http://www.hindawi.comThe latest articles from Hindawi Publishing Corporation© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/2010/948359.htmlA solution to the ranking and selection problem of determining a subset of size m containing at least c of the v best from k normal distributions has been developed. The best distributions are those having, for example, (i) the smallest means, or (ii) the smallest variances. This paper reviews various applicable algorithms and supplies the operating constants needed to apply these solutions. The constants are computed using a histogram approximation algorithm and Monte Carlo integration.E. Jack Chen and Min Li© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/2010/292013.htmlThe generalised score and Wald tests are described and related to their nongeneralised versions. Two interesting applications are discussed. In the first a new test for the Behrens-Fisher problem is derived. The second is testing homogeneity of variances from multiple univariate normal populations.Paul Rippon and J. C. W. Rayner© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/2009/716059.htmlWe consider a single-stage multiproduct manufacturing facility producing several end-products for delivery to customers with a required customer lead-time. The end-products can be split in two classes: few products with high volume demands and a large number of products with low-volume demands. In order to reduce inventory costs, it seems efficient to produce the high-volume products according to an MTS policy and the low volume products according to an MTO policy. The purpose of this paper is to analyze and compare the impact of the scheduling policy on the overall inventory costs, under customer lead-time service level constraints. We consider two policies: the classical FIFO policy and a priority policy (PR) which gives priority to low volume products over high volume products. We show that for some range of parameters, the PR rule can significantly outperform the FIFO rule. In these ranges, the service level constraints are satisfied by the PR rule with much lower inventory costs.Khaled Hadj Youssef, Christian van Delft, and Yves Dallery© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/2009/625712.htmlWe show how it is possible to construct efficient duration dependent semi-Markov reliability models by considering recurrence time processes. We define generalized reliability indexes and we show how it is possible to compute them. Finally, we describe a possible application in the study of credit rating dynamics by considering the credit rating migration as a reliability problem.Guglielmo D'Amico, Jacques Janssen, and Raimondo Manca© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/2009/980706.htmlFor at least partially ordered three-way tables, it is well known how to arithmetically decompose Pearson's XP2 statistic into informative components that enable a close scrutiny of the data. Similarly well-known are smooth models for two-way tables from which score tests for homogeneity and independence can be derived. From these models, both the components of Pearson's XP2 and information about their distributions can be derived. Two advantages of specifying models are first that the score tests have weak optimality properties and second that identifying the appropriate model from within a class of possible models gives insights about the data. Here, smooth models for higher-order tables are given explicitly, as are the partitions of Pearson's XP2 into components. The asymptotic distributions of statistics related to the components are also addressed.J. C. W. Rayner and Eric J. Beh© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/2009/512356.htmlAutomated public health records provide the necessary data for rapid outbreak detection. An adaptive exponentially weighted moving average (EWMA) plan is developed for signalling unusually high incidence when monitoring a time series of nonhomogeneous daily disease counts. A Poisson transitional regression model is used to fit background/expected trend in counts and provides “one-day-ahead” forecasts of the next day's count. Departures of counts from their forecasts are monitored. The paper outlines an approach for improving early outbreak data signals by dynamically adjusting the exponential weights to be efficient at signalling local persistent high side changes. We emphasise outbreak signals in steady-state situations; that is, changes that occur after the EWMA statistic had run through several in-control counts.R. S. Sparks, T. Keighley, and D. Muscatello© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/2009/394731.htmlLean Yu, Shouyang Wang, and K. K. Lai© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/2009/179230.htmlThe volatility is a crucial variable in option pricing and hedging strategies. The aim of this paper is to provide some initial evidence of the empirical relevance of genetic programming to volatility's forecasting. By using real data from S&P500 index options, the genetic programming's ability to forecast Black and Scholes-implied volatility is compared between time series samples and moneyness-time to maturity classes. Total and out-of-sample mean squared errors are used as forecasting's performance measures. Comparisons reveal that the time series model seems to be more accurate in forecasting-implied volatility than moneyness time to maturity models. Overall, results are strongly encouraging and suggest that the genetic programming approach works well in solving financial problems.Wafa Abdelmalek, Sana Ben Hamida, and Fathi Abid© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/2009/359623.htmlWe have derived the analytical kernels of the pricing formulae of the CEV knockout options with time-dependent parameters for a parametric class of moving barriers. By a series of similarity transformations and changing variables, we are able to reduce the pricing equation to one which is reducible to the Bessel equation with constant parameters. These results enable us to develop a simple and efficient method for computing accurate estimates of the CEV single-barrier option prices as well as their upper and lower bounds when the model parameters are time-dependent. By means of the multistage approximation scheme, the upper and lower bounds for the exact barrier option prices can be efficiently improved in a systematic manner. It is also natural that this new approach can be easily applied to capture the valuation of other standard CEV options with specified moving knockout barriers. In view of the CEV model being empirically considered to be a better candidate in equity option pricing than the traditional Black-Scholes model, more comparative pricing and precise risk management in equity options can be achieved by incorporating term structures of interest rates, volatility, and dividend into the CEV option valuation model.C. F. Lo, H. M. Tang, K. C. Ku, and C. H. Hui© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/2009/845804.htmlThis paper is concerned with the computational complexities of three types of queries, namely, satisfiability, equivalence, and hull inclusion. The first two queries are analyzed over the domain of CNF formulas, while hull inclusion queries are analyzed over continuous and discrete sets defined by rational polyhedra. Although CNF formulas can be represented by polyhedra over discrete sets, we analyze them separately on account of their distinct structure. In particular, we consider the NAESAT and XSAT versions of satisfiability over HornCNF, 2CNF, and Horn⊕2CNF formulas. These restricted families find applications in a number of practical domains. From the hull inclusion perspective, we are primarily concerned with the question of checking whether two succinct descriptions of a set of points are equivalent. In particular, we analyze the complexities of integer hull inclusion over 2SAT and Horn polyhedra. Hull inclusion problems are important from the perspective of deriving minimal descriptions of point sets. One of the surprising consequences of our work is the stark difference in complexities between equivalence problems in the clausal and polyhedral domains for the same polyhedral structure.K. Subramani© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/2009/897024.htmlThe purpose of stock portfolio selection is how to allocate the capital to a large number of stocks in order to bring a most profitable return for investors. In most of past literatures, experts considered the portfolio of selection problem only based on past crisp or quantitative data. However, many qualitative and quantitative factors will influence the stock portfolio selection in real investment situation. It is very important for experts or decision-makers to use their experience or knowledge to predict the performance of each stock and make a stock portfolio. Because of the knowledge, experience, and background of each expert are different and vague, different types of 2-tuple linguistic variable are suitable used to express experts' opinions for the performance evaluation of each stock with respect to criteria. According to the linguistic evaluations of experts, the linguistic TOPSIS and linguistic ELECTRE methods are combined to present a new decision-making method for dealing with stock selection problems in this paper. Once the investment set has been determined, the risk preferences of investor are considered to calculate the investment ratio of each stock in the investment set. Finally, an example is implemented to demonstrate the practicability of the proposed method.Chen-Tung Chen and Wei-Zhan Hung© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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'© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.http://www.hindawi.com/journals/ads/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© 2010, Hindawi Publishing Corporation. All rights reserved.