Market Spreads Research Articles

Risk Measures: Theoretical Foundations and New Perspectives

This thesis studies two new approaches of risk measurement. The first one is based on the class of spectral risk measures and proposes a new method to calibrate them to data and decision maker's objective. Based on the results of information theory, we use theorems of relative entropy optimisation to build a framework which allows data-specific calibration and selection of the best spectral risk measure among several candidates. The calibration procedure ensures that an optimal risk aversion coefficient is attained with respect to a constraint on the rst moment of the data distribution. The selection procedure provides an indication on which risk spectrum should be used in order to maximize the likelihood of the decision maker's objective, thus her risk aversion. Application to real data are then proposed and a study focused on extreme risk is realised through an adapted backtesting. The second approach studied in this thesis is grounded on disappointment theory and implements a framework to calibrate disappointment risk premia to market prices. Based on a recent new axiomatisation, we show the mathematical properties of this risk premium and then develop a odel for the valuation of credit-default-swap in a mean-variance framework. We express closed-form formulae under two different assumptions for the recovery rate process. Finally we apply our model to series of market spreads and propose an algorithm for the calibration of each component of the risk premium, based on the minimisation of the square error. This leads us to the estimation of an optimal risk aversion parameter, an implied recovery rate and an implied recovery volatility. Performance of the algorithm is verified through comparison of the default probabilities issued from the model with risk-neutral and historical ones.

Molecular Characterization of Antibiotic-Resistant Salmonella Isolates from Retail Meat from Markets in Northern Vietnam

A total of 118 Salmonella isolates were detected from 283 retail meat samples (135 pork and 148 chicken meat) purchased at retail markets in Northern Vietnam. Thirteen serovars, including Infantis, Anatum, Rissen, Reading, Emek, Typhimurium, Blockley, London, Newport, Derby, Weltevreden, Albany, and Hadar, were determined. Resistance to tetracycline (54.2%), sulfonamides (52.5%), streptomycin (41.5%), trimethoprim (36.4%), chloramphenicol (35.6%), and ampicillin (33.1%) was commonly seen in the Salmonella isolates. Fourteen [bla(TEM), bla(OXA-1), bla(PSE-1), aadA1, sul1, tetA, tetB, tetG, cmlA1, floR, dfrA1, dfrA12, aac(3)-IV, and aphA1-1AB ] of 17 resistance genes were detected from the isolates demonstrating resistance. Genes for plasmid-mediated quinolone resistance, such as qnrA, qnrB, qnrS, qepA, and acc(6')-1b-cr, were not detected in 23 quinoloneresistant isolates. The substitution TCC to TTC at codon 83 of gyrA was found in the 18 quinolone-resistant isolates. The data revealed that resistant Salmonella strains were widely distributed in Northern Vietnam via the food chain and that they might contain multiple genes specifying identical resistance phenotypes. Thus, further studies are necessary to clarify the mechanisms of antibiotic resistance in Salmonella strains and their spread in the livestock market.

The making of the book market in Siena (XVI-XVII): production, circulation, belonging

Between 1465 and 1600 the typographic production in Siena, although not much spread yet, significantly developed. The research on inventories of Sienese shops between the 15th and the 17th century, allows drawing a picture of the tastes and expectations of the book market, and highlights a complex commercial structure, made up by small and larger and richer bookshops. Although in most cases these inventories do not bear prices, some notes of possession in the books allow a general analysis of the social configuration of the book market. Accordingly, the purchase of books was in first instance a realm of middle/higher strata of the population, spreading after the decrease of prices on lower strata. Furthermore, the study of notarial acts enriches the picture with a variety of book collections belonging to different social actors. Finally, a valuable support in order to reconstruct the spread and circulation of the Sienese book market in the first thirty years of the 16th century is the library of Fernardo Colombo (Colombina), thanks to the habit of his owner to note on every single book the place, date and price of purchase.

