Pricing credit derivatives

The financial crisis set off by the default of Lehman Brothers in 2008 leading to disastrous consequences for the global economy has focused attention on regulation and pricing issues related to credit derivatives. Credit risk refers to the potential losses that can arise due to the changes in the credit quality of financial instruments. These changes could be due to changes in the ratings, market price (spread) or default on contractual obligations. Credit derivatives are financial instruments designed to mitigate the adverse impact that may arise due to credit risks. However, they also allow the investors to take up purely speculative positions. In this article we provide a succinct introduction to the notions of credit risk, the credit derivatives market and describe some of the important credit derivative products. There are two approaches to pricing credit derivatives, namely the structural and the reduced form or intensity-based models. A crucial aspect of the modelling that we touch upon briefly in this article is the problem of calibration of these models. We hope to convey through this article the challenges that are inherent in credit risk modelling, the elegant mathematics and concepts that underlie some of the models and the importance of understanding the limitations of the models.

A bottom-up approach for optimization of friction stir processing parameters; a study on aluminium 2024-T3 alloy

Friction stir processing (FSP) is emerging as one of the most competent severe plastic deformation (SPD) method for producing bulk ultra-fine grained materials with improved properties. Optimizing the process parameters for a defect free process is one of the challenging aspects of FSP to mark its commercial use. For the commercial aluminium alloy 2024-T3 plate of 6 mm thickness, a bottom-up approach has been attempted to optimize major independent parameters of the process such as plunge depth, tool rotation speed and traverse speed. Tensile properties of the optimum friction stir processed sample were correlated with the microstructural characterization done using Scanning Electron Microscope (SEM) and Electron Back-Scattered Diffraction (EBSD). Optimum parameters from the bottom-up approach have led to a defect free FSP having a maximum strength of 93% the base material strength. Micro tensile testing of the samples taken from the center of processed zone has shown an increased strength of 1.3 times the base material. Measured maximum longitudinal residual stress on the processed surface was only 30 MPa which was attributed to the solid state nature of FSP. Microstructural observation reveals significant grain refinement with less variation in the grain size across the thickness and a large amount of grain boundary precipitation compared to the base metal. The proposed experimental bottom-up approach can be applied as an effective method for optimizing parameters during FSP of aluminium alloys, which is otherwise difficult through analytical methods due to the complex interactions between work-piece, tool and process parameters. Precipitation mechanisms during FSP were responsible for the fine grained microstructure in the nugget zone that provided better mechanical properties than the base metal. (C) 2014 Elsevier Ltd. All rights reserved.

Speeding up AdaBoost Classifier with Random Projection

The development of techniques for scaling up classifiers so that they can be applied to problems with large datasets of training examples is one of the objectives of data mining. Recently, AdaBoost has become popular among machine learning community thanks to its promising results across a variety of applications. However, training AdaBoost on large datasets is a major problem, especially when the dimensionality of the data is very high. This paper discusses the effect of high dimensionality on the training process of AdaBoost. Two preprocessing options to reduce dimensionality, namely the principal component analysis and random projection are briefly examined. Random projection subject to a probabilistic length preserving transformation is explored further as a computationally light preprocessing step. The experimental results obtained demonstrate the effectiveness of the proposed training process for handling high dimensional large datasets.

Risk Minimizing Option Pricing in a Semi-Markov Modulated Market

We address risk minimizing option pricing in a semi-Markov modulated market where the floating interest rate depends on a finite state semi-Markov process. The growth rate and the volatility of the stock also depend on the semi-Markov process. Using the Föllmer–Schweizer decomposition we find the locally risk minimizing price for European options and the corresponding hedging strategy. We develop suitable numerical methods for computing option prices.

NMR study of the oil build-up in sunflower seeds

THE use of NMR to investigate the quality of the oil as a function of maturity of the seeds is demonstrated for sunflower seeds. The percentages of the saturated and individual unsaturated aids are determined as a function of time after flowering of the seeds. The percentage of saturated fatty acids is found to decrease with maturity of seeds whereas the extent of the unsaturated acids increases.

Synchronous decade up/down counter

Sequential up/down counting is required many a time. In this paper, the logical design of such a counter of the parallel carry type is furnished.

