http://www.hindawi.comThe latest articles from Hindawi Publishing Corporation© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2009/817137.htmlReal options modeling, which extends the ability of option pricing models to evaluate real assets, can be used to evaluate risky projects because of its capacity to handle uncertainties. This research utilizes possibility theory to represent private risks of a project, which are not reflected in the market and hence are not fully evaluated by standard option pricing models. Using a transformation method, these private risks can be represented as fuzzy variables and then priced with a fuzzy real options model. This principle is demonstrated by valuing a brownfield redevelopment project using a prototype decision support system based on fuzzy real options. Because they generalize the original model and enable it to deal with additional uncertainties, fuzzy real options are entirely suitable for the evaluation of such projects.Qian Wang, Keith W. Hipel, and D. Marc Kilgour© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2009/342089.htmlConvex interval games are introduced and characterizations are given. Some economic situations leading to convex interval games are discussed. The Weber set and the Shapley value are defined for a suitable class of interval games and their relations with the interval core for convex interval games are established. The notion of population monotonic interval allocation scheme (pmias) in the interval setting is introduced and it is proved that each element of the Weber set of a convex interval game is extendable to such a pmias. A square operator is introduced which allows us to obtain interval solutions starting from the corresponding classical cooperative game theory solutions. It turns out that on the class of convex interval games the square Weber set coincides with the interval core.S. Z. Alparslan Gök, R. Branzei, and S. Tijs© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2009/868215.htmlThis paper proposes a more comprehensive look at the ideas of KS and Area Under the Curve (AUC) of a cumulative gains chart to develop a model quality statistic which can be used agnostically to evaluate the quality of a wide range of models in a standardized fashion. It can be either used holistically on the entire range of the model or at a given decision threshold of the model. Further it can be extended into the model learning process.Thomas Brandenburger and Alfred Furth© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2009/125308.htmlThe aim of this paper is to present modified neural network algorithms to predict whether it is best to buy, hold, or sell shares (trading signals) of stock market indices. Most commonly used classification techniques are not successful in predicting trading signals when the distribution of the actual trading signals, among these three classes, is imbalanced. The modified network algorithms are based on the structure of feedforward neural networks and a modified Ordinary Least Squares (OLSs) error function. An adjustment relating to the contribution from the historical data used for training the networks and penalisation of incorrectly classified trading signals were accounted for, when modifying the OLS function. A global optimization algorithm was employed to train these networks. These algorithms were employed to predict the trading signals of the Australian All Ordinary Index. The algorithms with the modified error functions introduced by this study produced better predictions.C. D. Tilakaratne, M. A. Mammadov, and S. A. Morris© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2009/238196.htmlReal option analysis offers interesting insights on the value of assets and on the profitability of investments, which has made real options a growing field of academic research and practical application. Real option valuation is, however, often found to be difficult to understand and to implement due to the quite complex mathematics involved. Recent advances in modeling and analysis methods have made real option valuation easier to understand and to implement. This paper presents a new method (fuzzy pay-off method) for real option valuation using fuzzy numbers that is based on findings from earlier real option valuation methods and from fuzzy real option valuation. The method is intuitive to understand and far less complicated than any previous real option valuation model to date. The paper also presents the use of number of different types of fuzzy numbers with the method and an application of the new method in an industry setting.Mikael Collan, Robert Fullér, and József Mezei© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2009/215163.htmlThe valuation for an American continuous-installment put option on zero-coupon bond is considered by Kim's equations under a single factor model of the short-term interest rate, which follows the famous Vasicek model. In term of the price of this option, integral representations of both the optimal stopping and exercise boundaries are derived. A numerical method is used to approximate the optimal stopping and exercise boundaries by quadrature formulas. Numerical