The impact of liquidity on senior credit index spreads during the subprime crisis

This paper examines the effects of liquidity during the 2007–09 crisis, focussing on the Senior Tranche of the CDX.NA.IG Index and on Moody's AAA Corporate Bond Index. It aims to understand whether the sharp increase in the credit spreads of these AAA-rated credit indices can be explained by worse credit fundamentals alone or whether it also reflects a lack of depth in the relevant markets, the scarcity of risk-capital, and the liquidity preference exhibited by investors. Using cointegration analysis and error correction models, the paper shows that during the crisis lower market and funding liquidity are important drivers of the increase in the credit spread of the AAA-rated structured product, whilst they are less significant in explaining credit spread changes for a portfolio of unstructured credit instruments. Looking at the experience of the subprime crisis, the study shows that when the conditions under which securitisation can work properly (liquidity, transparency and tradability) suddenly disappear, investors are left highly exposed to systemic risk.

Stability of probiotic Lactobacillus plantarum in dry microcapsules under accelerated storage conditions

This study investigated the stability of freeze dried and fluid bed dried alginate microcapsules coated with chitosan containing model probiotic bacteria, Lactobacillus plantarum, during storage for up to 45 days at different water activities (0.11, 0.23, 0.40 and 0.70) and temperatures (4, 30 and 37 °C). The loss in cell viability was around 0.8 log in the case of fluid bed drying and around 1.3 in the case of freeze drying, with the former method resulting in dried capsules of smaller size (~ 1 mm vs 1.3 mm), more irregular shape, and with a rougher surface. In both cases, the water activity and water content were less than 0.25 and 10% w/w, respectively, which favours high storage stability. The storage stability studies demonstrated that as the water activity and temperature decreased the survival of the dried encapsulated cells increased. Considerably better survival was observed for fluid bed dried encapsulated cells compared to freeze dried encapsulated cells and freeze dried free cells with 10% sucrose (control), and in some cases, e.g. at 4 and 30 °C at water activities of 0.11, 0.23 and 0.40, there was more than 1 log difference after 45 days, with concentrations higher than 108 CFU/g after 45 days of storage. The results indicate that fluid bed drying is an effective and efficient manufacturing method to produce probiotic containing capsules with enhanced storage stability.

Understanding the rapid summer warming and changes in temperature extremes since the mid-1990s over Western Europe

Analysis of observations indicates that there was a rapid increase in summer (June-August, JJA) mean surface air temperature (SAT) since the mid-1990s over Western Europe. Accompanying this rapid warming are significant increases in summer mean daily maximum temperature, daily minimum temperature, annual hottest day temperature and warmest night temperature, and an increase in frequency of summer days and tropical nights, while the change in the diurnal temperature range (DTR) is small. This study focuses on understanding causes of the rapid summer warming and associated temperature extreme changes. A set of experiments using the atmospheric component of the state-of-the-art HadGEM3 global climate model have been carried out to quantify relative roles of changes in sea surface temperature (SST)/sea ice extent (SIE), anthropogenic greenhouse gases (GHGs), and anthropogenic aerosols (AAer). Results indicate that the model forced by changes in all forcings reproduces many of the observed changes since the mid-1990s over Western Europe. Changes in SST/SIE explain 62.2% ± 13.0% of the area averaged seasonal mean warming signal over Western Europe, with the remaining 37.8% ± 13.6% of the warming explained by the direct impact of changes in GHGs and AAer. Results further indicate that the direct impact of the reduction of AAer precursor emissions over Europe, mainly through aerosol-radiation interaction with additional contributions from aerosol-cloud interaction and coupled atmosphere-land surface feedbacks, is a key factor for increases in annual hottest day temperature and in frequency of summer days. It explains 45.5% ± 17.6% and 40.9% ± 18.4% of area averaged signals for these temperature extremes. The direct impact of the reduction of AAer precursor emissions over Europe acts to increase DTR locally, but the change in DTR is countered by the direct impact of GHGs forcing. In the next few decades, greenhouse gas concentrations will continue to rise and AAer precursor emissions over Europe and North America will continue to decline. Our results suggest that the changes in summer seasonal mean SAT and temperature extremes over Western Europe since the mid-1990s are most likely to be sustained or amplified in the near term, unless other factors intervene.