Tropical Cyclone Damage Assessment using a Projection Pursuit Dynamic Cluster Model

Using data from 62 tropical cyclones (TCs) that landed in Guangdong Province in China between 2000 and 2019, we calculated six indices—minimum central pressure, maximum wind speed, maximum rainstorm ratio, cumulative surface rainfall, cyclone track length and lifetime—and constructed a projection pursuit dynamic cluster (PPDC) model to assess TC damage risk. Although a single index may provide correct information on the intensity of certain types of damage, a comprehensive damage risk assessment cannot be obtained from individual indices alone. The PPDC model is a stable tool for TC damage risk assessment, especially in terms of economic loss, agricultural disaster area and disaster-affected population. Model validation improved the correlation of each of the indices. Output from the PPDC model for disaster-affected population and agricultural disaster-affected area also improved after model validation. We examined the limitations of the single indices using data from three TCs. Output from the PPDC model can closely reflect the intensity of the damage caused by the cyclones. Projection pursuit dynamic clustering is a new and objective method for typhoon damage risk assessment, and provides the scientific basis to support disaster prevention and mitigation.

How deep is your model? Network topology selection from a model validation perspective

Deep learning is a powerful tool, which is becoming increasingly popular in financial modeling. However, model validation requirements such as SR 11-7 pose a significant obstacle to the deployment of neural networks in a bank’s production system. Their typically high number of (hyper-)parameters poses a particular challenge to model selection, benchmarking and documentation. We present a simple grid based method together with an open source implementation and show how this pragmatically satisfies model validation requirements. We illustrate the method by learning the option pricing formula in the Black–Scholes and the Heston model.