results and discussions are provided.Guoan Huang, Guohe Deng, and Lihong Huang© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2009/594793.htmlClassification of whether recovery of non-performing loans (NPL) is zero or positive is not only important in management of non-performing loans, but also is essential for estimating recovery rate and implementing the new Basel Capital Accord. Based on the largest database of NPL's recovering information in China, this paper tries to establish discriminant models to predict the loan with zero recovery. We first use Step-wise discrimination method to select variables; then give an in-depth analysis on why the selected variables are important factors influencing whether a loan is zero or positive recovery rate. Using the selected variables, we establish two-type discriminant models to classify the NPLs. Empirical results show that both models achieve high prediction accuracy, and the characteristics of obligors are the most important factors in determining whether a NPL is positively recovered or zero recovered.Yue Tang, Hao Chen, Bo Wang, Muzi Chen, Min Chen, and Xiaoguang Yang© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2009/593986.htmlWe deal with the pricing of callable Russian options. A callable Russian option is a contract in which both of the seller and the buyer have the rights to cancel and to exercise at any time, respectively. The pricing of such an option can be formulated as an optimal stopping problem between the seller and the buyer, and is analyzed as Dynkin game. We derive the value function of callable Russian options and their optimal boundaries.Atsuo Suzuki and Katsushige Sawaki© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2009/945923.htmlGame option is an American-type option with added feature that the writer can exercise the option at any time before maturity. In this paper, we consider some type of game options and obtain explicit expressions through solving Stefan(free boundary) problems under condition that the stock price is driven by some jump-diffusion process. Finally, we give a simple application about convertible bonds.Lei Wang and Zhiming Jin© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2009/414507.htmlA product warranty is an agreement offered by a producer to a consumer to replace or repair a faulty item, or to partially or fully reimburse the consumer in the event of a failure. Warranties are very widespread and serve many purposes, including protection for producer, seller, and consumer. They are used as signals of quality and as elements of marketing strategies. In this study we review the notion of an online convex optimization algorithm and its variations, and apply it in warranty context. We introduce a class of profit functions, which are functions of warranty, and use it to formulate the problem of maximizing the company's profit over time as an online convex optimization problem. We use this formulation to present an approach to setting the warranty based on an online algorithm with low regret. Under a dynamic environment, this algorithm provides a warranty strategy for the company that maximises its profit over time.Nedialko B. Dimitrov and Stefanka Chukova© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2009/609196.htmlMost of the investments in practice are carried out without certain horizons. There are many factors to drive investment to a stop. In this paper, we consider a portfolio selection policy with market-related stopping time. Particularly, we assume that the investor exits the market once his wealth reaches a given investment target or falls below a bankruptcy threshold. Our objective is to minimize the expected time when the investment target is obtained, at the same time, we guarantee the probability that bankruptcy happens is no larger than a given level. We formulate the problem as a mix integer linear programming model and make analysis of the model by using a numerical example.Jianfeng Liang© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2009/925169.htmlThis research work investigates the theoretical foundations and computational aspects of constructing optimal bespoke CDO structures. Due to the evolutionary nature of the CDO design process, stochastic search methods that mimic the metaphor of natural biological evolution are applied. For efficient searching the optimal solution, the nondominating sort genetic algorithm (NSGA-II) is used, which places emphasis on moving towards the true Paretooptimal region. This is an essential part of real-world credit structuring problems. The algorithm further demonstrates attractive constraint handling features among others, which is suitable for successfully solving the constrained portfolio optimisation problem. Numerical analysis is conducted on a bespoke CDO collateral portfolio constructed from constituents of the iTraxx Europe IG S5 CDS index. For comparative purposes, the default dependence structure is modelled via Gaussian and Clayton copula assumptions. This research concludes that CDO tranche returns at all levels of risk under the Clayton copula assumption performed better than the sub-optimal Gaussian