Testing term structure estimation methods:evidence from the UK STRIPs market

Prices and yields of UK government zero-coupon bonds are used to test alternative yield curve estimation models. Zero-coupon bonds permit a more pure comparison, as the models are providing only the interpolation service and also not making estimation feasible. It is found that better yield curves estimates are obtained by fitting to the yield curve directly rather than fitting first to the discount function. A simple procedure to set the smoothness of the fitted curves is developed, and a positive relationship between oversmoothness and the fitting error is identified. A cubic spline function fitted directly to the yield curve provides the best overall balance of fitting error and smoothness, both along the yield curve and within local maturity regions.

Forecasting the term structure when short-term rates are near zero

This paper compares the experience of forecasting the UK government bond yield curve before and after the dramatic lowering of short-term interest rates from October 2008. Out-of-sample forecasts for 1, 6 and 12 months are generated from each of a dynamic Nelson-Siegel model, autoregressive models for both yields and the principal components extracted from those yields, a slope regression and a random walk model. At short forecasting horizons, there is little difference in the performance of the models both prior to and after 2008. However, for medium- to longer-term horizons, the slope regression provided the best forecasts prior to 2008, while the recent experience of near-zero short interest rates coincides with a period of forecasting superiority for the autoregressive and dynamic Nelson-Siegel models. © 2014 John Wiley & Sons, Ltd.

A two-factor model of the U.K. yield curve

I model the forward premium in the U.K. gilt-edged market over the period 1982–96 using a two-factor general equilibrium model of the term structure of interest rates. The model permits the decomposition of the forward premium into separate components representing interest rate expectations, the risk premia associated with each of the underlying factors, and terms capturing the direct impact of the variances of the factors on the shape of the forward curve.

Late Caledonian magmagenesis in Southern Scotland

The Priestlaw and Cockburn Law intrusions are zoned granitoid plutons intruded into Lower Palaeozoic sediments at the margin of, and prior to closure of, the Iapetus Ocean. They vary from marginal basic rocks to more acid rocks towards their centres. The parental magmas to the plutons were derived from an isotopically depleted mantle modified by melts/fluids during subduction. Zonation in the plutons was caused by combined assimilation and fractional crystallisation (AFC), and rates of assimilation were low relative to rates of fractionation. A series of pyroxene-mica diorites in Priestlaw are however hybrids formed by simple mixing. Porphyrite-acid porphyrite dykes, associated with the plutons, represent chilled portions of the pluton magmas; more evolved quartz porphyry dykes represent crustal melts. Lamprophyre dykes have high LILE and LREE abundances and relative depletions of HFS elements, typical of subduction related ultra-potassic magmas. High Mg numbers, Ni and Cr contents and experimental constraints, imply near primary status for the least evolved lamprophyres. Their enrichments in incompatible elements, high La/Nb, La/Yb, Sr and low Nd indicate derivation from a previously metasomatised mantle source. Granitoid plutons and lavas in the northern Southern Uplands have high Nd and low Sr, whereas the younger plutons of the southern Southern Uplands have higher Sr, La/Yb and lower Nd, consistent with derivation from a more enriched source. No plutons however have remained as closed systems. Three magmatic suites are present in southern Scotland: (1) Midland Valley Suite (2) Northern Southern Uplands Suite and (3) Southern Southern Uplands Suite, consistent with previous models indicating northward underthrusting of English lithosphere below the southern Southern Uplands. Further underthrusting of decoupled lithospheric mantle is indicated by the presence of lamorophyres in the eastern Southern Uplands, and took place between 410 Ma and 400 Ma.

Econometrics of yield spreads in the money market:a note

The literature on bond markets and interest rates has focused largely on the term structure of interest rates, specifically, on the so-called expectations hypothesis. At the same time, little is known about the nature of the spread of the interest rates in the money market beyond the fact that such spreads are generally unstable. However, with the evolution of complex financial instruments, it has become imperative to identify the time series process that can help one accurately forecast such spreads into the future. This article explores the nature of the time series process underlying the spread between three-month and one-year US rates, and concludes that the movements in this spread over time is best captured by a GARCH(1,1) process. It also suggests the use of a relatively long term measure of interest rate volatility as an explanatory variable. This exercise has gained added importance in view of the revelation that GARCH based estimates of option prices consistently outperform the corresponding estimates based on the stylized Black-Scholes algorithm.

