FPGA Acceleration of Monte Carlo-based Financial Simulation: Design Challenges and Lessons Learnt

The simulation of interest rate derivatives is a powerful tool to face the current market fluctuations. However, the complexity of the financial models and the way they are processed require exorbitant computation times, what is in clear conflict with the need of a processing time as short as possible to operate in the financial market. To shorten the computation time of financial derivatives the use of hardware accelerators becomes a must.

Integration of congestion pricing and intertemporal preference rate in social welfare function

Assessing social benefits in transport policy implementation has been studied by many researchers using theoretical or empirical measures. However, few of them measure social benefit using different discount rates including the inter-temporal preferences rate of users, the private investment discount rate and the inter-temporal preferences rate of the government. In general, the social discount rate used is the same for all social actors. Therefore, this paper aims to assess a new method by integrating different types of discount rate belonging to different social actors in order to measure the real benefits of each actor in the short, medium and long term. A dynamic simulation is provided by a strategic Land-Use and Transport Interaction (LUTI) model. The method is tested by optimizing a cordon toll scheme in Madrid considering socio- economic efficiency and environmental criteria. Based on the modified social welfare function (WF), the effects on the measure of social benefits are estimated and compared with the classical WF results as well. The results of this research could be a key issue to understanding the relationship between transport system policies and social actors' benefits distribution in a metropolitan context. The results show that the use of more suitable discount rates for each social actor had an effect on the selection and definition of optimal strategy of congestion pricing. The usefulness of the measure of congestion toll declines more quickly overtime.

Integration of congestion pricing and intertemporal preferences rate integration in social welfare function

Many researchers have used theoretical or empirical measures to assess social benefits in transport policy implementation. However, few have measured social benefits by using discount rates, including the intertemporal preference rate of users, the private investment discount rate, and the intertemporal preference rate of the government. In general, the social discount rate used is the same for all social actors. This paper aims to assess a new method by integrating different types of discount rates belonging to different social actors to measure the real benefits of each actor in the short term, medium term, and long term. A dynamic simulation is provided by a strategic land use and transport interaction model. The method was tested by optimizing a cordon toll scheme in Madrid, Spain. Socioeconomic efficiency and environmental criteria were considered. On the basis of the modified social welfare function, the effects on the measure of social benefits were estimated and compared with the classical welfare function measures. The results show that the use of more suitable discount rates for each social actor had an effect on the selection and definition of optimal strategy of congestion pricing. The usefulness of the measure of congestion toll declines more quickly over time. This result could be the key to understanding the relationship between transport system policies and the distribution of social actors? benefits in a metropolitan context.

Novel poly(3-hydroxybutyrate) nanocomposites containing WS2 inorganic nanotubes with improved thermal, mechanical and tribological properties

Poly(3-hydroxybutyrate) (PHB) nanocomposites containing environmentally-friendly tungsten disulphide inorganic nanotubes (INTeWS2) have been successfully prepared by a simple solution blending method. The dynamic and isothermal crystallization studies by differential scanning calorimetry (DSC) demonstrated that the INTeWS2 exhibits much more prominent nucleation activity on the crystallization of PHB than specific nucleating agents or other nanoscale fillers. Both crystallization rate and crystallinity significantly increase in the nanocomposites compared to neat PHB. These changes occur without modifying the crystalline structure of PHB in the nanocomposites, as shown by wide-angle X-ray diffraction (WAXS) and infrared/Raman spectroscopy. Other parameters such as the Avrami exponent, the equilibrium melting temperature, global rate constant and the fold surface free energy of PHB chains in the nanocomposites were obtained from the calorimetric data in order to determine the influence of the INTeWS2 filler. The addition of INTeWS2 remarkably influences the energetics and kinetics of nucleation and growth of PHB, reducing the fold surface free energy by up to 20%. Furthermore, these nanocomposites also show an improvement in both tribological and mechanical (hardness and modulus) properties with respect to pure PHB evidenced by friction and nanoindentation tests, which is of important potential interest for industrial and medical applications.