assumption. It is evident that our research has provided meaningful guidance to CDO traders, for seeking significant improvement of returns over standardised CDOs tranches of similar rating.Diresh Jewan, Renkuan Guo, and Gareth Witten© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2008/397028.htmlWe use additive processes to price options on the Standard and Poor's 500 index (SPX) for the sake of comparison of pricing performance across both model class and family of time-one distribution. Each of the additive processes in this study is defined using one of the following: subordination, Sato's (2002) construction of self-similar additive processes from self-decomposable distributions, or both. We find that during the year 2005: (1) for a given family of time-one distributions, four-parameter self-similar additive models consistently yielded lower pricing errors than those of four-parameter subordinated, and time-inhomogeneous additive models, (2) for a given class of additive models, the time-one marginal given by the normal inverse Gaussian distribution consistently yielded lower pricing errors than those of the variance gamma distribution. Market and model benchmarks for the additive models under consideration are obtained via the bid-ask spreads of the options and Lévy stochastic volatility model prices, respectively.Mack L. Galloway and Craig A. Nolder© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2008/125797.htmlThis paper seeks to develop an allocation of 0/1 data matrices to physical systems upon a Kullback-Leibler distance between probability distributions. The distributions are estimated from the contents of the data matrices. We discuss an ascending hierarchical classification method, a numerical example and mention an application with survey data concerning the level of development of the departments of a given territory of a country.Amar Rebbouh© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2008/605064.htmlWe apply the homotopy analysis method (HAM) for solving the multipantograph equation. The analytical results have been obtained in terms of convergent series with easily computable components. Several examples are given to illustrate the efficiency and implementation of the homotopy analysis method. Comparisons are made to confirm the reliability of the homotopy analysis method.Fadi Awawdeh, Ahmad Adawi, and Safwan Al-Shara'© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2008/745463.htmlIndoor residual spraying—spraying insecticide inside houses to kill mosquitoes—is an important method for controlling malaria vectors in sub-Saharan Africa. We propose a mathematical model for both regular and non-fixed spraying, using impulsive differential equations. First, we determine the stability properties of the nonimpulsive system. Next, we derive minimal effective spraying intervals and the degree of spraying effectiveness required to control mosquitoes when spraying occurs at regular intervals. If spraying is not fixed, then we determine the “next best” spraying times. We also consider the effects of climate change on the prevalence of mosquitoes. We show that both regular and nonfixed spraying will result in a significant reduction in the overall number of mosquitoes, as well as the number of malaria cases in humans. We thus recommend that the use of indoor spraying be re-examined for widespread application in malaria-endemic areas.Robert J. Smith? and Senelani D. Hove-Musekwa© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2008/483267.htmlOperations researchers have always assumed that when a product's unit cost is constant and its demand curve is known and stationary, a retailer of the product would find it optimal to replenish the inventory with a fixed quantity and to sell the product always at a fixed price. We present, with proof, a model that shows that, in such a case, an e-tailer is better off using a continuously increasing price strategy than using a fixed price strategy within each inventory cycle. Sensitivity analysis shows that this strategy is particularly profitable when demand is highly price sensitive and the inventory ordering and carrying costs are high.Prafulla Joglekar, Patrick Lee, and Alireza M. Farahani© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2008/795869.htmlWe study the impact of the efforts aimed at reducing the lead-time variability in a quality-adjusted stochastic inventory model. We assume that each lot contains a random number of defective units. More specifically, a logarithmic investment function is used that allows investment to be made to reduce lead-time variability. Explicit results for the optimal values of decision variables as well as optimal value of the variance of lead-time are obtained. A series of numerical exercises is presented to demonstrate the use of the models developed in this paper. Initially the lead-time variance reduction model (LTVR) is compared to the quality-adjusted model (QA) for different values of initial lead-time over uniformly distributed lead-time intervals from one to seven weeks. In all cases where investment is warranted, investment in lead-time reduction results in reduced lot