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.

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.

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.

Performance studies on mechanical + adsorption hybrid compression refrigeration cycles with HFC 134a

This paper presents the results of an investigation on the efficacy of hybrid compression process for refrigerant HFC 134a in cooling applications. The conventional mechanical compression is supplemented by thermal compression using a string of adsorption compressors. Activated carbon is the adsorbent for the thermal compression segment. The alternatives of bottoming either mechanical or thermal compression stages are investigated. It is shown that almost 40% energy saving is realizable by carrying out a part of the compression in a thermal compressor compared to the case when the entire compression is carried out in a single-stage mechanical compressor. The hybrid compression is feasible even when low grade heat is available. Some performance indictors are defined and evaluated for various configurations.

Absorption-resorption heating cycles with the new working pairs R21-NMP and R21-DMA

The new working pairs, R21-NMP and R21-DMA, find potential application as working pairs for the single stage Resorption Heat Pump (RHP) and the Resorption Heat Transformer (RHT) cycles. A thermodynamic cycle analysis with these pairs shows that single stage RHPs have high COPs in their entire range of operation. RHTs show higher temperature boosts (up to 47 K) than the simple absorption heat transformers. Absorber temperatures of up to 400 K can be achieved in a single stage RHT system using R21 as the refrigerant. However, absorption-resorption systems have inherent limitations on the range of operating temperatures. Besides, they necessitate a higher pump work as compared to simple single stage absorption heating systems.

Thermodynamic modelling of absorption-resorption heating cycles with some new working pairs

This paper presents the results of a thermodynamic cycle analysis of single stage resorption heat pump (RHP) and resorption heat transformer (RHT) cycles with the new working pairs R22-NMP and R22-DMA. The coefficients of performance (COP) are correlated with the low grade source temperature, temperature at which useful heat is obtained and ambient temperature. The COPs are in the range 1.20–1.60 for the RHP mode and 0.25–0.45 for the RHT mode. Absorber temperatures (useful temperatures) as high as 50°C in the RHP mode and 87°C in the RHT mode have been obtained. It is observed that absorption-resorption systems are inflexible in their range of operating temperature and necessitate a higher pump work as compared with simple single-stage absorption heating systems. However, single stage RHTs show higher temperature boosts than simple absorption heat transformers.

A polynomial bound on the number of light cycles in an undirected graph

Let G be an undirected graph with a positive real weight on each edge. It is shown that the number of minimum-weight cycles of G is bounded above by a polynomial in the number of edges of G. A similar bound holds if we wish to count the number of cycles with weight at most a constant multiple of the minimum weight of a cycle of G.

Melting-freezing cycles in a relatively sheared pair of crystalline monolayers

The nonequilibrium dynamical behaviour that arises when two ordered two-dimensional monolayers of particles are sheared over each other is studied in Brownian dynamics simulations. A curious sequence of nonequilibrium states is observed as the driving rate is increased, the most striking of which is a sliding state with irregular alternation between disordered and ordered states. We comment on possible mechanisms underlying these cycles, and experiments that could observe them.

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.

Relative roles of instruction count and cycles per instruction in WCET estimation

Most of the existing WCET estimation methods directly estimate execution time, ET, in cycles. We propose to study ET as a product of two factors, ET = IC * CPI, where IC is instruction count and CPI is cycles per instruction. Considering directly the estimation of ET may lead to a highly pessimistic estimate since implicitly these methods may be using worst case IC and worst case CPI. We hypothesize that there exists a functional relationship between CPI and IC such that CPI=f(IC). This is ascertained by computing the covariance matrix and studying the scatter plots of CPI versus IC. IC and CPI values are obtained by running benchmarks with a large number of inputs using the cycle accurate architectural simulator, Simplescalar on two different architectures. It is shown that the benchmarks can be grouped into different classes based on the CPI versus IC relationship. For some benchmarks like FFT, FIR etc., both IC and CPI are almost a constant irrespective of the input. There are other benchmarks that exhibit a direct or an inverse relationship between CPI and IC. In such a case, one can predict CPI for a given IC as CPI=f(IC). We derive the theoretical worst case IC for a program, denoted as SWIC, using integer linear programming(ILP) and estimate WCET as SWIC*f(SWIC). However, if CPI decreases sharply with IC then measured maximum cycles is observed to be a better estimate. For certain other benchmarks, it is observed that the CPI versus IC relationship is either random or CPI remains constant with varying IC. In such cases, WCET is estimated as the product of SWIC and measured maximum CPI. It is observed that use of the proposed method results in tighter WCET estimates than Chronos, a static WCET analyzer, for most benchmarks for the two architectures considered in this paper.

Evaluation of isopentane, R-245fa and their mixtures as working fluids for organic Rankine cycles

Low grade thermal energy from sources such as solar, geothermal and industrial waste heat in the temperature range of 380-425 K can be converted to electrical energy with reasonable efficiency using isopentane and R-245fa. While the former is flammable and the latter has considerable global warming potential, their mixture in 0.7/0.3 mole fraction is shown to obviate these disadvantages and yet retain dominant merits of each fluid. A realistic thermodynamic analysis is carried out wherein the possible sources of irreversibilities such as isentropic efficiencies of the expander and the pump and entropy generation in the regenerator, boiler and condenser are accounted for. The performance of the system in the chosen range of heat source temperatures is evaluated. A technique of identifying the required source temperature for a given output of the plant and the maximum operating temperature of the working fluid is developed. This is based on the pinch point occurrence in the boiler and entropy generation in the boiling and superheating regions of the boiler. It is shown that cycle efficiencies of 10-13% can be obtained in the range investigated at an optimal expansion ratio of 7-10. (C) 2012 Elsevier Ltd. All rights reserved.