Bio-based polymer nanocomposites based on nylon 11 and WS2 inorganic nanotubes

Tungsten disulphide nanotubes (INT-WS2) have been successfully dispersed in a bio-based polyamide matrix (nylon 11) by conventional melt processing. The effect of INT-WS2 content on the morphology, thermal stability, crystallization behaviour and dynamic mechanical properties is investigated. The results indicate that these inorganic nanotubes can be efficiently incorporated into the bio-based polymer matrix without the need for modifiers or surfactants. Additionally, it is found that the non-isothermal crystallization behaviour of nylon 11/INT-WS2 depends on both the cooling rate and INT-WS2 concentration. In particular, crystallization kinetics results demonstrate that the nucleating activity of INTs plays a dominant role in accelerating the crystallization of nylon 11. This fact leads to the appearance of the more-disordered phase at higher temperature. More significantly, it was shown that these INT-WS2 nanocomposites can facilitate a good processability and cost efficiency, and will be of interest for many eco-friendly and medical applications.

Mahogany (mg) stimulates feeding and increases basal metabolic rate independent of its suppression of agouti

The mahogany (mg) locus originally was identified as a recessive suppressor of agouti, a locus encoding a skin peptide that modifies coat color by antagonizing the melanocyte-stimulating hormone receptor or MC1-R. Certain dominant alleles of agouti cause an obesity syndrome when ectopic expression of the peptide aberrantly antagonizes the MC4-R, a related melanocyte-stimulating hormone receptor expressed in hypothalamic circuitry and involved in the regulation of feeding behavior and metabolism. Recent work has demonstrated that mg, when homozygous, blocks not only the ability of agouti to induce a yellow coat color when expressed in the skin of the lethal yellow mouse (AY), but also the obesity resulting from ectopic expression of agouti in the brain. Detailed analysis of mg/mg AY/a animals, presented here, demonstrates that mg/mg blocks the obesity, hyperinsulinemia, and increased linear growth induced by ectopic expression of the agouti peptide. Remarkably, however, mg/mg did not reduce hyperphagia in the AY/a mouse. Furthermore, mg/mg induced hyperphagia and an increase in basal metabolic rate in the C57BL/6J mouse in the absence of AY. Consequently, although mahogany is broadly required for agouti peptide action, it also appears to be involved in the control of metabolic rate and feeding behavior independent of its suppression of agouti.

Mutators and sex in bacteria: Conflict between adaptive strategies

Bacterial mutation rates can increase and produce genetic novelty, as shown by in vitro and in silico experiments. Despite the cost due to a heavy deleterious mutation load, mutator alleles, which increase the mutation rate, can spread in asexual populations during adaptation because they remain associated with the rare favorable mutations they generate. This indirect selection for a genetic system generating diversity (second-order selection) is expected to be highly sensitive to changes in the dynamics of adaptation. Here we show by a simulation approach that even rare genetic exchanges, such as bacterial conjugation or transformation, can dramatically reduce the selection of mutators. Moreover, drift or competition between the processes of mutation and recombination in the course of adaptation reveal how second-order selection is unable to optimize the rate of generation of novelty.

Choques de oferta e política monetária na economia brasileira: Uma análise do impacto dos preços das commodities na inflação entre 2002 e 2014