Concreteness effects in different tasks: implications for models of short-term memory

This study investigates concreteness effects in tasks requiring short-term retention. Concreteness effects were assessed in serial recall, matching span, order reconstruction, and free recall. Each task was carried out both in a control condition and under articulatory suppression. Our results show no dissociation between tasks that do and do not require spoken output. This argues against the redintegration hypothesis according to which lexical-semantic effects in short-term memory arise only at the point of production. In contrast, concreteness effects were modulated by task demands that stressed retention of item versus order information. Concreteness effects were stronger in free recall than in serial recall. Suppression, which weakens phonological representations, enhanced the concreteness effect with item scoring. In a matching task, positive effects of concreteness occurred with open sets but not with closed sets of words. Finally, concreteness effects reversed when the task asked only for recall of word positions (as in the matching task), when phonological representations were weak (because of suppression), and when lexical semantic representations overactivated (because of closed sets). We interpret these results as consistent with a model where phonological representations are crucial for the retention of order, while lexical-semantic representations support maintenance of item identity in both input and output buffers.

Analysing time series structure with hidden Markov models

This paper consides the problem of extracting the relationships between two time series in a non-linear non-stationary environment with Hidden Markov Models (HMMs). We describe an algorithm which is capable of identifying associations between variables. The method is applied both to synthetic data and real data. We show that HMMs are capable of modelling the oil drilling process and that they outperform existing methods.

Equilibrium properties of disordered spin models with two-scale interactions

Methods for understanding classical disordered spin systems with interactions conforming to some idealized graphical structure are well developed. The equilibrium properties of the Sherrington-Kirkpatrick model, which has a densely connected structure, have become well understood. Many features generalize to sparse Erdös- Rényi graph structures above the percolation threshold and to Bethe lattices when appropriate boundary conditions apply. In this paper, we consider spin states subject to a combination of sparse strong interactions with weak dense interactions, which we term a composite model. The equilibrium properties are examined through the replica method, with exact analysis of the high-temperature paramagnetic, spin-glass, and ferromagnetic phases by perturbative schemes. We present results of replica symmetric variational approximations, where perturbative approaches fail at lower temperature. Results demonstrate re-entrant behaviors from spin glass to ferromagnetic phases as temperature is lowered, including transitions from replica symmetry broken to replica symmetric phases. The nature of high-temperature transitions is found to be sensitive to the connectivity profile in the sparse subgraph, with regular connectivity a discontinuous transition from the paramagnetic to ferromagnetic phases is apparent.

Short-term electricity demand and gas price forecasts using wavelet transforms and adaptive models

This paper presents some forecasting techniques for energy demand and price prediction, one day ahead. These techniques combine wavelet transform (WT) with fixed and adaptive machine learning/time series models (multi-layer perceptron (MLP), radial basis functions, linear regression, or GARCH). To create an adaptive model, we use an extended Kalman filter or particle filter to update the parameters continuously on the test set. The adaptive GARCH model is a new contribution, broadening the applicability of GARCH methods. We empirically compared two approaches of combining the WT with prediction models: multicomponent forecasts and direct forecasts. These techniques are applied to large sets of real data (both stationary and non-stationary) from the UK energy markets, so as to provide comparative results that are statistically stronger than those previously reported. The results showed that the forecasting accuracy is significantly improved by using the WT and adaptive models. The best models on the electricity demand/gas price forecast are the adaptive MLP/GARCH with the multicomponent forecast; their MSEs are 0.02314 and 0.15384 respectively.

The heteromeric 5-HT3A/B receptor:the effect of 5-HT3B subunits on receptor structure and ligand recognition

The 5-HT3 receptors are members of the cys-loop family of ligand-gated ion channels. Two functional subtypes are known, the homomeric 5HT3A and the heteromeric 5HT3A/B receptors, which exhibit distinct biophysical characteristics but are difficult to differentiate pharmacologically. Atomic force microscopy has been used to determine the stoichiometry and architecture of the heteromeric 5HT3A/B receptor. Each subunit was engineered to express a unique C-terminal epitope tag, together with six sequential histidine residues to facilitate nickel affinity purification. The 5-HT3 receptors, ectopically expressed in HEK293 cells, were solubilised, purified and decorated with antibodies to the subunit specific epitope tags. Imaging of individual receptors by atomic force microscopy revealed a pentameric arrangement of subunits in the order BBABA, reading anti-clockwise when viewed from the extracellular face. Homology models for the heteromeric receptor were then constructed using both the electron microscopic structure of the nicotinic acetylcholine receptor, from Torpedo marmorata, and the X-ray crystallographic structure of the soluble acetylcholine binding protein, from Lymnaea stagnalis, as templates. These homology models were used, together with equivalent models constructed for the homomeric receptor, to interpret mutagenesis experiments designed to explore the minimal recognition differences of both the natural agonist, 5-HT, and the competitive antagonist, granisetron, for the two human receptor subtypes. The results of this work revealed that the 5-HT3B subunit residues within the ligand binding site, for both the agonist and antagonist, are accommodating to conservative mutations. They are consistent with the view that the 5-HT3A subunit provides the principal and the 5-HT38 subunit the complementary recognition interactions at the binding interface.

