On the robustness of short-term interest rate models

This paper investigates the robustness of a range of short–term interest rate models. We examine the robustness of these models over different data sets, time periods, sampling frequencies, and estimation techniques. We examine a range of popular one–factor models that allow the conditional mean (drift) and conditional variance (diffusion) to be functions of the current short rate. We find that parameter estimates are highly sensitive to all of these factors in the eight countries that we examine. Since parameter estimates are not robust, these models should be used with caution in practice.

On the estimation and comparison of short-rate models using the generalised method of moments

Subsequent to the influential paper of [Chan, K.C., Karolyi, G.A., Longstaff, F.A., Sanders, A.B., 1992. An empirical comparison of alternative models of the short-term interest rate. Journal of Finance 47, 1209-1227], the generalised method of moments (GMM) has been a popular technique for estimation and inference relating to continuous-time models of the short-term interest rate. GMM has been widely employed to estimate model parameters and to assess the goodness-of-fit of competing short-rate specifications. The current paper conducts a series of simulation experiments to document the bias and precision of GMM estimates of short-rate parameters, as well as the size and power of [Hansen, L.P., 1982. Large sample properties of generalised method of moments estimators. Econometrica 50, 1029-1054], J-test of over-identifying restrictions. While the J-test appears to have appropriate size and good power in sample sizes commonly encountered in the short-rate literature, GMM estimates of the speed of mean reversion are shown to be severely biased. Consequently, it is dangerous to draw strong conclusions about the strength of mean reversion using GMM. In contrast, the parameter capturing the levels effect, which is important in differentiating between competing short-rate specifications, is estimated with little bias. (c) 2006 Elsevier B.V. All rights reserved.

Are there non-linearities in short-term interest rates?

The present paper investigates the characteristics of short-term interest rates in several countries. We examine the importance of nonlinearities in the mean reversion and volatility of short-term interest rates. We examine various models that allow the conditional mean (drift) and conditional variance (diffusion) to be functions of the current short rate.We find that different markets require different models. In particular, we find evidence of nonlinear mean reversion in some of the countries that we examine, linear mean reversion in others and no mean reversion in some countries. For all countries we examine, there is strong evidence of the need for the volatility of interest rate changes to be highly sensitive to the level of the short-term interest rate. Out-of-sample forecasting performance of one-factor short rate models is poor, stemming from the inability of the models to accommodate jumps and discontinuities in the time series data.

A Comparison of Bayesian and Sampling Theory Inferences in a Probit Model

HE PROBIT MODEL IS A POPULAR DEVICE for explaining binary choice decisions in econometrics. It has been used to describe choices such as labor force participation, travel mode, home ownership, and type of education. These and many more examples can be found in papers by Amemiya (1981) and Maddala (1983). Given the contribution of economics towards explaining such choices, and given the nature of data that are collected, prior information on the relationship between a choice probability and several explanatory variables frequently exists. Bayesian inference is a convenient vehicle for including such prior information. Given the increasing popularity of Bayesian inference it is useful to ask whether inferences from a probit model are sensitive to a choice between Bayesian and sampling theory techniques. Of interest is the sensitivity of inference on coefficients, probabilities, and elasticities. We consider these issues in a model designed to explain choice between fixed and variable interest rate mortgages. Two Bayesian priors are employed: a uniform prior on the coefficients, designed to be noninformative for the coefficients, and an inequality restricted prior on the signs of the coefficients. We often know, a priori, whether increasing the value of a particular explanatory variable will have a positive or negative effect on a choice probability. This knowledge can be captured by using a prior probability density function (pdf) that is truncated to be positive or negative. Thus, three sets of results are compared:those from maximum likelihood (ML) estimation, those from Bayesian estimation with an unrestricted uniform prior on the coefficients, and those from Bayesian estimation with a uniform prior truncated to accommodate inequality restrictions on the coefficients.