Late Quaternary vegetational and climatic changes from tropical peats in southern India - An extended record up to 40,000 years BP

Stable carbon isotope ratios of peats dated (by C-14) back to 40 kyr BP from the montane region (> 1800 m asl) of the Nilgiris, southern India, reflect changes in the relative proportions of C3 and C4 plant types, which are influenced by soil moisture (and hence monsoonal precipitation), From prior to 40 kyr BP until 28 kyr BP, a general decline in delta(13)C values from about - 14 per mil to - 19 per mil suggests increased dominance of C3 plants concurrent with increasingly moist conditions, During 28-18 kyr BP there seems relatively little change with delta(13) C of - 19 to - 18 per mil, At about 16 kyr BP a sharp reversal in delta(13)C to a peak of - 14.7 per mil indicates a clear predominance of C4 vegetation associated with arid conditions, possibly during or just after the Last Glacial Maximum, A moist phase at about 9 kyr BP (the Holocene Optimum) with dominance of C3 vegetation type is observed, while arid conditions are re-established during 5-2 kyr BP with an overall dominance of C4 vegetation, New data do not support the occurrence of a moist phase coinciding with the Mediaeval Warm Period (at 0.6 kyr BP) as suggested earlier, Overall, the climate and vegetation in the high altitude regions of the southern Indian tropics seem to have responded to past global climatic changes, and this is consistent with other evidences from India and other tropical regions.

High pressure clamp for electrical measurements up to 8 GPa and temperature down to 77 K

A compact clamp-type high pressure cell for carrying out electrical conductivity measurements on small solid samples of size 1 mm or less at pressures upto 8 GPa (i.e., 80 kbar) and for use down to 77 K has been designed and fabricated. The pressure generated in the sample region has been calibrated at room temperature against the polymorphic phase transitions of Bismuth and Ytterbium. The pressure relaxation of the clamp at low temperatures has been estimated by monitoring the electrical conductivity behavior of lead. Review of Scientific Instruments is copyrighted by The American Institute of Physics.

Asymptotic analysis of option pricing in a Markov modulated market

We address asymptotic analysis of option pricing in a regime switching market where the risk free interest rate, growth rate and the volatility of the stocks depend on a finite state Markov chain. We study two variations of the chain namely, when the chain is moving very fast compared to the underlying asset price and when it is moving very slow. Using quadratic hedging and asymptotic expansion, we derive corrections on the locally risk minimizing option price.

Elastic modulus of Ti-6Al-4V-xB alloys with B up to 0.55 wt.%

An anomalous variation in the experimental elastic modulus, E, of Ti-6Al-4V-xB (with x up to 0.55 wt.%) is reported. Volume fractions and moduli of the constituent phases were measured using microscopy and nanoindentation,respectively. These were used in simple micromechanical models to examine if the E values could be rationalized. Experimental E values higher than the upper bound estimates suggest complex interplay between microstructural modifications, induced by the addition of B, and properties.

The Role of UPF0157 in the Folding of M-tuberculosis Dephosphocoenzyme A Kinase and the Regulation of the Latter by CTP

Background: Targeting the biosynthetic pathway of Coenzyme A (CoA) for drug development will compromise multiple cellular functions of the tubercular pathogen simultaneously. Structural divergence in the organization of the penultimate and final enzymes of CoA biosynthesis in the host and pathogen and the differences in their regulation mark out the final enzyme, dephosphocoenzyme A kinase (CoaE) as a potential drug target. Methodology/Principal Findings: We report here a complete biochemical and biophysical characterization of the M. tuberculosis CoaE, an enzyme essential for the pathogen's survival, elucidating for the first time the interactions of a dephosphocoenzyme A kinase with its substrates, dephosphocoenzyme A and ATP; its product, CoA and an intrinsic yet novel inhibitor, CTP, which helps modulate the enzyme's kinetic capabilities providing interesting insights into the regulation of CoaE activity. We show that the mycobacterial enzyme is almost 21 times more catalytically proficient than its counterparts in other prokaryotes. ITC measurements illustrate that the enzyme follows an ordered mechanism of substrate addition with DCoA as the leading substrate and ATP following in tow. Kinetic and ITC experiments demonstrate that though CTP binds strongly to the enzyme, it is unable to participate in DCoA phosphorylation. We report that CTP actually inhibits the enzyme by decreasing its Vmax. Not surprisingly, a structural homology search for the modeled mycobacterial CoaE picks up cytidylmonophosphate kinases, deoxycytidine kinases, and cytidylate kinases as close homologs. Docking of DCoA and CTP to CoaE shows that both ligands bind at the same site, their interactions being stabilized by 26 and 28 hydrogen bonds respectively. We have also assigned a role for the universal Unknown Protein Family 0157 (UPF0157) domain in the mycobacterial CoaE in the proper folding of the full length enzyme. Conclusions/Significance: In view of the evidence presented, it is imperative to assign a greater role to the last enzyme of Coenzyme A biosynthesis in metabolite flow regulation through this critical biosynthetic pathway.

