Modeling Dependence Structure and Forecasting Portfolio Value-at-Risk with Dynamic Copulas

We study the asymmetric and dynamic dependence between financial assets and demonstrate, from the perspective of risk management, the economic significance of dynamic copula models. First, we construct stock and currency portfolios sorted on different characteristics (ex ante beta, coskewness, cokurtosis and order flows), and find substantial evidence of dynamic evolution between the high beta (respectively, coskewness, cokurtosis and order flow) portfolios and the low beta (coskewness, cokurtosis and order flow) portfolios. Second, using three different dependence measures, we show the presence of asymmetric dependence between these characteristic-sorted portfolios. Third, we use a dynamic copula framework based on Creal et al. (2013) and Patton (2012) to forecast the portfolio Value-at-Risk of long-short (high minus low) equity and FX portfolios. We use several widely used univariate and multivariate VaR models for the purpose of comparison. Backtesting our methodology, we find that the asymmetric dynamic copula models provide more accurate forecasts, in general, and, in particular, perform much better during the recent financial crises, indicating the economic significance of incorporating dynamic and asymmetric dependence in risk management.

Unemployment and Endogenous Reallocation over the Business Cycle

This paper studies unemployed workers’ decisions to change occupations, and their impact on fluctuations in aggregate unemployment and its underlying duration distribution. We develop an analytically and computationally tractable stochastic equilibrium model with heterogenous labor markets. In this model three different types of unemployment arise: search, rest and reallocation unemployment. We document new evidence on unemployed workers’ gross occupational mobility and use it to calibrate the model. We show that rest unemployment is the main driver of unemployment fluctuations over the business cycle and causes cyclical unemployment to be highly volatile. The resulting unemployment duration distribution generated by the model responds realistically to the business cycle, creating substantial longer-term unemployment in downturns. Finally, rest unemployment also makes our model simultaneously consistent with procyclical occupational mobility of the unemployed, countercyclical job separations into unemployment and a negatively-sloped Beveridge curve.

Directed Search over the Life Cycle

We develop a life-cycle model of the labor market in which different worker-firm matches have different quality and the assignment of the right workers to the right firms is time consuming because of search and learning frictions. The rate at which workers move between unemployment, employment and across different firms is endogenous because search is directed and, hence, workers can choose whether to seek low-wage jobs that are easy to find or high-wage jobs that are hard to find. We calibrate our theory using data on labor market transitions aggregated across workers of different ages. We validate our theory by showing that it predicts quite well the pattern of labor market transitions for workers of different ages. Finally, we use our theory to decompose the age profiles of transition rates, wages and productivity into the effects of age variation in work-life expectancy, human capital and match quality.

Computing Markov-Perfect Optimal Policies in Business-Cycle Models

Time-inconsistency is an essential feature of many policy problems (Kydland and Prescott, 1977). This paper presents and compares three methods for computing Markov-perfect optimal policies in stochastic nonlinear business cycle models. The methods considered include value function iteration, generalized Euler-equations, and parameterized shadow prices. In the context of a business cycle model in which a scal authority chooses government spending and income taxation optimally, while lacking the ability to commit, we show that the solutions obtained using value function iteration and generalized Euler equations are somewhat more accurate than that obtained using parameterized shadow prices. Among these three methods, we show that value function iteration can be applied easily, even to environments that include a risk-sensitive scal authority and/or inequality constraints on government spending. We show that the risk-sensitive scal authority lowers government spending and income-taxation, reducing the disincentive households face to accumulate wealth.

Modeling Dependence Structure and Forecasting Market Risk with Dynamic Asymmetric Copula

We investigate the dynamic and asymmetric dependence structure between equity portfolios from the US and UK. We demonstrate the statistical significance of dynamic asymmetric copula models in modelling and forecasting market risk. First, we construct “high-minus-low" equity portfolios sorted on beta, coskewness, and cokurtosis. We find substantial evidence of dynamic and asymmetric dependence between characteristic-sorted portfolios. Second, we consider a dynamic asymmetric copula model by combining the generalized hyperbolic skewed t copula with the generalized autoregressive score (GAS) model to capture both the multivariate non-normality and the dynamic and asymmetric dependence between equity portfolios. We demonstrate its usefulness by evaluating the forecasting performance of Value-at-Risk and Expected Shortfall for the high-minus-low portfolios. From back-testing, e find consistent and robust evidence that our dynamic asymmetric copula model provides the most accurate forecasts, indicating the importance of incorporating the dynamic and asymmetric dependence structure in risk management.

