Spread Changes Research Articles

Wrong-way-risk in tails

With new regulations like the credit valuation adjustment, the assessment of wrong-way-risk is of utter importance. We analyse the effect of a counterparty’s credit risk and its influence on other asset classes (equity, currency, commodity and interest rate) in the event of extreme market movements like the counterparty’s default. With an extreme value approach, we model the tail of the joint distribution of different asset returns belonging to the above asset classes and counterparty credit risk indicated by changes in CDS spreads and calculate the effect on the expected shortfall when conditioning on counterparty credit risk. We find the conditional expected shortfall to be 2 to 440% higher than the unconditional expected shortfall depending on the asset class. Our results give insights both for risk management and for setting an initial margin for non-centrally cleared derivatives which becomes mandatory in the European Market Infrastructure Regulation.

Short‐selling and credit default swap spreads—Where do informed traders trade?

During the global financial crisis, short‐selling and credit default swaps (CDS) gained notoriety as indicators of financial collapse. This paper extends the literature by examining the relationship between short‐selling and CDS spreads. Results indicate that lagged short‐selling metrics forecast changes in CDS spreads; short‐selling is found to have a positive relationship with CDS spreads. These results are robust to various controls including the supply of stock for short‐selling, changes in CDS spreads, cross‐sectional controls for fixed effects, sub‐group analysis by industry sector, and the use of contemporaneous explanatory variables. This suggests that informed traders prefer to short‐sell the underlying stocks.

Study on the Effect of Electron Beam Quality on a Continuously Frequency-Tunable 250-GHz Gyrotron

The effect of the electron beam quality, including the variation of the velocity spread, the guiding center radius spread, and the pitch factor when the operating frequency of a 250-GHz TE <sub xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">52</sub> mode continuously frequency-tunable gyrotron used for dynamic nuclear polarization (DNP) enhanced nuclear magnetic resonance (NMR) spectroscopy is tuned by changing the operating voltage V <sub xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">0</sub> or the operating magnetic field B <sub xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">0</sub> , on the operating frequency, the frequency-tunable range and the beam-wave interaction efficiency, has been studied based on a selfconsistent nonlinear beam-wave interaction theory. It is found that the velocity spread changes from 2.2% to 7.3% and the guiding center radius spread varies from 0.6% to 1.5%, when the operating voltage V <sub xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">0</sub> changes between 8 and 15 kV at an operating magnetic field of 9.24 T, the velocity spread varies from 4.1% to 6% and the guiding center radius spread changes from 0.8% to 1.4%, when the operating magnetic field B <sub xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">0</sub> changes between 9 and 9.3 T at an operating voltage of 10.1 kV. The variation of the velocity spread and guiding center radius spread with respect to the operating voltage or the magnetic field have a significant effect on the beam-wave interaction efficiency and the frequency-tunable range of the 250-GHz TE <sub xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">52</sub> mode continuously frequency-tunable DNP/NMR gyrotron,and the effect of the variation of the velocity spread and the guiding center radius spread should be taken into account in a frequency-tunable gyrotron design.

What Moves the Correlation between Equity and CDS Markets

We document substantial correlation dynamics between equity returns and CDS spread changes at the firm level, which is critical for cross-market hedging and arbitrage strategies. Using the implied cost of capital approach, we decompose the unexpected equity returns into cash flow and discount rate news, and examine the impact of the shocks on the correlations. We find discount rate news explains the majority fraction. However, at longer horizons and in periods when cash flow news is more negatively related with CDS spread changes, the cross-market integration is stronger. In addition, firms with more cash flow news exhibit stronger correlations between equity returns and credit spread changes, and the structural model can explain more variations of credit spread changes in these firms.

25 years of ESCOM: Achievements and challenges

This reflection on the first 25 years of ESCOM’s activities is in two parts. In the first part we analyse the country and discipline spread of contributors to its journal Musicae Scientiae and its formal membership. In the second we address the choice of “cognitive sciences of music” as the initial focus of both Society and journal by comparing the topics of early meetings and publications with those that are current now. Journal contributors and members are both concentrated in a small number of countries. When corrected for population size, the countries with the highest levels of activity are, in order: Finland, Estonia, UK, Sweden, Germany, Belgium, Switzerland, and Austria. This has not changed substantially over the duration of ESCOM’s existence. In contrast, there have been significant changes in the disciplinary spread of contributions, psychology becoming increasingly popular in recent years to the near exclusion of some other disciplinary approaches including ethnomusicology, computational modelling and theoretical musicology. Current topics include performance and composition, emotion, musical development, perception, music therapy and well-being, music learning, preferences, cognition, and neuropsychological approaches. An early aspiration of the Society was that the wide range of disciplines represented by the cognitive sciences of music might eventually converge, but this has proved difficult to achieve. An increasing convergence on the use of English as its normative language, however, has provided ESCOM with both new challenges and some opportunities.