Há mais de uma década o controle dos níveis de preço na economia brasileira é realizado dentro do escopo do Regime de Metas de Inflação, que utiliza modelos macroeconômicos como instrumentos para guiar as tomadas de decisões sobre política monetária. Após um período de relativo êxito (2006 - 2009), nos últimos anos apesar dos esforços das autoridades monetárias na aplicação das políticas de contenção da inflação, seguindo os mandamentos do regime de metas, esta tem se mostrado resistente, provocando um debate em torno de fatores que podem estar ocasionando tal comportamento. Na literatura internacional, alguns trabalhos têm creditado aos choques de oferta, especialmente aos desencadeados pela variação dos preços das commodities, uma participação significativa na inflação, principalmente em economias onde os produtos primários figuram como maioria na pauta exportadora. Na literatura nacional, já existem alguns trabalhos que apontam nesta mesma direção. Sendo assim, buscou-se, como objetivo principal para o presente estudo, avaliar como os choques de oferta, mais especificamente os choques originados pelos preços das commodities, têm impactado na inflação brasileira e como e com que eficiência a política monetária do país tem reagido. Para tanto, foi estimado um modelo semiestrutural contendo uma curva de Phillips, uma curva IS e duas versões da Função de Reação do Banco Central, de modo a verificar como as decisões de política monetária são tomadas. O método de estimação empregado foi o de Autorregressão Vetorial com Correção de Erro (VEC) na sua versão estrutural, que permite uma avaliação dinâmica das relações de interdependência entre as variáveis do modelo proposto. Por meio da estimação da curva de Phillips foi possível observar que os choques de oferta, tanto das commodities como da produtividade do trabalho e do câmbio, não impactam a inflação imediatamente, porém sua relevância é crescente ao longo do tempo chegando a prevalecer sobre o efeito autorregressivo (indexação) verificado. Estes choques também se apresentaram importantes para o comportamento da expectativa de inflação, produzindo assim, uma indicação de que seus impactos tendem a se espalhar pelos demais setores da economia. Através dos resultados da curva IS constatou-se a forte inter-relação entre o hiato do produto e a taxa de juros, o que indica que a política monetária, por meio da fixação de tal taxa, influencia fortemente a demanda agregada. Já por meio da estimação da primeira função de reação, foi possível perceber que há uma relação contemporânea relevante entre o desvio da expectativa de inflação em relação à meta e a taxa Selic, ao passo que a relação contemporânea do hiato do produto sobre a taxa Selic se mostrou pequena. Por fim, os resultados obtidos com a segunda função de reação, confirmaram que as autoridades monetárias reagem mais fortemente aos sinais inflacionários da economia do que às movimentações que acontecem na atividade econômica e mostraram que uma elevação nos preços das commodities, em si, não provoca diretamente um aumento na taxa básica de juros da economia.

The distribution of debt across euro area countries : The role of individual characteristics, institutions and credit conditions. National Bank of Belgium Working Paper No. 252, December 2013

The aim of this paper is twofold. First, we present an up-to-date assessment of the differences across euro area countries in the distributions of various measures of debt conditional on household characteristics. We consider three different outcomes: the probability of holding debt, the amount of debt held and, in the case of secured debt, the interest rate paid on the main mortgage. Second, we examine the role of legal and economic institutions in accounting for these differences. We use data from the first wave of a new survey of household finances, the Household Finance and Consumption Survey, to achieve these aims. We find that the patterns of secured and unsecured debt outcomes vary markedly across countries. Among all the institutions considered, the length of asset repossession periods best accounts for the features of the distribution of secured debt. In countries with longer repossession periods, the fraction of people who borrow is smaller, the youngest group of households borrow lower amounts (conditional on borrowing), and the mortgage interest rates paid by low-income households are higher. Regulatory loan-to-value ratios, the taxation of mortgages and the prevalence of interest-only or fixed-rate mortgages deliver less robust results.

So far apart and yet so close: Should the ECB care about inflation differentials? Bruegel Policy Contribution, Issue 2014/10 September 2014

Inflation rates can differ across regions of monetary unions. We show that in the euro area, the US, Canada, Japan and Australia, inflation rates have been substantially and persistently different in different regions. Differences were particularly substantial in the euro area. Inflation differences can reflect normal adjustment processes such as price convergence or the Balassa-Samuelson effect, or can reflect the different cyclical position of regions. But they can also be the result of economic distortions resulting from segmented markets or unsustainable demand and credit developments fueled by low real interest rates. In normal times, the European Central Bank cannot influence such developments with its single interest rate instrument. However, unconventional policy measures can have different effects on different countries depending on the chosen instrument, and should be used to reduce fragmentation and ensure the proper transmission of monetary policy. The new macro prudential policy tools are unlikely to be practical in addressing inflation divergences. It is crucial to keep the average inflation rate close to two percent so that inflation differentials are possible without deflation in some parts of the euro area, which in turn might endanger area-wide financial stability and price stability.

