carlo simulation studies and real‐life data applications are conducted in order to illustrate the performance of the proposed EM method over the pseudo method.","PeriodicalId":55495,"journal":{"name":"Applied Stochastic Models in Business and Industry","volume":"68 1 1","pages":""},"PeriodicalIF":1.4,"publicationDate":"2024-08-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142205757","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Modelling the Chinese crude oil futures returns through a skew-geometric Brownian motion correlated with the market volatility index process for pricing financial options","authors":"Michele Bufalo,&nbsp;Viviana Fanelli","doi":"10.1002/asmb.2882","DOIUrl":"10.1002/asmb.2882","url":null,"abstract":"<p>In this paper we model the dynamics of the Chinese crude oil futures returns by using a skew-geometric Brownian motion correlated with the market volatility, which is taken as a square-root stochastic process. We use the OVX index data as proxy for market volatility. We validate the proposed model in terms of accuracy of its calibrations through an in-sample simulation. Instead, out-of-sample simulations are used to show that a correlated skew-geometric Brownian motion is more appropriate for modelling the Chinese returns compared to a single skew-geometric Brownian motion in terms of forecasts. Furthermore, we price an American call option on the Chinese futures by using a recursively scheme based on a closed-form formula, and an alternative Monte Carlo approach, for the related European call option. We show that our call price estimates are very close to market values and our model generally outperforms many benchmarks in literature, such as the Barone-Adesi and Whaley formula and its generalizations.</p>","PeriodicalId":55495,"journal":{"name":"Applied Stochastic Models in Business and Industry","volume":"40 5","pages":"1377-1401"},"PeriodicalIF":1.3,"publicationDate":"2024-08-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141932704","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"SVM-Jacobi for fitting linear combinations of exponential distributions with applications to finance and insurance","authors":"Xixuan Han,&nbsp;Boyu Wei,&nbsp;Hailiang Yang,&nbsp;Qian Zhao","doi":"10.1002/asmb.2885","DOIUrl":"10.1002/asmb.2885","url":null,"abstract":"<p>We propose a method called SVM-Jacobi to approximate probability distributions by linear combinations of exponential distributions, associated with a comprehensive asymptotic analysis. In multivariate cases, the multivariate distribution is approximated by linear combinations of products of independent exponential distributions, and the method works effectively. The proposed method has many applications in both quantitative finance and insurance, especially for modeling random time, like default time and remaining lifetime. In addition to the methodology and theoretical analysis, we provide examples of pricing defaultable bonds, European options, credit default swaps, equity-linked death benefits, and calculating the credit value adjustment of credit default swaps. Finally, some numerical results based on real data and simulated data are presented for illustration.</p>","PeriodicalId":55495,"journal":{"name":"Applied Stochastic Models in Business and Industry","volume":"40 5","pages":"1402-1432"},"PeriodicalIF":1.3,"publicationDate":"2024-07-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141785758","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"A new extended δ-shock model with the consideration of shock magnitude","authors":"Hamed Lorvand,&nbsp;Serkan Eryilmaz","doi":"10.1002/asmb.2884","DOIUrl":"10.1002/asmb.2884","url":null,"abstract":"<p>In this article, a new <span></span><math>\u0000 <semantics>\u0000 <mrow>\u0000 <mi>δ</mi>\u0000 </mrow>\u0000 <annotation>$$ delta $$</annotation>\u0000 </semantics></math>-shock model that takes into account the magnitude of shocks is introduced and studied from reliability perspective. According to the new model, the system breaks down if either a shock after non-critical shock occurs in a time length less than <span></span><math>\u0000 <semantics>\u0000 <mrow>\u0000 <msub>\u0000 <mrow>\u0000 <mi>δ</mi>\u0000 </mrow>\u0000 <mrow>\u0000 <mn>1</mn>\u0000 </mrow>\u0000 </msub>\u0000 </mrow>\u0000 <annotation>$$ {delta}_1 $$</annotation>\u0000 </semantics></math> or a shock after a critical shock occurs in a time length less than <span></span><math>\u0000 <semantics>\u0000 <mrow>\u0000 <msub>\u0000 <mrow>\u0000 <mi>δ</mi>\u0000 </mrow>\u0000 <mrow>\u0000 <mn>2</mn>\u0000 </mrow>\u0000 </msub>\u0000 <mo>,</mo>\u0000 </mrow>\u0000 <annotation>$$ {delta}_2, $$</annotation>\u0000 </semantics></math> where <span></span><math>\u0000 <semantics>\u0000 <mrow>\u0000 <msub>\u0000 <mrow>\u0000 <mi>δ</mi>\u0000 </mrow>\u0000 <mrow>\u0000 <mn>1</mn>\u0000 </mrow>\u0000 </msub>\u0000 <mo>&lt;</mo>\u0000 <msub>\u0000 <mrow>\u0000 <mi>δ</mi>\u0000 </mrow>\u0000 <mrow>\u0000 <mn>2</mn>\u0000 </mrow>\u0000 </msub>\u0000 </mrow>\u0000 <annotation>$$ {delta}_1&lt;{delta}_2 $$</annotation>\u0000 </semantics></math>. The distribution of the system's lifetime is studied for both discrete and continuous intershock time distributions. It is shown that a new model is useful to describe a certain cold standby repairable system.</p>","PeriodicalId":55495,"journal":{"name":"Applied Stochastic Models in Business and Industry","volume":"40 5","pages":"1355-1364"},"PeriodicalIF":1.3,"publicationDate":"2024-07-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1002/asmb.2884","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141649522","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Correlation analysis of degrading systems based on bivariate Wiener processes under imperfect maintenance","authors":"Lucía Bautista,&nbsp;Inma T. Castro,&nbsp;Christophe Bérenguer,&nbsp;Olivier Gaudoin,&nbsp;Laurent Doyen","doi":"10.1002/asmb.2883","DOIUrl":"10.1002/asmb.2883","url":null,"abstract":"<p>This article focuses on the correlation between the degradation levels of the two components that form a system. The degradation evolution of each component is modeled using Wiener processes. Both components are dependent and this dependence is described using the trivariate reduction method. To reduce the degradation and extend the system lifetime, preventive maintenance actions are periodically performed. These preventive maintenance actions are imperfect and they are modeled by using an arithmetic reduction of degradation of infinite order model with a determined maintenance efficiency parameter. The evolution of the maintained system is analysed by assessing the expectation and variance of both degradation processes at successive maintenance times. The novelty of this work is the analysis of the Pearson correlation coefficient between the degradation levels of the two components. Different properties of the monotonicity of the Pearson correlation coefficient between the two degradation paths are obtained by considering equal maintenance efficiency and equal general time scales functions for the two Wiener degradation processes associated to each degrading component.</p>","PeriodicalId":55495,"journal":{"name":"Applied Stochastic Models in Business and Industry","volume":"40 6","pages":"1651-1674"},"PeriodicalIF":1.3,"publicationDate":"2024-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1002/asmb.2883","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141523610","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Comparing risk profiles of international stock markets as functional data: COVID-19 versus the global financial crisis","authors":"Ryan Liam Shackleton,&nbsp;Sonali Das,&nbsp;Rangan Gupta","doi":"10.1002/asmb.2879","DOIUrl":"10.1002/asmb.2879","url":null,"abstract":"<p>In this article, we aim to provide a detailed econometric analysis of the realized volatility in international stock markets of Brazil, China, Europe, India, the United Kingdom, and the United States, which represent a mix of large developing, and developed markets. For our purpose, we use the functional data analysis (FDA) framework, whence discrete volatility data were first transformed into continuous functions, and thereafter, derivatives of the continuous functions were investigated, and kinetic and potential energy associated is the volatility system were extracted. Results revealed that COVID-19 indeed had a significant effect on international financial market volatility for all the countries, with the exception of China. The realized volatility of the international financial markets did return to their pre-COVID levels in May 2020, and this recovery time was significantly faster than the 2008 financial crisis recovery period. Within the FDA framework, we further investigated the role of uncertainty on the realized volatility, specifically from an outbreak of an infectious disease (such as COVID-19) and a daily newspaper-based infectious disease index as the predictor. The regression analysis showed that the volatility of financial markets can be accurately modeled by this infectious disease index, but only for periods experiencing an epidemic or pandemic.