Intensity-Based Optical Systems for Fluid Level Detection

In this work different patented optical sensing solutions are reviewed, mostly for their application of measuring fluid level within tanks, containers or bio-mass boilers in condominiums, thus providing an intrinsically safe sensing scenario within harsh and hazardous environments, due to the passive nature of light. In general, the intensity modulation of the light is very attractive since it is simple in concept, reliable, and can produce optical sensors which offer a wide range of applications at lower costs, thus facilitating their final commercialization and market spread. The optical sensing solutions discussed in this work include a fiber-optic sensor for fluid detection/level with intrinsic self-referencing property thus solving one of the main drawbacks when using intensity-based sensors, namely the undesirable and unexpected optical power fluctuations when operating. Moreover, a low-cost intensity-based POF sensor for fuel level measurements in paramotoring and powered paragliding is presented. It features a very simple and a very low-cost solution for these sports, attending the increasing demand of new and more sophisticated embedded sensors in the flight instrumental. Going on from this, a fiber-optic fluid level sensor for a range greater than 2m is described. The system uses a single lens and a single fiber but being possible to increase the measuring safety area by optical multiplexing. Finally, a fluid level sensor based on a Light Dependent Resistor (LDR), which includes a temperature control scheme, is presented. Its final embodiment design is also shown and described. Keywords: Fiber-optic sensor, fluid level, intensity-based optical sensor, polymer optical fiber (POF), self-referencing technique, Liquid Detection, POF Fiber-optic Sensor, Paragliding

Determinants of Primary Market Spreads on U.K. Residential Mortgage-Backed Securities and the Implications for Investor Reliance on Credit Ratings

The authors investigate the pricing of U.K. residential mortgage-backed securities primary issues in the years prior to the credit crisis. They find that investors did not rely excessively on credit ratings but that the investors’ interpretations of their proprietary research were sometimes amiss.

Inferring Default Probabilities from Credit Spreads

Default probabilities (PDs) for risky obligors are derived from market spreads and spread volatilities. The method assumes that 1) credit spreads, on average, are linear functions of spread volatility and that 2) investors require the same spread compensation per unit of spread volatility regardless of its source. Credit spreads are decomposed into two parts: compensation for default and compensation for spread volatility. An analysis of the credit risk premium is described as a precursor to estimating default probabilities from market data. Finally, market-implied PDs are used to assess risk and relative value of global sovereign issuers of external debt.

What drives the cost of US dollar bond funding for banks?

This paper decomposes issue spreads on US dollar-denominated bonds issued by LIBOR panel banks into credit risk and liquidity premium components. We attribute the recent increase in issue spreads to the investor perception that banks are less creditworthy than in the past. Although the behaviour of the credit risk component is well-explained by a structural model of default, this mechanism is nullified by the introduction of government guarantees. The behaviour of the liquidity premium component is partially explained by the bid/ask spread in the secondary market and issue size. Government guarantees also reduce the liquidity component of the issue spread.

Credit default swaps: implied ratings versus official ones

Recently, in line with the progressive development of the credit derivatives market, the academic research has begun to explore the relationship between Credit Default Swap market and rating events. In this paper, following a market based approach, we calibrate an Implied Rating model on Credit Default Swap market spreads. The non parametric mapping of Implied Ratings is calibrated on a large data set of Credit Default Swap quotes that includes the years of financial turmoils. This allows also to investigate the existence of possible differences between normal and abnormal market conditions. Unlike other models, the one proposed considers a linear penalty function which allows to evaluate market quotes in a neutral way and to formalize a more computationally efficient programming model. We compare the behaviors of credit rating agencies in different markets (EU and USA) and in different sub-periods, in order to analyze whether Implied Rating changes anticipate or follow the effective rating changes supplied by Fitch Ratings, Moody’s and Standard and Poor’s.

