Pricing Defaultable Bonds in a Markov Modulated Market

We address the problem of pricing defaultable bonds in a Markov modulated market. Using Merton's structural approach we show that various types of defaultable bonds are combination of European type contingent claims. Thus pricing a defaultable bond is tantamount to pricing a contingent claim in a Markov modulated market. Since the market is incomplete, we use the method of quadratic hedging and minimal martingale measure to derive locally risk minimizing derivative prices, hedging strategies and the corresponding residual risks. The price of defaultable bonds are obtained as solutions to a system of PDEs with weak coupling subject to appropriate terminal and boundary conditions. We solve the system of PDEs numerically and carry out a numerical investigation for the defaultable bond prices. We compare their credit spreads with some of the existing models. We observe higher spreads in the Markov modulated market. We show how business cycles can be easily incorporated in the proposed framework. We demonstrate the impact on spreads of the inclusion of rare states that attempt to capture a tight liquidity situation. These states are characterized by low risk-free interest rate, high payout rate and high volatility.

Origin of grand minima in Sunspot cycles

One of the most striking aspects of the 11-year sunspot cycle is that there have been times in the past when some cycles went missing, a most well-known example of this being the Maunder minimum during 1645-1715. Analyses of cosmogenic isotopes (C-14 and Be-10) indicated that there were about 27 grand minima in the last 11 000 yrs, implying that about 2.7% of the solar cycles had conditions appropriate for forcing the Sun into grand minima. We address the question of how grand minima are produced and specifically calculate the frequency of occurrence of grand minima from a theoretical dynamo model. We assume that fluctuations in the poloidal field generation mechanism and in the meridional circulation produce irregularities of sunspot cycles. Taking these fluctuations to be Gaussian and estimating the values of important parameters from the data of the last 28 solar cycles, we show from our flux transport dynamo model that about 1-4% of the sunspot cycles may have conditions suitable for inducing grand minima.

Fluctuations in the alpha-effect and grand solar minima

The parameters of a special type of alpha-effect known in dynamo theory as the Babcock-Leighton mechanism are estimated using the data of sunspot catalogs. The estimates support the presence of the Babcock-Leighton alpha-effect on the Sun. Fluctuations of the alpha-effect are also estimated. The fluctuation amplitude appreciably exceeds themean value, and the characteristic time for the fluctuations is comparable to the period of the solar rotation. Fluctuations with the parameters found are included in a numericalmodel for the solar dynamo. Computations show irregular changes in the amplitudes of the magnetic cycles on time scales of centuries and millennia. The calculated statistical characteristics of the grand solar minima and maxima agree with the data on solar activity over the Holocene.

Studies of grand minima in sunspot cycles by using a flux transport solar dynamo model

We propose that grand minima in solar activity are caused by simultaneous fluctuations in the meridional circulation and the Babcock-Leighton mechanism for the poloidal field generation in the flux transport dynamo model. We present the following results: (a) fluctuations in the meridional circulation are more effective in producing grand minima; (b) both sudden and gradual initiations of grand minima are possible; (c) distributions of durations and waiting times between grand minima seem to be exponential; (d) the coherence time of the meridional circulation has an effect on the number and the average duration of grand minima, with a coherence time of about 30 yr being consistent with observational data. We also study the occurrence of grand maxima and find that the distributions of durations and waiting times between grand maxima are also exponential, like the grand minima. Finally we address the question of whether the Babcock-Leighton mechanism can be operative during grand minima when there are no sunspots. We show that an alpha-effect restricted to the upper portions of the convection zone can pull the dynamo out of the grand minima and can match various observational requirements if the amplitude of this alpha-effect is suitably fine-tuned.

Correlation Between Decay Rate and Amplitude of Solar Cycles as Revealed from Observations and Dynamo Theory

Using different proxies of solar activity, we have studied the following features of the solar cycle: i) The linear correlation between the amplitude of cycle and its decay rate, ii) the linear correlation between the amplitude of cycle and the decay rate of cycle , and iii) the anti-correlation between the amplitude of cycle and the period of cycle . Features ii) and iii) are very useful because they provide precursors for future cycles. We have reproduced these features using a flux-transport dynamo model with stochastic fluctuations in the Babcock-Leighton effect and in the meridional circulation. Only when we introduce fluctuations in meridional circulation, are we able to reproduce different observed features of the solar cycle. We discuss the possible reasons for these correlations.