Lingual kinematic strategies used to increase speech rate: Comparisons between younger and older adults

The primary objective of this study was to assess the lingual kinematic strategies used by younger and older adults to increase rate of speech. It was hypothesised that the strategies used by the older adults would differ from the young adults either as a direct result of, or in response to a need to compensate for, age-related changes in the tongue. Electromagnetic articulography was used to examine the tongue movements of eight young (M526.7 years) and eight older (M567.1 years) females during repetitions of /ta/ and /ka/ at a controlled moderate rate and then as fast as possible. The younger and older adults were found to significantly reduce consonant durations and increase syllable repetition rate by similar proportions. To achieve these reduced durations both groups appeared to use the same strategy, that of reducing the distances travelled by the tongue. Further comparisons at each rate, however, suggested a speed-accuracy trade-off and increased speech monitoring in the older adults. The results may assist in differentiating articulatory changes associated with normal aging from pathological changes found in disorders that affect the older population.

Blood pressure and heart rate during tonic immobility in the black tipped reef shark, Carcharhinus melanoptera

Tonic immobility was induced in black tipped reef sharks (Carcharhinus melanoptera) and heart rate and ventral aortic blood pressure recorded. Without branchial irrigation, tonic immobility was correlated with a significant depression in blood pressure and heart rate irrespective of the sharks being in air or in water. Tonic immobility with branchial irrigation resulted in a significant increase in blood pressure in sharks in air, but not in water. Heart rate was unchanged when the gills were irrigated. Intra-arterial injections of atropine abolished the bradycardia and blood pressure rise associated with tonic immobility. We conclude that, during tonic immobility, sharks are able to receive afferent information from the ventilatory system and make appropriate responses via the vagus nerve.

Non-Equilibrium Reaction Rates in the Macroscopic Chemistry Method for DSMC Calculations

The Direct Simulation Monte Carlo (DSMC) method is used to simulate the flow of rarefied gases. In the Macroscopic Chemistry Method (MCM) for DSMC, chemical reaction rates calculated from local macroscopic flow properties are enforced in each cell. Unlike the standard total collision energy (TCE) chemistry model for DSMC, the new method is not restricted to an Arrhenius form of the reaction rate coefficient, nor is it restricted to a collision cross-section which yields a simple power-law viscosity. For reaction rates of interest in aerospace applications, chemically reacting collisions are generally infrequent events and, as such, local equilibrium conditions are established before a significant number of chemical reactions occur. Hence, the reaction rates which have been used in MCM have been calculated from the reaction rate data which are expected to be correct only for conditions of thermal equilibrium. Here we consider artificially high reaction rates so that the fraction of reacting collisions is not small and propose a simple method of estimating the rates of chemical reactions which can be used in the Macroscopic Chemistry Method in both equilibrium and non-equilibrium conditions. Two tests are presented: (1) The dissociation rates under conditions of thermal non-equilibrium are determined from a zero-dimensional Monte-Carlo sampling procedure which simulates ‘intra-modal’ non-equilibrium; that is, equilibrium distributions in each of the translational, rotational and vibrational modes but with different temperatures for each mode; (2) The 2-D hypersonic flow of molecular oxygen over a vertical plate at Mach 30 is calculated. In both cases the new method produces results in close agreement with those given by the standard TCE model in the same highly nonequilibrium conditions. We conclude that the general method of estimating the non-equilibrium reaction rate is a simple means by which information contained within non-equilibrium distribution functions predicted by the DSMC method can be included in the Macroscopic Chemistry Method.

Relationships between blood pressure and heart rate in the saltwater crocodile Crocodylus porosus

The cardiac limb of the baroreflex loop was studied in the saltwater crocodile Crocodylus porosus, The classical pharmacological methodology using phenylephrine and sodium nitroprusside was used to trigger blood pressure changes, and the resulting alterations in heart rate were analysed quantitatively using a logistic function. Interindividual differences in resting heart rates and blood pressures were observed, but all seven animals displayed clear baroreflex responses. Atropine and sotalol greatly attenuated the response. A maximal baroreflex gain of 7.2 beats min(-1) kPa(-1) was found at a mean aortic pressure of 6.1 kPa, indicating the active role of the baroreflex in a wide pressure range encompassing hypotensive and hypertensive states. At the lowest mean aortic pressures (5.0 kPa), the synergistic role of the pulmonary-to-systemic shunt in buffering the blood pressure drop also contributes to blood pressure regulation, Pulse pressure showed a better correlation,vith heart rate and also a higher gain than mean aortic, systolic or diastolic pressures, and this is taken as an indicator of the existence of a differential control element working simultaneously with a linear proportional element.