Antimicrobial Resistance of <i>Salmonella</i> Serovars Isolated from Beef at Retail Markets in the North Vietnam

Approximately 39.9% (63/158) of beef samples collected from retail markets in Hanoi from January to June 2009 were Salmonella-positive. Nine Salmonella serovars, Anatum (28.6%), Rissen (25.4%), Weltevreden (12.7%), Typhimurium (7.9%), Derby (7.9%), Lexington (7.9%), Dublin (4.6%), Newport (3.2%) and London (1.8%), were identified. Thirty-seven (58.7%) of the 63 Salmonella isolates were resistant to at least one antimicrobial tested, of which 29 (46%) isolates showed multidrug resistance (MDR). The isolates were commonly resistant to tetracycline (46.0%), sulphonamide (39.7%), ampicilline (31.7%), streptomycin (30.2%), trimethoprim (28.6%), kanamycin (28.6%) and chloramphenicol (22.2%). Fourteen (bla(TEMV), bla(OXA-1), aadA1, aadA2, sul1, tetA, tetB, tetG, cmlA1, floR, dfrA1, dfrA12, aac (3)-IV and aphA1-1AB) out of 22 antimicrobial resistance genes were detected by PCR from the resistant isolates. The catA1, Kn, blaPSE-1 genes and plasmid-mediated quinolones resistance (PMQR) genes such as qnrA, qnrB, qnrS, qepA and acc (6')-ib-cr were not detected. Mutations in the gyrA gene leading to the amino acid changes Ser83Phe and/or Asp87Asn were found in 6 out of the 11 quinolone-resistant isolates. The data revealed that multidrug resistant Salmonella strains were widely distributed in north Vietnam via the food chain and might contain multiple genes specifying identical resistant phenotypes. Thus, continuous studies are necessary to clarify the mechanisms of MDR in Salmonella and its spread in the livestock market.

Complexity of a Duopoly Game in the Electricity Market with Delayed Bounded Rationality

According to a triopoly game model in the electricity market with bounded rational players, a new Cournot duopoly game model with delayed bounded rationality is established. The model is closer to the reality of the electricity market and worth spreading in oligopoly. By using the theory of bifurcations of dynamical systems, local stable region of Nash equilibrium point is obtained. Its complex dynamics is demonstrated by means of the largest Lyapunov exponent, bifurcation diagrams, phase portraits, and fractal dimensions. Since the output adjustment speed parameters are varied, the stability of Nash equilibrium gives rise to complex dynamics such as cycles of higher order and chaos. Furthermore, by using the straight‐line stabilization method, the chaos can be eliminated. This paper has an important theoretical and practical significance to the electricity market under the background of developing new energy.

Rethinking Capital Structure Arbitrage

It is well known that the capital structure arbitrage strategy generated negative Sharpe ratios over the period 2005-2009. In this paper we introduce three new alternative strategies that, while still based on the discrepancy between the CDS market spread and its equity-implied spread, exploit the information provided by the time-varying price discovery of the equity and CDS markets. We implement the strategies for both US and European obligors and find that these outperform traditional arbitrage trading during the financial crisis. R-squared measures from a regression of strategies’ excess returns on market risk factors reveal that the new strategies’ returns have lower correlation with market returns than the standard capital structure arbitrage.

Euro Money Market Spreads During the 2007-? Financial Crisis

Euro Money Market Spreads During the 2007-? Financial Crisis

Determinants of Primary Market Spreads on U.K. Residential Mortgage-Backed Securities and the Implications for Investor Reliance on Credit Ratings

We provide empirical evidence about the credit factors that affect the pricing of newly issued residential mortgage-backed securities (RMBS) in the U.K. Our findings add an important element to the current debate by regulators throughout the world regarding whether investors rely exclusively on credit ratings in making investment decisions. Our results show that credit factors such as subordination level and collateral type that are taken into account by credit rating agencies when assigning a rating still have a significant impact on the new issuance spread even after accounting for the credit rating. The implication is that investors do not rely exclusively on ratings. <b>TOPICS:</b>MBS and residential mortgage loans, information providers/credit ratings, developed markets [UK], analysis of individual factors/risk premia