Quarternary Sediment Characteristics of Floodplain area: Study Case at Kampar River, Rumbio Area and Surroundings, Riau Province

The study area is located in some floodplains of meandering river environment along the Kampar River, Rumbio. Typical morphology of meandering river that found in this area can be classified as stream channel, floodplain, abandoned channel, and sand bars deposit. Meandering river system carries sediment supply by suspended and bed - load (mixed load) in conjunction with low energy into a particular characteristic on sediment deposition. This study aims to determine the characteristics of the sediments, changes in vertical and lateral spread of sediment deposition on the floodplain environment. This study conducted by field survey using a hand auger of 1.5m - 4m depth and trenching which is a layer that has been exposed of 1-2 meters depth. Further analysis had been carried out using granulometri method and core data analysis to determine the characteristics and depositional facies. Sediment deposit that formed along the Kampar River is the result of the main channel migration of Kampar River. The characteristic of quaternary sediment facies is coarse to gravelly sand on the bottom followed by fine to very fine sand with pattern fining upwards and silt to clay and abundant terrestrial organic matter at the uppermost layer. Depositional facies are determined based on the characteristics of sediment facies which can be grouped into a stream channel, oblique accretion deposits, sand bars and overbank deposits.

Safe Haven CDS Premiums

Credit default swaps can be used to lower the capital requirements of dealer banks entering into uncollateralized derivatives positions with sovereigns. We show in a model that the regulatory incentive to obtain capital relief makes CDS contracts valuable to dealer banks and empirically that, consistent with the use of CDS for regulatory purposes, there is a disconnect between changes in bond yield spreads and in CDS premiums, especially for safe sovereigns. Additional empirical tests related to the volume of contracts outstanding, effects of regulatory proxies, and the corporate bond and CDS markets support that CDS contracts are used for capital relief. Received September 28, 2016; editorial decision January 26, 2018 by Editor Itay Goldstein. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online

Automatic Segmentation of Dynamic Network Sequences with Node Labels

Given a sequence of snapshots of flu propagating over a population network, can we find a segmentation when the patterns of the disease spread change, possibly due to interventions? In this paper, we study the problem of segmenting graph sequences with labeled nodes. Memes on the Twitter network, diseases over a contact network, movie-cascades over a social network, etc. are all graph sequences with labeled nodes. Most related work on this subject is on plain graphs and hence ignores the label dynamics. Others require fix parameters or feature engineering. We propose SnapNETS , to automatically find segmentations of such graph sequences, with different characteristics of nodes of each label in adjacent segments. It satisfies all the desired properties (being parameter free, comprehensive and scalable) by leveraging a principled, multi-level, flexible framework which maps the problem to a path optimization problem over a weighted DAG. Also, we develop the parallel framework of SnapNETS which speeds up its running time. Finally, we propose an extension of SnapNETS to handle the dynamic graph structures and use it to detect anomalies (and events) in network sequences. Extensive experiments on several diverse real datasets show that it finds cut points matching ground-truth or meaningful external signals and detects anomalies outperforming non-trivial baselines. We also show that the segmentations are easily interpretable, and that SnapNETS scales near-linearly with the size of the input. Finally, we show how to use SnapNETS to detect anomaly in a sequence of dynamic networks.

Building the Child Safety Collaborative Innovation and Improvement Network: How does it work and what is it achieving?

ObjectiveThis study investigated whether the Child Safety Collaborative Innovation and Improvement Network (CS CoIIN) framework could be applied in the field of injury and violence prevention to reduce fatalities, hospitalizations...

Increased Substrate Stiffness Elicits a Myofibroblastic Phenotype in Human Lamina Cribrosa Cells.