Fluctuations in protein synthesis from a single RNA template: Stochastic kinetics of ribosomes

Proteins are polymerized by cyclic machines called ribosomes, which use their messenger RNA (mRNA) track also as the corresponding template, and the process is called translation. We explore, in depth and detail, the stochastic nature of the translation. We compute various distributions associated with the translation process; one of them-namely, the dwell time distribution-has been measured in recent single-ribosome experiments. The form of the distribution, which fits best with our simulation data, is consistent with that extracted from the experimental data. For our computations, we use a model that captures both the mechanochemistry of each individual ribosome and their steric interactions. We also demonstrate the effects of the sequence inhomogeneities of real genes on the fluctuations and noise in translation. Finally, inspired by recent advances in the experimental techniques of manipulating single ribosomes, we make theoretical predictions on the force-velocity relation for individual ribosomes. In principle, all our predictions can be tested by carrying out in vitro experiments.

Studies on friction and formation of transfer layer when Al-4Mg alloy pins slid at various numbers of cycles on steel plates of different surface texture

In the present investigation, various kinds of textures, namely, unidirectional, 8-ground, and random were attained on the die surfaces. Roughness of the textures was varied using different grits of emery papers or polishing powders. Then pins made of Al-4Mg alloys were slid against steel plates at various numbers of cycles, namely 1, 2, 6, 10 and 20 under both dry and lubricated conditions using an inclined pin-on-plate sliding tester. The morphologies of the worn surfaces of the pins and the formation of transfer layer on the counter surfaces were observed using a scanning electron microscope. Surface roughness parameters of the plate were measured using an optical profilometer. It was observed that the coefficient of friction and formation of transfer layer during the first few cycles depend on the die surface textures under both dry and lubricated conditions. It was also observed that under lubricated condition, the coefficient of friction decreases with number of cycles for all kinds of textures. However, under dry condition, it ecreases for unidirectional and 8-ground surfaces while for random surfaces it increases with number of cycles

Continuation of limit cycles near saddle homoclinic points using splines in phase space

We present a new algorithm for continuation of limit cycles of autonomous systems as a system parameter is varied. The algorithm works in phase space with an ordered set of points on the limit cycle, along with spline interpolation. Currently popular algorithms in bifurcation analysis packages compute time-domain approximations of limit cycles using either shooting or collocation. The present approach seems useful for continuation near saddle homoclinic points, where it encounters a corner while time-domain methods essentially encounter a discontinuity (a relatively short period of rapid variation). Other phase space-based algorithms use rescaled arclength in place of time, but subsequently resemble the time-domain methods. Compared to these, we introduce additional freedom through a variable stretching of arclength based on local curvature, through the use of an auxiliary index-based variable. Several numerical examples are presented. Comparisons with results from the popular package, MATCONT, are favorable close to saddle homoclinic points.

Constant conductance fluctuations in disordered metals

We discuss the effect of fluctuations of the random potential in directions transverse to the current flow in a modified Migdal-Kadanoff approach to probabilistic scaling of conductance with size L, in d-dimensional metallic systems. The conductance cumulants are finite and vary as Ld−1−n for n greater-or-equal, slanted 2 i.e. conductance fluctuations are constant for d = 3. The mean conductance has a non-classical correction with Image Full-size image (<1K) for d greater-or-equal, slanted 2. The form of the higher cumulants is strongly influenced by the transverse potential fluctuations and may be compared with the results of perturbative diagrammatic approaches.

Wall Shear Fluctuations in a Turbulent Boundary Layer

IN the last two decades, the instantaneous structure of a turbulent boundary layer has been examined by many in an effort to understand the dynamics of the flow. Distinct and well-defined flow patterns that seem to have great relevance to the turbulence production mechanism have been observed in the wall region.1'2 The flow near the wall is intermittent with periodic eruptions of the fluid, a phenomenon generally termed "bursting process." Earlier investigations in this field were limited to liquid flows at low speeds and the entire flowpattern was observed using flow visualization techniques.Study was later extended to boundary-layer flows in windtunnels at higher speeds and Reynolds numbers using hot-wiresignals for the analysis of the bursting phenomenon.