Spatial Spillovers in Emerging Market Spreads

We use novel spatial econometrics techniques to explore spillovers in the sovereign bond market for 24 emerging economies during 1995-2010. The paper extends the previous literature focusing on spillover effects from advanced to emerging economies by analyzing transmission of shocks across emerging markets. After controlling for the impact of global factors, we find strong evidence of spillovers from both sovereign spreads and macroeconomic fundamentals in neighboring emerging economies. In addition to the geographical proximity, the channels of spatial transmission include trade and financial linkages. The results of the paper highlight the importance of accounting not only for spillovers from advanced economies to emerging markets, but also across emerging markets when analyzing sovereign spreads.

African Freedom Suits and Portuguese Vassal Status: Legal Mechanisms for Fighting Enslavement in Benguela, Angola, 1800–1830

This article focuses on the vulnerability of free blacks in Benguela, in West Central Africa, during the first decades of the nineteenth century at the height of slave exports. After the British abolition of the transatlantic slave trade in 1807, slavers moved south of the Equator leading to the pressure for more captives and the expansion of violence around Benguela. Focusing on the case of a free black woman, Dona Leonor de Carvalho Fonseca, this study discusses how she was captured, enslaved, transported to the coast, and sold. However she did not remain in captivity for a long time, since she was able to claim the principle of ‘original freedom.’ A legal mechanism created by the vassalage treaty, the principal of original freedom differentiated the local population between vassals and non vassal, Christians and non-Christians. The case of Dona Leonor illustrates how a free black could be subject to arbitrary capture, but also could claim original freedom and hence be protected from enslavement. Like her, others were able to bring freedom cases to the attention of Portuguese authorities and dispute their enslavement. These cases allow us to explore how, where, and why people were captured. It also shows the importance of vassalage treaties in defining who could or not be enslaved. By the early nineteenth century, Portuguese legislation regulated legal and illegal enslavement opening the space for captives to challenge their status. The freedom suits stress the vulnerability of the population living around the Portuguese settlements, and show how the pressures of the international slave market spread instability, even among those who were supposed to be protected by colonial law.

Liquidity Comovement in the Foreign Exchange Market

Studying major currencies versus the U.S. Dollar, this paper makes two contributions. First, we document strong comovement in both intraday and daily currency spreads. We also show that currency spreads co-move with aggregate U.S. equity market spreads. Thus, comovement in liquidity is even more pervasive than previously documented. Second, we explore the sources of this comovement. In the presence of controls for inventory and funding effects, we find that the comovement in liquidity remains strong. This result suggests that correlated adverse selection effects across currencies and across currencies and stocks are an important driver of liquidity comovement, and is consistent with a recent literature on aggregate private information. The important contribution of our analysis is to shed light on the origins of correlated FX liquidity. In practical terms, our results suggest that, due to the comovement in currency and equity market liquidity, international diversification strategies based on major markets will not reduce the liquidity risk that arises in domestic portfolios.

Why is US Dollar Bond Funding for International Banks More Expensive?

This paper decomposes issue spreads on USD-denominated bonds issued during the period between mid-2005 and mid-2010 into credit risk and liquidity premium components. Regression analysis shows that the behaviour of the credit risk component is well-explained by a structural model of default, consistent with prior research. However the sensitivity of the credit risk component to the structural model variables is nullified by the introduction of government guarantees. We also find that the liquidity premium component can be partially explained by the bid/ask spread in the secondary market, consistent with the liquidity premium impounding future illiquidity, and with the issue size, consistent with the price pressure hypothesis. Government guarantees reduce the liquidity component of the issue spread, consistent with the notion that government guarantees enhance the marketability of bonds during times of financial stress. We attribute the increase in long-term funding costs experienced by international banks raising funds in the US bond market to the investor perception that banks are less creditworthy than in the past.