Quantifying rates of landscape evolution and tectonic processes by thermochronology and numerical modeling of crustal heat transport using PECUBE

PECUBE is a three-dimensional thermal-kinematic code capable of solving the heat production-diffusion-advection equation under a temporally varying surface boundary condition. It was initially developed to assess the effects of time-varying surface topography (relief) on low-temperature thermochronological datasets. Thermochronometric ages are predicted by tracking the time-temperature histories of rock-particles ending up at the surface and by combining these with various age-prediction models. In the decade since its inception, the PECUBE code has been under continuous development as its use became wider and addressed different tectonic-geomorphic problems. This paper describes several major recent improvements in the code, including its integration with an inverse-modeling package based on the Neighborhood Algorithm, the incorporation of fault-controlled kinematics, several different ways to address topographic and drainage change through time, the ability to predict subsurface (tunnel or borehole) data, prediction of detrital thermochronology data and a method to compare these with observations, and the coupling with landscape-evolution (or surface-process) models. Each new development is described together with one or several applications, so that the reader and potential user can clearly assess and make use of the capabilities of PECUBE. We end with describing some developments that are currently underway or should take place in the foreseeable future. (C) 2012 Elsevier B.V. All rights reserved.

Cell-based computational modeling of vascular morphogenesis using Tissue Simulation Toolkit.

Computational modeling has become a widely used tool for unraveling the mechanisms of higher level cooperative cell behavior during vascular morphogenesis. However, experimenting with published simulation models or adding new assumptions to those models can be daunting for novice and even for experienced computational scientists. Here, we present a step-by-step, practical tutorial for building cell-based simulations of vascular morphogenesis using the Tissue Simulation Toolkit (TST). The TST is a freely available, open-source C++ library for developing simulations with the two-dimensional cellular Potts model, a stochastic, agent-based framework to simulate collective cell behavior. We will show the basic use of the TST to simulate and experiment with published simulations of vascular network formation. Then, we will present step-by-step instructions and explanations for building a recent simulation model of tumor angiogenesis. Demonstrated mechanisms include cell-cell adhesion, chemotaxis, cell elongation, haptotaxis, and haptokinesis.

Experimental heteroxenous cycle of Lagochilascaris minor Leiper, 1909 (Nematoda: Ascarididae) in white mice and in cats

Reports of natural infections of sylvatic carnivores by adult worms of species similar to Lagochilascaris minor in the Neotropical region led to attempts to estabilish experimental cycles in laboratory mice and in cats. Also, larval development was seen in the skeletal muscle of an agouti (Dasyprocta leporina) infected per os with incubated eggs of the parasite obtained from a human case. In cats, adult worms develop and fertile eggs are expelled in the feces: in mice, larval stages of the parasite develop, and are encapsulate in the skeletal muscle, and in the adipose and subcutaneous connective tissue. From our observations, we conclude that the larva infective for the mouse is the early 3rd stage, while for the final host the infective form is the later 3rd stage. A single moult was seen in the mouse, giving rise to a small population of 4th stage larvae, long after the initial infection.

The dynamics of yeast telomeres and silencing proteins through the cell cycle.