An optimal weighted-average congestion based pricing scheme for enhanced QoS

Pricing is an effective tool to control congestion and achieve quality of service (QoS) provisioning for multiple differentiated levels of service. In this paper, we consider the problem of pricing for congestion control in the case of a network of nodes under a single service class and multiple queues, and present a multi-layered pricing scheme. We propose an algorithm for finding the optimal state dependent price levels for individual queues, at each node. The pricing policy used depends on a weighted average queue length at each node. This helps in reducing frequent price variations and is in the spirit of the random early detection (RED) mechanism used in TCP/IP networks. We observe in our numerical results a considerable improvement in performance using our scheme over that of a recently proposed related scheme in terms of both throughput and delay performance. In particular, our approach exhibits a throughput improvement in the range of 34 to 69 percent in all cases studied (over all routes) over the above scheme.

Structure of polyamidoamide dendrimers up to limiting generations: A mesoscale description

The polyamidoamide (PAMAM) class of dendrimers was one of the first dendrimers synthesized by Tomalia and co-workers at Dow. Since its discovery the PAMAMs have stimulated many discussions on the structure and dynamics of such hyperbranched polymers. Many questions remain open because the huge conformation disorder combined with very similar local symmetries have made it difficult to characterize experimentally at the atomistic level the structure and dynamics of PAMAM dendrimers. The higher generation dendrimers have also been difficult to characterize computationally because of the large size (294852 atoms for generation 11) and the huge number of conformations. To help provide a practical means of atomistic computational studies, we have developed an atomistically informed coarse-grained description for the PAMAM dendrimer. We find that a two-bead per monomer representation retains the accuracy of atomistic simulations for predicting size and conformational complexity, while reducing the degrees of freedom by tenfold. This mesoscale description has allowed us to study the structural properties of PAMAM dendrimer up to generation 11 for time scale of up to several nanoseconds. The gross properties such as the radius of gyration compare very well with those from full atomistic simulation and with available small angle x-ray experiment and small angle neutron scattering data. The radial monomer density shows very similar behavior with those obtained from the fully atomistic simulation. Our approach to deriving the coarse-grain model is general and straightforward to apply to other classes of dendrimers.

Link route pricing for enhanced QoS

Pricing is an effective tool to control congestion and achieve quality of service (QoS) provisioning for multiple differentiated levels of service. In this paper, we consider the problem of pricing for congestion control in the case of a network of nodes under multiple service classes. Our work draws upon [1] and [2] in various ways. We use the Tirupati pricing scheme in conjunction with the stochastic approximation based adaptive pricing methodology for queue control (proposed in [1]) for minimizing network congestion. However, unlike the methodology of [1] where pricing for entire routes is directly considered, we consider prices for individual link-service grade tuples. Further, we adapt the methodology proposed in [21 for a single-node scenario to the case of a network of nodes, for evaluating performance in terms of price, revenue rate and disutility. We obtain considerable performance improvements using our approach over that in [1]. In particular, our approach exhibits a throughput improvement in the range of 54 to 80 percent in all cases studied (over all routes) while exhibiting a lower packet delay in the range of 26 to 38 percent over the scheme in [1].

Scale-up criteria of square tank surface aerator

Oxygen transfer rate and the corresponding power requirement to operate the rotor are vital for design and scale-up of surface aerators. Present study develops simulation or scale-up criterion correlating the oxygen transsimulation fer coefficient and power number along with a parameter governing theoretical power per unit volume (X, which is defined as equal to (FR1/3)-R-4/3, where F and R are impellers' Fronde and Reynolds number, respectively). Based on such scale-up criteria, design considerations are developed to save energy requirements while designing square tank surface aerators. It has been demonstrated that energy can be saved substantially if the aeration tanks are run at relatively higher input powers. It is also demonstrated that smaller sized tanks are more energy conservative and economical when compared to big sized tanks, while aerating the same volume of water, and at the same time by maintaining a constant input power in all the tanks irrespective of their size. An example illustrating how energy can be reduced while designing different sized aerators is given. The results presented have a wide application in biotechnology and bioengineering areas with a particular emphasis on the design of appropriate surface aeration systems.