Coalescence of rigid droplets in a stirred dispersion-II. Band-limited force fluctuations

The coalescence of nearly rigid liquid droplets in a turbulent flow field is viewed as the drainage of a thin film of liquid under the action of a stochastic force representing the effect of turbulence. The force squeezing the drop pair is modelled as a correlated random function of time. The drops are assumed to coalesce once the film thickness becomes smaller than a critical thickness while they are regarded as separated if their distance of separation is larger than a prescribed distance. A semi-analytical solution is derived to determine the coalescence efficiency. The veracity of the solution procedure is established via a Monte-Carlo solution scheme. The model predicts a reversing trend of the dependence of the coalescence efficiency on the drop radii, the film liquid viscosity and the turbulence energy dissipation per unit mass, as the relative fluctuation increases. However, the dependence on physical parameters is weak (especially at high relative fluctuation) so that for the smallest droplets (which are nearly rigid) the coalescence efficiency may be treated as an empirical constant. The predictions of this model are compared with those of a white-noise force model. The results of this paper and those in Muralidhar and Ramkrishna (1986, Ind. Engng Chem. Fundam. 25, 554-56) suggest that dynamic drop deformation is the key factor that influences the coalescence efficiency.

Information theory and resistance fluctuations in one-dimensional disordered conductors

A novel method is proposed to treat the problem of the random resistance of a strictly one-dimensional conductor with static disorder. For the probability distribution of the transfer matrix R of the conductor we propose a distribution of maximum information entropy, constrained by the following physical requirements: (1) flux conservation, (2) time-reversal invariance, and (3) scaling with the length of the conductor of the two lowest cumulants of ω, where R=exp(iω→⋅Jbhat). The preliminary results discussed in the text are in qualitative agreement with those obtained by sophisticated microscopic theories.

Large Low-Frequency Fluctuations in the Velocity of a Driven Vortex Lattice in a Single Crystal of 2H-NbSe2 Superconductor

The driven state of a well-ordered flux line lattice in a single crystal of 2H-NbSe2 in the time domain has revealed the presence of substantial fluctuations in velocity, with large and distinct time periods (similar to seconds). A superposition of a periodic drive in the driven vortex lattice causes distinct changes in these fluctuations. We propose that prior to the onset of the peak effect there exists a heretofore unexplored regime of coherent dynamics, with unexpected behavior in velocity fluctuations.

EPR Evidence for Premonitory Charge-Ordering Fluctuations in Hydrothermally Grown Pr0.57Ca0.41Ba0.02MnO3 Nanowires

Electron paramagnetic resonance (EPR) and magnetic properties of nanowires of Pr0.57Ca0.41Ba0.02MnO3 (PCBMO) are studied and compared with those of the bulk material. PCBMO nanowires with diameter of 80-90 nm and length of similar to 3.5 mu m were synthesized by a low reaction temperature hydrothermal method and the bulk sample was prepared following a solid-state reaction route. The samples were characterized by X-ray diffraction, scanning electron microscopy and transmission electron microscopy. The bulk PCBMO manganite exhibits charge order at 230 K along with a ferromagnetic transition at 110 K. However, superconducting quantum interference device measurements on the PCBMO nanowires show a complete `melting' of charge ordering and a ferromagnetic transition at 115 K. This result is confirmed by the EPR intensity behavior as well. However, the EPR line width, which is reflective of the spin dynamics, shows a shallow minimum for nanowires at the temperature corresponding to the charge-ordering transition, i.e., 230 K. We interpret this result as an indication of the presence of charge-ordering fluctuations in the nanowires even though the static charge order is absent, thus heralding the occurrence of charge order in the bulk sample.

Cost Sharing Mechanisms for Business Clusters with Strategic Firms

A business cluster is a co-located group of micro, small, medium scale enterprises. Such firms can benefit significantly from their co-location through shared infrastructure and shared services. Cost sharing becomes an important issue in such sharing arrangements especially when the firms exhibit strategic behavior. There are many cost sharing methods and mechanisms proposed in the literature based on game theoretic foundations. These mechanisms satisfy a variety of efficiency and fairness properties such as allocative efficiency, budget balance, individual rationality, consumer sovereignty, strategyproofness, and group strategyproofness. In this paper, we motivate the problem of cost sharing in a business cluster with strategic firms and illustrate different cost sharing mechanisms through the example of a cluster of firms sharing a logistics service. Next we look into the problem of a business cluster sharing ICT (information and communication technologies) infrastructure and explore the use of cost sharing mechanisms.