Genes integrated near the telomeres of budding yeast have a variegated pattern of gene repression that is mediated by the silent information regulatory proteins Sir2p, Sir3p, and Sir4p. Immunolocalization and fluorescence in situ hybridization (FISH) reveal 6-10 perinuclear foci in which silencing proteins and subtelomeric sequences colocalize, suggesting that these are sites of Sir-mediated repression. Telomeres lacking subtelomeric repeat elements and the silent mating locus, HML, also localize to the periphery of the nucleus. Conditions that disrupt telomere proximal repression disrupt the focal staining pattern of Sir proteins, but not necessarily the localization of telomeric DNA. To monitor the telomere-associated pools of heterochromatin-binding proteins (Sir and Rap1 proteins) during mitotic cell division, we have performed immunofluorescence and telomeric FISH on populations of yeast cells synchronously traversing the cell cycle. We observe a partial release of Rap1p from telomeres in late G2/M, although telomeres appear to stay clustered during G2-phase and throughout mitosis. A partial release of Sir3p and Sir4p during mitosis also occurs. This is not observed upon HU arrest, although other types of DNA damage cause a dramatic relocalization of Sir and Rap1 proteins. The observed cell cycle dynamics were confirmed by direct epifluorescence of a GFP-Rap1p fusion. Using live GFP fluorescence we show that the diffuse mitotic distribution of GFP-Rap1p is restored to the interphase pattern of foci in early G1-phase.

Preliminary investigations on transmission and life cycle of the ear mites of the genus Raillietia trouessart (Acari: Gamasida) parasites of cattle

The life cycle of ear mites of the genus Raillietia Trouessart consists of egg, larva, proto-and deutonymph and adult. The proto-and deutonymph are free living, non feeding instars. The teneral adult is the transfer stage. The minimum period required for completion of the life cycle is approximately eight days.

Variation in the intensity of inbreeding depression among successive life-cycle stages and generations in gynodioecious Silene vulgaris (Caryophyllaceae).

Inbreeding depression is one of the hypotheses explaining the maintenance of females within gynodioecious plant populations. However, the measurement of fitness components in selfed and outcrossed progeny depends on life-cycle stage and the history of inbreeding. Comparative data indicate that strong inbreeding depression is more likely to occur at later life-cycle stages. We used hermaphrodite individuals of Silene vulgaris originating from three populations located in different valleys in the Swiss Alps to investigate the effect of two generations of self- and cross-fertilization on fitness components among successive stages of the life cycle in a glasshouse experiment. We detected significant inbreeding depression for most life-cycle stages including: the number of viable and aborted seeds per fruit, probability of germination, above ground biomass, probability of flowering, number of flowers per plant, flower size and pollen viability. Overall, the intensity of inbreeding depression increased among successive stages of the life cycle and cumulative inbreeding depression was significantly stronger in the first generation (delta approximately 0.5) compared with the second generation (delta approximately 0.35). We found no evidence for synergistic epistasis in our experiment. Our finding of more intense inbreeding depression during later stages of the life cycle may help to explain the maintenance of females in gynodioecious populations of S. vulgaris because purging of genetic load is less likely to occur.

Life cycle of Misumenops pallida (Araneae, Thomisidae)

Postembryonic development of Misumenops pallida (Keyserling) (Araneae, Thomisidae), one of the most abundant predator species in soybean fields in Buenos Aires Province (Argentina) was studied. The life cycle was observed in the laboratory from egg sacs collected in the field, and from egg sacs spined in the laboratory by gravid females collected in the field. Results indicated that instar length and feeding rate increased throughout the life cycle being higher in females than in males. Greater mortality was observed to third and fourth instars decreasing thereafter. These results may contribute to deternmine the efficiency of this species as a natural enemy of insect pests of soybean.

Life cycle and influence of age and feeding on the first mating of Triatoma mazzottii (Hemiptera: Reduviidae)

A cohort of 100 eggs of Triatoma mazzottii Usinger was studied to obtain information on its life cycle. Egg incubation took 24 days; mean duration of 1st, 2nd, 3rd, 4th, and 5th instar nymphs was 27, 36, 39, 46 and 64 days respectively; mean time from egg to adult was 236 days. The total duration of the nymphal stages was 212 days. The total nymph mortality in cohort was 16.3% and the embryonic egg mortality was 14.0%. The grater mortality occured in the 2nd instar. The average number of eggs/female/week was 9.8 during 15 weeks of observation. Of the total eggs laid (2,514), only 58.7% hatched. The total of insects that achieved the adult stage (72), 38 were females (52.8%), and 34 were males (47.2%). The influence of age and feeding on the first mating of T. mazzottii were also studied. It was found that the first mating depended on the male's age and it was on the average 30 days after the last imaginal molt. The female could be mating since 2nd days after the imaginal life. The nutritional status did not play an important role in the capacity of the insect for the first mating.