Heart rate, blood lactate and kinematic data of elite colts (under-19) rugby union players during competition

Physiological and kinematic data were collected from elite under-19 rugby union players to provide a greater understanding of the physical demands of rugby union. Heart rate, blood lactate and time-motion analysis data were collected from 24 players (mean +/- s((x) over bar): body mass 88.7 +/- 9.9 kg, height 185 +/- 7 cm, age 18.4 +/- 0.5 years) during six competitive premiership fixtures. Six players were chosen at random from each of four groups: props and locks, back row forwards, inside backs, outside backs. Heart rate records were classified based on percent time spent in four zones (>95%, 85-95%, 75-84%, <75% HRmax). Blood lactate concentration was measured periodically throughout each match, with movements being classified as standing, walking, jogging, cruising, sprinting, utility, rucking/mauling and scrummaging. The heart rate data indicated that props and locks (58.4%) and back row forwards (56.2%) spent significantly more time in high exertion (85-95% HRmax) than inside backs (40.5%) and outside backs (33.9%) (P < 0.001). Inside backs (36.5%) and outside backs (38.5%) spent significantly more time in moderate exertion (75-84% HRmax) than props and locks (22.6%) and back row forwards (19.8%) (P < 0.05). Outside backs (20.1%) spent significantly more time in low exertion (< 75% HRmax) than props and locks (5.8%) and back row forwards (5.6%) (P < 0.05). Mean blood lactate concentration did not differ significantly between groups (range: 4.67 mmol.l(-1) for outside backs to 7.22 mmol.l(-1) for back row forwards; P < 0.05). The motion analysis data indicated that outside backs (5750 m) covered a significantly greater total distance than either props and locks or back row forwards (4400 and 4080 m, respectively; P < 0.05). Inside backs and outside backs covered significantly greater distances walking (1740 and 1780 m, respectively; P < 0.001), in utility movements (417 and 475 m, respectively; P < 0.001) and sprinting (208 and 340 m, respectively; P < 0.001) than either props and locks or back row forwards (walking: 1000 and 991 m; utility movements: 106 and 154 m; sprinting: 72 and 94 m, respectively). Outside backs covered a significantly greater distance sprinting than inside backs (208 and 340 m, respectively; P < 0.001). Forwards maintained a higher level of exertion than backs, due to more constant motion and a large involvement in static high-intensity activities. A mean blood lactate concentration of 4.8-7.2 mmol.l(-1) indicated a need for 'lactate tolerance' training to improve hydrogen ion buffering and facilitate removal following high-intensity efforts. Furthermore, the large distances (4.2-5.6 km) covered during, and intermittent nature of, match-play indicated a need for sound aerobic conditioning in all groups (particularly backs) to minimize fatigue and facilitate recovery between high-intensity efforts.

Factors affecting biosynthesis by Xanthomonas albilineans of albicidin antibiotics and phytotoxins

Albicidins are important factors in systemic pathogenesis by Xanthomonas albilineans, which causes the devastating leaf scald disease of sugar cane. They ale also of substantial interest as antibiotics that selectively block prokaryote DNA replication. Albicidin biosynthesis is highly sensitive to medium composition. An optimized, chemically defined medium (SMG3) yielded 30-fold more albicidin from half the accumulated biomass, relative to sucrose peptone (SP) medium. Phosphate starvation stimulated albicidin production in SMG3 and SP media. Addition of other amino acids, ammonium ions or peptones to the defined medium increased the growth rate of X albilineans XA3, but differentially inhibited albicidin biosynthesis. Knowledge of these factors indicates new approaches to understanding mechanisms of pathogenesis and resistance to sugar cane leaf scald disease, and to strain improvement for production of albicidin antibiotics.