Alteration in the extracellular matrix (ECM) of the optic nerve head (ONH) causes lamina cribrosa (LC) fibrosis and affects the mechanical integrity of the ONH. Increased ECM tissue stiffness drives myofibroblast activation leading to tissue fibrosis throughout the body. Here using primary human LC cells, we investigate the effect of substrate stiffness on profibrotic changes, which might be a key molecular mechanism driving ECM remodeling of the LC in primary open-angle glaucoma (POAG) glaucoma. Primary human LC cells from normal and age-matched POAG glaucoma donors were cultured on substrates with defined mechanical properties of 5 and 100 kPa to replicate the range of mechanical microenvironments that cells may experience in vivo. Cell morphology, spread area, actin stress fibers, vinculin-focal adhesion formation, and α-smooth muscle actin (α-SMA) signal were examined using immunofluorescence staining. The elastic modulus of cells was measured using atomic force microscopy (AFM). Significantly greater cell spread area along with increased actin filament development, and vinculin-focal adhesion formation (number and size) were found in both normal and glaucoma LC cells cultured on stiff substrates. These changes were positively associated with elevated cell stiffness measured by AFM. Changes in spreading and cytoskeleton organization of glaucoma LC cells were significantly more pronounced than those in normal cells. The transformation to a myofibroblast-like cell phenotype was identified in both LC cells exposed to stiffer substrates, as indicated by an increased α-SMA signal and its colocalization with the actin stress fibers. These findings demonstrated that a stiffer cell microenvironment activates a myofibroblastic transformation in human LC cells, and therefore contributes to LC remodelling and fibrosis in glaucoma.

The Costs of Sovereign Default: Evidence from the Stock Market

We use stock market data to test cross-sectional implications of theories of sovereign default and provide a market-based estimate of sovereign default costs. We find that the stock prices of firms vulnerable to financial intermediation disruption, or firms more exposed to the government, are particularly sensitive to changes in sovereign credit spreads. This is consistent with theories in which default is costly because it disrupts financial intermediation and damages government reputation. Estimation of a structural valuation model indicates that the market prices stocks as if sovereign default has large effects on vulnerable stocks, translating to a 12% destruction of the value of their productive assets. Received July 9, 2011; editorial decision August 16, 2017 by Editor Geert Bekaert.

Determinants of Yield Spread in the Government of India Bond Markets

Yield on Government Bonds form the benchmark “risk free rate of return” for the pricing of all financial assets and their derivatives. Yield spread of government bonds is an indicator of efficiency of the treasury market, which is essential for an effective monetary policy. This is one of the first papers on Indian government bond market, with specific focus on yield spread. Using the NSE’s N-S method based ZCYC, and including 186,279 bond trades, over the period 2006-2012, this paper attempts to identify the determinants of yield spread of Government of India Bonds, controlling for various bond specific characteristics. Additionally it also examines the interaction of illiquidity, maturity in both normal, and crisis periods, and analyses the weekly changes in spread to explore the presence of AR(1) process in weekly changes. This paper finds that trades, trade interval, turnover, and coupon are the key determinants of yield spread in the Government of India bond market. Turnover with a negative coefficient of -137 bp, has the maximum impact on spread. Outstanding volume has a positive impact on higher duration trades during crisis period and a negative impact during the normal period. While examining the determinants of changes in yield spread, it is found that previous week’s change in spread has a significant dampening effect. Further the changes in yield spread are positively influenced by trading volume and price dispersion measure, and negatively by changes in spread. Counter intuitively changes in trade interval negatively and significantly influence the changes in yield spreads.

Long-term investigations and experimental manipulations: Useful perspectives for applied vegetation studies

Long-term investigations and experimental manipulations: Useful perspectives for applied vegetation studies

Symposia Abstracts

Symposia Abstracts

Measuring sovereign contagion in Europe

This paper analyzes sovereign risk shift-contagion, i.e. positive and significant changes in the propagation mechanisms, using bond yield spreads for the major eurozone countries. By emphasizing the use of two econometric approaches based on quantile regressions (standard quantile regression and Bayesian quantile regression with heteroskedasticity) we find that the propagation of shocks in euro's bond yield spreads shows almost no presence of shift-contagion in the sample periods considered (2003–2006, Nov. 2008–Nov. 2011, Dec. 2011–Apr. 2013). Shock transmission is no different on days with big spread changes and small changes. This is the case even though a significant number of the countries in our sample have been extremely affected by their sovereign debt and fiscal situations. The risk spillover among these countries is not affected by the size or sign of the shock, implying that so far contagion has remained subdued. However, the US crisis does generate a change in the intensity of the propagation of shocks in the eurozone between the 2003–2006 pre-crisis period and the Nov. 2008–Nov. 2011 post-Lehman one, but the coefficients actually go down, not up! All the increases in correlation we have witnessed over the last years come from larger shocks and the heteroskedasticity in the data, not from similar shocks propagated with higher intensity across Europe. These surprising, but robust, results emerge because this is the first paper, to our knowledge, in which a Bayesian quantile regression approach allowing for heteroskedasticity is used to measure contagion. This methodology is particularly well-suited to deal with nonlinear and unstable transmission mechanisms especially when asymmetric responses to sign and size are suspected.