sizes, variances, and total inventory costs. Further, both the reduction in lot-size and lead-time variance increase as the lead-time interval increases. Similar results are obtained when lead-time follows a truncated normal distribution. The impact of proportion of defective items was also examined for the uniform case resulting in the finding that the total inventory related costs of investing in lead-time variance reduction decrease significantly as the proportion defective decreases. Finally, the results of sensitivity analysis relating to proportion defective, interest rate, and setup cost show the lead-time variance reduction model to be quite robust and representative of practice.Farrokh Nasri, Javad Paknejad, and John Affisco© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2008/825156.htmlThe aim of this paper is to formulate the mathematical relationship between firms potential ability and their applied efforts to attract the body of unattached customers. A method is devised in this paper by which management techniques imposed by a particular firm can evaluate its market share. This paper demonstrates the relationship between the applied marketing effort of management and the potential ability of the firm in determining its market share. This paper also investigates the effect of a number of simultaneous marketing impulses on the movement of the body of unattached customers and hence on the size of the market share.Mokhtar M. Metwally© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2008/760191.htmlInteger linear fractional programming problem with multiple objective (MOILFP) is an important field of research and has not received as much attention as did multiple objective linear fractional programming. In this work, we develop a branch and cut algorithm based on continuous fractional optimization, for generating the whole integer efficient solutions of the MOILFP problem. The basic idea of the computation phase of the algorithm is to optimize one of the fractional objective functions, then generate an integer feasible solution. Using the reduced gradients of the objective functions, an efficient cut is built and a part of the feasible domain not containing efficient solutions is truncated by adding this cut. A sample problem is solved using this algorithm, and the main practical advantages of the algorithm are indicated.Mohamed El-Amine Chergui and Mustapha Moulaï© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2008/463781.htmlSmooth tests for the logarithmic distribution are compared with three tests: the first is a test due to Epps and is based on a probability generating function, the second is the Anderson-Darling test, and the third is due to Klar and is based on the empirical integrated distribution function. These tests all have substantially better power than the traditional Pearson-Fisher X2 test of fit for the logarithmic. These traditional chi-squared tests are the only logarithmic tests of fit commonly applied by ecologists and other scientists.D. J. Best, J. C. W. Rayner, and O. Thas© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2008/218140.htmlThe correspondence analysis of a two-way contingency table is now accepted as a very versatile tool for helping users to understand the structure of the association in their data. In cases where the variables consist of ordered categories, there are a number of approaches that can be employed and these generally involve an adaptation of singular value decomposition. Over the last few years, an alternative decomposition method has been used for cases where the row and column variables of a two-way contingency table have an ordinal structure. A version of this approach is also available for a two-way table where one variable has a nominal structure and the other variable has an ordinal structure. However, such an approach does not take into consideration the presence of the nominal variable. This paper explores an approach to correspondence analysis using an amalgamation of singular value decomposition and bivariate moment decomposition. A benefit of this technique is that it combines the classical technique with the ordinal analysis by determining the structure of the variables in terms of singular values and location, dispersion and higher-order moments.Eric J. Beh© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2007/083852.abs.htmlA Cox process NCox directed by a stationary random measure ξ has second moment var NCox(0,t]=E(ξ(0,t])+var ξ(0,t], where by stationarity E(ξ(0,t])=(const.)t=E(NCox(0,t]), so long-range dependence (LRD) properties of NCox coincide with LRD properties of the random measure ξ. When ξ(A)=∫AνJ(u)du is determined by a density that depends on rate parameters νi(i∈𝕏) and the current state J(⋅) of an 𝕏-valued stationary irreducible Markov renewal process (MRP) for some countable state space 𝕏 (so J(t) is a stationary semi-Markov process on 𝕏), the random measure is LRD if and only if each (and then by irreducibility, every) generic return time Yjj(j∈X) of the process for entries to state j has infinite second moment, for which a necessary and sufficient condition when 𝕏 is finite is that at