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.

A shape-based decomposition of the yield adjustment term in the arbitrage-free Nelson and Siegel (AFNS) model of the yield curve

The appealing feature of the arbitrage-free Nelson-Siegel model of the yield curve is the ability to capture movements in the yield curve through readily interpretable shifts in its level, slope or curvature, all within a dynamic arbitrage-free framework. To ensure that the level, slope and curvature factors evolve so as not to admit arbitrage, the model introduces a yield-adjustment term. This paper shows how the yield-adjustment term can also be decomposed into the familiar level, slope and curvature elements plus some additional readily interpretable shape adjustments. This means that, even in an arbitrage-free setting, it continues to be possible to interpret movements in the yield curve in terms of level, slope and curvature influences. © 2014 © 2014 Taylor & Francis.

Secondary market pricing behaviour around UK bond auctions

Using an event study approach, this article reports evidence that the UK Treasury bond market displayed anomalous pricing behaviour in the secondary market both immediately before and after auctions of seasoned bonds. Using a benchmark return derived from the behaviour of the underlying yield curve, the market offered statistically and economically significant excess returns, around the auctions held between 1992 and 2004. A cross-sectional analysis of the cumulative excess returns shows that the excess demand at the auctions is a key determinant of this excess return.

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.

Estimating time-varying risk premia in UK long-term government bonds

Simple models of time-varying risk premia are used to measure the risk premia in long-term UK government bonds. The parameters of the models can be estimated using nonlinear seemingly unrelated regression (NL-SUR), which permits efficient use of information across the entire yield curve and facilitates the testing of various cross-sectional restrictions. The estimated time-varying premia are found to be substantially different to those estimated using models that assume constant risk premia. © 2004 Taylor and Francis Ltd.

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.

Increasing cell biomass in Saccharomyces cerevisiae increases recombinant protein yield:the use of a respiratory strain as a microbial cell factory

BACKGROUND: Recombinant protein production is universally employed as a solution to obtain the milligram to gram quantities of a given protein required for applications as diverse as structural genomics and biopharmaceutical manufacture. Yeast is a well-established recombinant host cell for these purposes. In this study we wanted to investigate whether our respiratory Saccharomyces cerevisiae strain, TM6*, could be used to enhance the productivity of recombinant proteins over that obtained from corresponding wild type, respiro-fermentative strains when cultured under the same laboratory conditions. RESULTS: Here we demonstrate at least a doubling in productivity over wild-type strains for three recombinant membrane proteins and one recombinant soluble protein produced in TM6* cells. In all cases, this was attributed to the improved biomass properties of the strain. The yield profile across the growth curve was also more stable than in a wild-type strain, and was not further improved by lowering culture temperatures. This has the added benefit that improved yields can be attained rapidly at the yeast's optimal growth conditions. Importantly, improved productivity could not be reproduced in wild-type strains by culturing them under glucose fed-batch conditions: despite having achieved very similar biomass yields to those achieved by TM6* cultures, the total volumetric yields were not concomitantly increased. Furthermore, the productivity of TM6* was unaffected by growing cultures in the presence of ethanol. These findings support the unique properties of TM6* as a microbial cell factory. CONCLUSIONS: The accumulation of biomass in yeast cell factories is not necessarily correlated with a proportional increase in the functional yield of the recombinant protein being produced. The respiratory S. cerevisiae strain reported here is therefore a useful addition to the matrix of production hosts currently available as its improved biomass properties do lead to increased volumetric yields without the need to resort to complex control or cultivation schemes. This is anticipated to be of particular value in the production of challenging targets such as membrane proteins.

Acoustic emission and yield in sand

An experimental investigation into the Acoustic Emission (AE) response of sand has been undertaken, and the use of AE as a method of yield point identification has been assessed. Dense, saturated samples of sand were tested in conventional triaxial apparatus. The measurements of stresses and strains were carried out according to current research practice. The AE monitoring system was integrated with the soil mechanics equipment in such a way that sample disturbance was minimised. During monotonically loaded, constant cell pressure tests the total number of events recorded was found to increase at an increasing rate in a manner which may be approximated by a power law. The AE response of the sand was found to be both stress level and stress path dependent. Undrained constant cell pressure tests showed that, unlike drained tests, the AE event rate increased at an increasing rate; this was shown to correlate with the mean effective stress variation. The stress path dependence was most noticeable in extension tests, where the number of events recorded was an order of magnitude less than that recorded in comparable compression tests. This stress path dependence was shown to be due to the differences in the work done by the external stresses. In constant cell pressure tests containing unload/reload cycles it was found that yield could be identified from a discontinuity in the event rate/time curve which occurred during reloading. Further tests involving complex stress paths showed that AE was a useful method of yield point identification. Some tests involving large stress reversals were carried out, and AE identified the inverse yield points more distinctly than conventional methods of yield point identification.

Stock repurchases and treasury share sales:do they stabilize price and enhance liquidity?

Can companies reduce the volatility and increase the liquidity of their stocks by trading them? In the context of the Italian stock market, where companies have far more leeway to sell as well as buy their own stocks than in the U.S., the answer is yes. We examine the effects of trading (open-market share repurchases and treasury shares sales) on liquidity (bid–ask spread) and volatility (return variance). Further, we examine the impact of shareholder approvals of repurchase programs on liquidity and volatility. We find clear evidence that trading increases liquidity and reduces volatility. These results are consistent with our analysis of the motives Italian companies give for making share repurchases.