FX modelling under collateralization

We present the market practice for interest rate yield curves construction and pricing interest rate derivatives. Then we give a brief description of the Vasicek and the Hull-White models, with an example of calibration to market data. We generalize the classical Black-Scholes-Merton pricing formulas, considering more general cases such as perfect or partial collateral, derivatives on a dividend paying asset subject to repo funding, and multiple currencies. Finally we derive generic pricing formulae for different combinations of cash flow and collateral currencies, and we apply the results to the pricing of FX swaps and CCS, and we discuss curve bootstrapping.

Numerical investigation of turbulent/non-turbulent interface

The subject of this work is the diffusion of turbulence in a non-turbulent flow. Such phenomenon can be found in almost every practical case of turbulent flow: all types of shear flows (wakes, jet, boundary layers) present some boundary between turbulence and the non-turbulent surround; all transients from a laminar flow to turbulence must account for turbulent diffusion; mixing of flows often involve the injection of a turbulent solution in a non-turbulent fluid. The mechanism of what Phillips defined as “the erosion by turbulence of the underlying non-turbulent flow”, is called entrainment. It is usually considered to operate on two scales with different mechanics. The small scale nibbling, which is the entrainment of fluid by viscous diffusion of turbulence, and the large scale engulfment, which entraps large volume of flow to be “digested” subsequently by viscous diffusion. The exact role of each of them in the overall entrainment rate is still not well understood, as it is the interplay between these two mechanics of diffusion. It is anyway accepted that the entrainment rate scales with large properties of the flow, while is not understood how the large scale inertial behavior can affect an intrinsically viscous phenomenon as diffusion of vorticity. In the present work we will address then the problem of turbulent diffusion through pseudo-spectral DNS simulations of the interface between a volume of decaying turbulence and quiescent flow. Such simulations will give us first hand measures of velocity, vorticity and strains fields at the interface; moreover the framework of unforced decaying turbulence will permit to study both spatial and temporal evolution of such fields. The analysis will evidence that for this kind of flows the overall production of enstrophy , i.e. the square of vorticity omega^2 , is dominated near the interface by the local inertial transport of “fresh vorticity” coming from the turbulent flow. Viscous diffusion instead plays a major role in enstrophy production in the outbound of the interface, where the nibbling process is dominant. The data from our simulation seems to confirm the theory of an inertially stirred viscous phenomenon proposed by others authors before and provides new data about the inertial diffusion of turbulence across the interface.

Surface cloud radiative forcing from broadband radiation measurements on the Antarctic plateau

Surface based measurements systems play a key role in defining the ground truth for climate modeling and satellite product validation. The Italian-French station of Concordia is operative year round since 2005 at Dome C (75°S, 123°E, 3230 m) on the East Antarctic Plateau. A Baseline Surface Radiation Network (BSRN) site was deployed and became operational since January 2006 to measure downwelling components of the radiation budget, and successively was expanded in April 2007 to measure upwelling radiation. Hence, almost a decade of measurement is now available and suitable to define a statistically significant climatology for the radiation budget of Concordia including eventual trends, by specifically assessing the effects of clouds and water vapor on SW and LW net radiation. A well known and robust clear sky-id algorithm (Long and Ackerman, 2000) has been operationally applied on downwelling SW components to identify cloud free events and to fit a parametric equation to determine clear-sky reference along the Antarctic daylight periods (September to April). A new model for surface broadband albedo has been developed in order to better describe the features the area. Then, a novel clear-sky LW parametrization, based on a-priori assumption about inversion layer structure, combined with daily and annual oscillations of the surface temperature, have been adopted and validated. The longwave based method is successively exploited to extend cloud radiative forcing studies to nighttime period (winter). Results indicated inter-annual and intra-annual warming behaviour, i.e. 13.70 W/m2 on the average, specifically approaching neutral effect in summer, when SW CRF compensates LW CRF, and warming along the rest of the year due prevalentely to CRF induced on the LW component.