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In this paper, a down-to-earth approach to purely data-based modelling
of unknown dynamical systems is presented. Starting from a classical, explicit ODE
formulation y=f(t,y) of a dynamical system, a method determining the unknown
right-hand side f(t,y) from some trajectory data y_k(t_j), possibly very sparse, is given.
As illustrative examples, a semi-standard predator-prey model is reconstructed from a
data set describing the population numbers of hares and lynxes over a period of twenty
years [1], and a simple damped pendulum system with a highly non-linear right-hand
side is recovered from some artificial but very sparse data [2].
In this paper, a down-to-earth approach to purely data-based modelling of unknown dynamical systems is presented. Starting from a classical, explicit ODE formulation y=f(t,y) of a dynamical system, a method determining the unknown right-hand side f(t,y) from some trajectory data y_k(t_j), possibly very sparse, is given. As illustrative examples, a semi-standard predator-prey model is reconstructed from a data set describing the population numbers of hares and lynxes over a period of twenty years, and a simple damped pendulum system with a highly non-linear right-hand side is recovered from some artificial but very sparse data.
In this article we present a new approach to estimate the change of the present value of a given cashflow pattern caused by an interest rate shift. Our approximation is based on analysing the evolution of the present value function through a linear differential equation. The outcome is far more accurate than the standard approach achieved by a Taylor expansion. Furthermore, we derive an approximation formula of second order that produces nearly accurate results. In particular, we prove that our method is superior to any known alternative approximation formula based on duration. In order to demonstrate the power of this improved approximation we apply it to coupon bonds, level annuities, and level perpetuities. We finally generalise the approach to a non-flat term structure. As for applications in insurance, we estimate the change of the discounted value of future liabilities due to a proportional shift in the set of capital accumulation factors. These findings are of particular importance to capital adequacy calculations with respect to interest rate stress scenarios that are part of regulatory solvency requirements.