Verification and validation of numerical models of the transport of insulation debris

Damage to insulation materials located near to a primary circuit coolant leak may compromise the operation of the emergency core cooling system (ECCS). Insulation material in the form of mineral wool fiber agglomerates (MWFA) maybe transported to the containment sump strainers, where they may block or penetrate the strainers. Though the impact of MWFA on the pressure drop across the strainers is minimal, corrosion products formed over time may also accumulate in the fiber cakes on the strainers, which can lead to a significant increase in the strainer pressure drop and result in cavitation in the ECCS. An experimental and theoretical study performed by the Helmholtz-Zentrum Dresden-Rossendorf and the Hochschule Zittau/Görlitz is investigating the phenomena that maybe observed in the containment vessel during a primary circuit coolant leak. The study entails the generation of fiber agglomerates, the determination of their transport properties in single and multi-effect experiments and the long-term effect that corrosion and erosion of the containment internals by the coolant has on the strainer pressure drop. The focus of this paper is on the verification and validation of numerical models that can predict the transport of MWFA. A number of pseudo-continuous dispersed phases of spherical wetted agglomerates represent the MWFA. The size, density, the relative viscosity of the fluid-fiber agglomerate mixture and the turbulent dispersion all affect how the fiber agglomerates are transported. In the cases described here, the size is kept constant while the density is modified. This definition affects both the terminal velocity and volume fraction of the dispersed phases. Note that the relative viscosity is only significant at high concentrations. Three single effect experiments were used to provide validation data on the transport of the fiber agglomerates under conditions of sedimentation in quiescent fluid, sedimentation in a horizontal flow and suspension in a horizontal flow. The experiments were performed in a rectangular column for the quiescent fluid and a racetrack type channel that provided a near uniform horizontal flow. The numerical models of sedimentation in the column and the racetrack channel found that the sedimentation characteristics are consistent with the experiments. For channel suspension, the heavier fibers tend to accumulate at the channel base even at high velocities, while lighter phases are more likely to be transported around the channel.

Toward the prediction of class I and II mouse major histocompatibility complex-peptide-binding affinity:in silico bioinformatic step-by-step guide using quantitative structure-activity relationships

Quantitative structure-activity relationship (QSAR) analysis is a cornerstone of modern informatics. Predictive computational models of peptide-major histocompatibility complex (MHC)-binding affinity based on QSAR technology have now become important components of modern computational immunovaccinology. Historically, such approaches have been built around semiqualitative, classification methods, but these are now giving way to quantitative regression methods. We review three methods--a 2D-QSAR additive-partial least squares (PLS) and a 3D-QSAR comparative molecular similarity index analysis (CoMSIA) method--which can identify the sequence dependence of peptide-binding specificity for various class I MHC alleles from the reported binding affinities (IC50) of peptide sets. The third method is an iterative self-consistent (ISC) PLS-based additive method, which is a recently developed extension to the additive method for the affinity prediction of class II peptides. The QSAR methods presented here have established themselves as immunoinformatic techniques complementary to existing methodology, useful in the quantitative prediction of binding affinity: current methods for the in silico identification of T-cell epitopes (which form the basis of many vaccines, diagnostics, and reagents) rely on the accurate computational prediction of peptide-MHC affinity. We have reviewed various human and mouse class I and class II allele models. Studied alleles comprise HLA-A*0101, HLA-A*0201, HLA-A*0202, HLA-A*0203, HLA-A*0206, HLA-A*0301, HLA-A*1101, HLA-A*3101, HLA-A*6801, HLA-A*6802, HLA-B*3501, H2-K(k), H2-K(b), H2-D(b) HLA-DRB1*0101, HLA-DRB1*0401, HLA-DRB1*0701, I-A(b), I-A(d), I-A(k), I-A(S), I-E(d), and I-E(k). In this chapter we show a step-by-step guide into predicting the reliability and the resulting models to represent an advance on existing methods. The peptides used in this study are available from the AntiJen database (http://www.jenner.ac.uk/AntiJen). The PLS method is available commercially in the SYBYL molecular modeling software package. The resulting models, which can be used for accurate T-cell epitope prediction, will be made are freely available online at the URL http://www.jenner.ac.uk/MHCPred.