least one generic holding time Xj in state j, with distribution function (DF)Hj, say, has infinite second moment (a simple example shows that this condition is not necessary when 𝕏 is countably infinite). Then, NCox has the same Hurst index as the MRP NMRP that counts the jumps of J(⋅), while as t→∞, for finite 𝕏, var NMRP(0,t]∼2λ2∫0t𝒢(u)du, var NCox(0,t]∼2∫0t∑i∈𝕏(νi−ν¯)2ϖiℋi(t)du, where ν¯=∑iϖiνi=E[ξ(0,1]], ϖj=Pr{J(t)=j},1/λ=∑jpˇjμj, μj=E(Xj), {pˇj} is the stationary distribution for the embedded jump process of the MRP, ℋj(t)=μi−1∫0∞min(u,t)[1−Hj(u)]du, and 𝒢(t)∼∫0tmin(u,t)[1−Gjj(u)]du/mjj∼∑iϖiℋi(t) where Gjj is the DF and mjj the mean of the generic return time Yjj of the MRP between successive entries to the state j. These two variances are of similar order for t→∞ only when each ℋi(t)/𝒢(t) converges to some [0,∞]-valued constant, say, γi, for t→∞.D. J. Daley, T. Rolski, and R. Vesilo© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2007/013749.abs.htmlWe present an excursion with Jeff Hunter, visiting some of his research topics. Specifically, we will present some facts about certain people whose work seems to have influenced Jeff in his scientific career; we illustrate our presentation with postage stamps that have been issued in honour of these people. Our main guide is Hunter’s two-volume book entitled Mathematical Techniques of Applied Probability (Academic Press, 1983).George P. H. Styan and Götz Trenkler© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2007/094515.abs.htmlWe will place certain parts of the theory of statistical efficiency into the author's operator trigonometry (1967), thereby providing new geometrical understanding of statistical efficiency. Important earlier results of Bloomfield and Watson, Durbin and Kendall, Rao and Rao, will be so interpreted. For example, worse case relative least squares efficiency corresponds to and is achieved by the maximal turning antieigenvectors of the covariance matrix. Some little-known historical perspectives will also be exposed. The overall view will be emphasized.K. Gustafson© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2007/068280.abs.htmlConsider a network of parallel finite tandem queues with two stages, where each arrival attempts to minimize its own cost due to loss. It is known that the user optimal and asymptotic system optimal policies may differ—we give examples showing that they may differ for finite systems and that as the service rate is increased at the second stage the user optimal policy may change in such a way that the total expected cost due to loss increases.Ilze Ziedins© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2007/037475.abs.htmlIn this paper, a procedure based on M-estimation to determine the number of regression models for the problem of regression clustering is proposed. We have shown that the true classification is attained when n increases to infinity under certain mild conditions, for instance, without assuming normality of the distribution of the random errors in each regression model.C. R. Rao, Y. Wu, and Q. Shao© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2007/024053.abs.htmlLq-penalized regression arises in multidimensional statistical modelling where all or part of the regression coefficients are penalized to achieve both accuracy and parsimony of statistical models. There is often substantial computational difficulty except for the quadratic penalty case. The difficulty is partly due to the nonsmoothness of the objective function inherited from the use of the absolute value. We propose a new solution method for the general Lq-penalized regression problem based on space transformation and thus efficient optimization algorithms. The new method has immediate applications in statistics, notably in penalized spline smoothing problems. In particular, the LASSO problem is shown to be polynomial time solvable. Numerical studies show promise of our approach.Tracy Zhou Wu, Yingyi Chu, and Yan Yu© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2007/057619.abs.htmlPaul Cowpertwait, Graeme Wake, Robert D. Anderson, Howard Edwards, and Shayle Searle© 2009, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/jamds/2007/098086.abs.htmlMarkov chain theory plays an important role in statistical inference both in the formulation of models for data and in the construction of efficient algorithms for inference. The use of Markov chains in modeling data has a long history, however the use of Markov chain theory in developing algorithms for statistical inference has only become popular recently. Using mark-recapture models as an illustration, we show how Markov chains can be used for developing demographic models and also in developing efficient algorithms for inference. We anticipate that a major area of future research involving mark-recapture data will be the development of hierarchical models that lead to better demographic models that account for all uncertainties in the analysis. A key issue is determining when the chains produced by Markov chain Monte Carlo sampling have converged.Richard J. Barker and Matthew R. Schofield© 2009, Hindawi Publishing Corporation. All rights reserved.