The Determinants of Country Risk in Eastern European Countries. Evidence from Sovereign Bond Spreads. Bruges European Economic Research (BEER) Papers 8/November 2006

The paper studies country risk in two Central and Eastern European countries - Bulgaria and Poland. The long run relationship between the yield differential (spread) of Eastern European national bonds (denominated in US dollars) over a US Treasury bond on one the hand and the country’s fundamentals as well as an US interest rate on the other hand, is examined. The cointegrated VAR model is used. First, the yield differentials are analyzed on a country by country basis to extract stochastic trends which are common for all bonds in a given country. Thereafter, the risk is disentangled into country and higher level risk. This paper is among the first ones which use time series data to study the evidence from sovereign bond spreads in Eastern Europe.

The Relevance of International Spillovers and Asymmetric Effects in the Taylor Rule. CEPS Working Document No. 403, February 2015

Deviations of policy interest rates from the levels implied by the Taylor rule have been persistent before the financial crisis and increased especially after the turn of the century. Compared to the Taylor benchmark, policy rates were often too low. This paper provides evidence that both international spillovers, for instance international dependencies in the interest rate-setting of central banks, and nonlinear reaction patterns can offer a more realistic specification of the Taylor rule in the main industrial countries. The inclusion of international spillovers and, even more, nonlinear dynamics improves the explanatory power of standard Taylor reaction functions. Deviations from Taylor rates tend to be smaller and their negative trend can be eliminated.

Comparing fiscal multipliers across models and countries in Europe. National Bank of Belgium Working Paper No. 278, March 2015

This paper employs fifteen dynamic macroeconomic models maintained within the European System of Central Banks to assess the size of fiscal multipliers in European countries. Using a set of common simulations, we consider transitory and permanent shocks to government expenditures and different taxes. We investigate how the baseline multipliers change when monetary policy is transitorily constrained by the zero nominal interest rate bound, certain crisis-related structural features of the economy such as the share of liquidity-constrained households change, and the endogenous fiscal rule that ensures fiscal sustainability in the long run is specified in terms of labour income taxes instead of lump-sum taxes.

The Drivers of Current Account Surplus in Germany and the Politics of Rebalancing in the Eurozone. EU Centre, Singapore Working Paper No. 24, April 2015

Current account deficits have caught the public’s attention as they have contributed to the European debt crisis. However, surpluses also constitute an issue as a deficit in any country must be financed through a surplus in another country. In 2013, Germany, now the world’s largest surplus economy, registered a record high US$273 billion surplus. This paper looks at what accounts for Germany’s surplus, revealing that the major driving factors include strong global demand for quality German exports, domestic wage restraint, an undervalued single currency, high domestic savings rate and interest rate convergence in the euro area. This paper echoes the US Treasury’s view that a persistent German surplus makes it harder for the eurozone as a whole and the southern peripheral economies in particular to recover from the current financial crisis by imposing a Europe-wide “deflationary bias” through pushing up the exchange rate of the euro, exporting feeble German inflation and projecting its ultra-tight macroeconomic policies onto crisis economies. This paper contends that Germany’s trade surplus is likely to endure as Germany and other eurozone countries uphold diverging views on the nature of the surplus engage in a blame-game amidst a sluggish rebalancing process. Prizing the surplus as a reflection of hard work and economic competitiveness, German authorities urge their southern eurozone colleagues to undertake bold structural reforms to correct the imbalance, while the hand-tied governments in crisis-stricken economies call on Germany to do its “homework” by boosting German demands for European goods and services.

Squaring the cycle: capital flows, financial cycles, and macro-prudential policy in the euro area. Bruegel Working Paper 2015/14, November 2015

• Before the financial and economic crisis, monetary policy unification and interest rate convergence resulted in the divergence of euroarea countries’ financial cycles. This divergence is deeply rooted in the financial integration spurred by currency union and strongly correlated with intra-euro area capital flows. Macro-prudential policy will need to deal with potentially divergent financial cycles, while catering for potential cross-border spillovers from domestic policies, which domestic authorities have little incentive to internalise. • The current framework is unfit to deal effectively with these challenges. The European Central Bank should be responsible for consistent and coherent application of macro-prudential policy, with appropriate divergences catering for national differences in financial conditions. The close link between domestic financial cycles and intra-euro area capital flows raises the question of whether macro-prudential policy in the euro area can be compatible with free flows of capital. Financial cycle divergence had its counterpart in the build-up of macroeconomic imbalances, so effective implementation of the Macroeconomic Imbalance Procedure would support and strengthen macro-prudential policy.