</p>","PeriodicalId":55495,"journal":{"name":"Applied Stochastic Models in Business and Industry","volume":"40 4","pages":"1153-1181"},"PeriodicalIF":1.3,"publicationDate":"2024-06-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1002/asmb.2879","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141503893","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Optimal designs of accelerated degradation tests with random shock failures and measurement errors","authors":"Lin Wu,&nbsp;Xiao-Dong Zhou,&nbsp;Rong-Xian Yue","doi":"10.1002/asmb.2878","DOIUrl":"https://doi.org/10.1002/asmb.2878","url":null,"abstract":"<p>Accelerated degradation tests (ADTs) are widely used for assessing the reliability of long-life products. During an ADT, accelerated stresses not only expedite the degradation of test products but also increase the likelihood of encountering traumatic shocks. Moreover, it is important to acknowledge that measurement errors can be inevitable during the observation process of an ADT. Unfortunately, these errors are often overlooked in the optimal design of the ADT, especially when multiple competing failure modes are present. In this article, we propose a new approach to design ADTs when measurement errors exist and test products suffer from degradation failures and random shock failures. We utilize the Wiener process to model the degradation path, incorporating normally distributed measurement errors, and an exponential distribution to fit the time between random shock failures. Given the number of test products and the termination time, we optimize the ADT plans under three common design criteria. The equivalence theorem is used to verify the optimality of the optimal ADT plans. A real-life example and sensitivity analysis are provided to illustrate our proposed method. The results demonstrate that when competing failure modes are present, the optimal ADT plans, which account for measurement errors, differ significantly from those that do not consider such errors.</p>","PeriodicalId":55495,"journal":{"name":"Applied Stochastic Models in Business and Industry","volume":"40 4","pages":"1125-1152"},"PeriodicalIF":1.3,"publicationDate":"2024-06-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141991738","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Estimation of VaR with jump process: Application in corn and soybean markets","authors":"Minglian Lin,&nbsp;Indranil SenGupta,&nbsp;William Wilson","doi":"10.1002/asmb.2880","DOIUrl":"https://doi.org/10.1002/asmb.2880","url":null,"abstract":"<p>Value at risk (VaR) is a quantitative measure used to evaluate the risk linked to the potential loss of investment or capital. Estimation of the VaR entails the quantification of prospective losses in a portfolio of investments, using a certain likelihood, under normal market conditions within a specific time period. The objective of this article is to construct a model and estimate the VaR for a diversified portfolio consisting of multiple cash commodity positions driven by standard Brownian motions and jump processes. Subsequently, a thorough analytical estimation of the VaR is conducted for the proposed model. The results are then applied to two distinct commodities—corn and soybean—enabling a comprehensive comparison of the VaR values in the presence and absence of jumps.</p>","PeriodicalId":55495,"journal":{"name":"Applied Stochastic Models in Business and Industry","volume":"40 5","pages":"1337-1354"},"PeriodicalIF":1.3,"publicationDate":"2024-06-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142447460","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Extreme shock model with change point based on the Poisson process of shocks","authors":"Dheeraj Goyal,&nbsp;Min Xie","doi":"10.1002/asmb.2881","DOIUrl":"10.1002/asmb.2881","url":null,"abstract":"<p>In this article, we introduce and study an extreme shock model in which the distribution of magnitude of shocks can change due to environmental effects. A new decision parameter is used to model the change point, and the non-homogeneous Poisson process is employed to model the arrival of shocks. We derive the reliability function and mean time to system failure for the defined model. Furthermore, we propose an optimal age replacement policy. The results are illustrated when the change point follows the Erlang distribution.</p>","PeriodicalId":55495,"journal":{"name":"Applied Stochastic Models in Business and Industry","volume":"40 6","pages":"1635-1650"},"PeriodicalIF":1.3,"publicationDate":"2024-06-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141337044","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}