WITHDRAWN: S&P 500 Index evisions and credit spreads

AbstractWe investigate the impact of S&amp;P 500 Index revisions on credit spreads from 2001 to 2014. Additions have a significant negative impact on credit default swap (CDS) spreads both during the financial crisis period and for speculative grade firms, but deletions show no significant CDS spread changes. After excluding the effect of market integration between the stock and CDS markets, we find that S&amp;P 500 Index inclusion conveys no unique information beyond that due to market integration except during the financial crisis. Furthermore, CDS trading liquidity does not improve after S&amp;P 500 Index inclusion.

Over-the-Counter Market Frictions and Yield Spread Changes

We empirically study whether systematic over-the-counter (OTC) market frictions affect the large unexplained common factor in yield spread changes. Using transactions data on U.S. corporate bonds, we show that measures of marketwide inventory, search, and bargaining frictions reduce the unexplained common component by 19 percentage points. Systematic OTC frictions substantially improve the explanatory power of yield spread changes and account for one-third of their total explained variation. Inventory frictions are equally important in explaining the dynamics of yield spread changes as search and bargaining frictions combined. Our findings support the implications of leading theories of intermediation frictions in OTC markets.

Credit spreads and merger pricing

Previous studies (Axelson et al. in J Finance 68(6):2223–2267, 2013; Gorbenko and Malenko in J Finance 69(6):2513–2555, 2014) find that transaction prices and maximum-willingness-to-pay for targets are negatively correlated with credit market conditions. We extend the literature along two dimensions. First, we focus on takeover premiums (which account for market conditions), not transaction prices or maximum-willingness-to-pay. Second, we use predicted changes in credit spreads (which are less likely driven by confounding factors), not contemporaneous changes in credit spreads. Empirically, we find that predicted changes in the credit spread negatively impact takeover premiums, and that the correlation between predicted credit spreads and takeover premiums is not significantly different between private and public acquisitions.

Credit Risk Propagation Along Supply Chains: Evidence from the CDS Market

Using a panel of Credit Default Swap (CDS) spreads and supply chain links, we observe that both favorable and unfavorable credit shocks propagate through supply chains in the CDS market. Particularly, the three-day cumulative abnormal CDS spread change (CASC) is 63 basis points for firms whose customers experienced a CDS up-jump event (an adverse credit shock). The value is 74 basis points if their suppliers experienced a CDS up-jump event. The corresponding three-day CASC values are −36 and −38 basis points, respectively, for firms whose customers and suppliers, respectively, experienced an extreme CDS down-jump event (a favorable credit shock). These effects are approximately twice as large for adverse credit shocks originating from natural disasters. Credit shock propagation is absent in inactive supply chains, and is amplified if supply-chain partners are followed by the same analysts. Industry competition and financial linkages between supply chain partners, such as trade credit and large sales exposure, amplify the shock propagation along supply chains. Strong shock propagation persists through second and third supply-chain tiers for adverse shocks but attenuates for favorable shocks.

Credit Ratings and Credit Default Swaps During the European Sovereign Debt Crisis

We investigate the relationship between credit rating events and credit default swap spreads for EU countries around the Subprime and European Debt Crises. Using event studies and OLS regressions we analyse the behavior of CDS spreads before, around and after credit rating events. Our results indicate that CDS spreads anticipate positive rating events as early as 2-3 months before the event however the anticipation for negative events is only 1-2 months prior; in addition we also observe announcement and post announcement effects in some instances. We also find that the behavior of CDS spreads and credit rating events has undergone a significant change after the crisis period. On similar lines, using logit and multinomial logit regressions we find that a change in CDS spreads are effective in predicting forthcoming credit rating events.