Derivatives pricing and liquidity dominance in alternative trading venues

This study examines the quality of derivatives pricing in the market in which liquidity is dominated by an alternative market. We use US interest rate futures from the side-by-side open outcry and electronic markets, in which electronic markets dominate liquidity. We find that the bid-ask spreads in illiquid open outcry markets have increased substantially since electronic markets became a major part of the market liquidity. Accordingly, the implicit trading costs in open outcry markets have significantly increased. We also show that the volatility of bid-ask spreads in illiquid open outcry markets has increased, which is consistent with a decrease in the depth of the market. In addition, we find that the fast rate of price discovery in electronic markets instabilizes the bid-ask spread in open outcry market. Our results are particularly important for practitioners in that the performance of their portfolio and risk managements critically depends on which market dominates liquidity.

A Study on Korean Male Cosmetics Analysed Through The Newspaper Articles From 2000 To 2010

This stuck aims to prove the changes, development and social background of Korean male cosmetics over the period of 2000-2010. There were total 574 articles written about male make-up and cosmetics in Chosun Daily, Joongang Daily and Donga Daily, which are the top three Korean local daily newspapers in terms of sales revenue for that period. These articles were analyzed together with social background research from various books and daily newspapers. The analysis of articles was divided into different categories; such at foundation cosmetics, color cosmetics, hair, and the social background. It was found that the articles related to foundation cosmetics were written the most, the articles related to male appearance management were second, articles on other items including how to manage the skin being the least. As for the social background of Korean male cosmetics, first of all, a change in social recognition can be pointed out. The traditional understanding of gender roles has changed. men`s appeorunce management has started to be regarded as a competitive talent, and at the same time, the esthetic vie wpoint for men also has changed One example is the newly made popular term, flower-hand-some man, which shows the new trend of favoring males with nice skin. Second, the expansion of mass culture can be painted out. As consumers can get information and fashion trends easier and faster, the fashion spreads fast, and this has led to the generalization and popularization of the sense of beauty. Third, the development of scientific technology and medical science can be pointed out. Thanks to the progress in those areas, the extension of youthfulness has become possible and the cosmetics industry was also affected greatly, as shown in the market spread of functional products for anti-ageing and wrinkle control as the interest in anti-ageing has grown. There are benefits from the development of scientific technology, but the problem of environmental pollution has appeared due to machinery and industrialization and thus the issue of well-being has been raised Rising interest in naturalism, pro-environmentalism and organic cosmetics has influenced the cosmetics industry. In addition, the quantity of ultraviolet rays exposed to our skin has increased due to the air pollution caused by the destruction of environment, leading to increased usage of sun block lotion. Lastly, the influence of consumer society and the expansion of consumerism culture can be pointed out. In the modern society, consumption acts not only as the use of products and services but it also has an important role of mediating individuals with others and the society. The market for male cosmetics has been expanding and the number of men putting on make-up has been increasing rapidly. Therefore, this study is meaningful in that the analysis of the mode of change and the social background are an essential process in order to provide a direction for the future market for male cosmetics.

RECOVERING PORTFOLIO DEFAULT INTENSITIES IMPLIED BY CDO QUOTES

We propose a stable nonparametric algorithm for the calibration of “top‐down” pricing models for portfolio credit derivatives: given a set of observations of market spreads for collateralized debt obligation (CDO) tranches, we construct a risk‐neutral default intensity process for the portfolio underlying the CDO which matches these observations, by looking for the risk‐neutral loss process “closest” to a prior loss process, verifying the calibration constraints. We formalize the problem in terms of minimization of relative entropy with respect to the prior under calibration constraints and use convex duality methods to solve the problem: the dual problem is shown to be an intensity control problem, characterized in terms of a Hamilton–Jacobi system of differential equations, for which we present an analytical solution. Given a set of observed CDO tranche spreads, our method allows to construct a default intensity process which leads to tranche spreads consistent with the observations. We illustrate our method on ITRAXX index data: our results reveal strong evidence for the dependence of loss transitions rates on the previous number of defaults, and offer quantitative evidence for contagion effects in the (risk‐neutral) loss process.