Dynamic Option Adjusted Spread and the Value of Mortgage Backed Securities (Draft 1)

We extend a reduced form model for pricing pass-through mortgage backed securities (MBS) and provide a novel hedging tool for investors in this market. To calculate the price of an MBS, traders use what is known as option-adjusted spread (OAS). The resulting OAS value represents the required basis points adjustment to reference curve discounting rates needed to match an observed market price. The OAS suffers from some drawbacks. For example, it remains constant until the maturity of the bond (thirty years in mortgage-backed securities), and does not incorporate interest rate volatility. We suggest instead what we call dynamic option adjusted spread (DOAS). The latter allows investors in the mortgage market to account for both prepayment risk and changes of the yield curve.

Dynamic Option Adjusted Spread and the Value of Mortgage Backed Securities (Draft 2)

We extend a reduced form model for pricing pass-through mortgage backed securities (MBS) and provide a novel hedging tool for investors in this market. To calculate the price of an MBS, traders use what is known as option-adjusted spread (OAS). The resulting OAS value represents the required basis points adjustment to reference curve discounting rates needed to match an observed market price. The OAS suffers from some drawbacks. For example, it remains constant until the maturity of the bond (thirty years in mortgage-backed securities), and does not incorporate interest rate volatility. We suggest instead what we call dynamic option adjusted spread (DOAS), which allows investors in the mortgage market to account for both prepayment risk and changes of the yield curve.

Interest Rate Co-movements, Global Factors and the Long End of the Term Spread

The disconnect between rising short and low long interest rates has been a distinctive feature of the 2000s. Both research and policy circles have argued that international forces, such as global monetary policy (e.g. Rogoff, 2006); international business cycles (e.g. Borio and Filardo, 2007); or a global savings glut (e.g Bernanke, 2005) may be responsible. In this paper, we employ recent advances in panel data econometrics to document the disconnect and link it explicitly to the existence of a global latent factor that dominates the long end of the term spread for the recent period; the saving glut story emerges as the most likely contender for the global factor.

Universal banking, competition and risk in a macro model

A stylized macroeconomic model is developed with an indebted, heterogeneous Investment Banking Sector funded by borrowing from a retail banking sector. The government guarantees retail deposits. Investment banks choose how risky their activities should be. We compared the benefits of separated vs. universal banking modelled as a vertical integration of the retail and investment banks. The incidence of banking default is considered under different constellations of shocks and degrees of competitiveness. The benefits of universal banking rise in the volatility of idiosyncratic shocks to trading strategies and are positive even for very bad common shocks, even though government bailouts, which are costly, are larger compared to the case of separated banking entities. The welfare assessment of the structure of banks may depend crucially on the kinds of shock hitting the economy as well as on the efficiency of government intervention.

The past, present and future of central banking

The financial crisis, on the one hand, and the recourse to ‘unconventional’ monetary policy, on the other, have given a sharp jolt to perceptions of the role and status of central banks. In this paper we start with a brief ‘contrarian’ history of central banks since the second world war, which presents the Great Moderation and the restricted focus on inflation targeting as a temporary aberration from the norm. We then discuss how recent developments in fiscal and monetary policy have affected the role and status of central banks, notably their relationships with governments, before considering the environment central banks will face in the near and middle future and how they will have to change to address it.

Pathology as the Cornerstone of Human Tissue Banking: European Consensus Expert Group Report

Aside from ethical considerations, the primary requirement for usage of human tissues in basic or translational research is the thorough characterization of tissues. The second, but equally essential, requirement is that tissues be collected, processed, annotated, and preserved in optimal conditions. These requirements put the pathologist at the center of tissue banking activities and of research aimed at discovering new biomarkers. Pathologists not only provide information identifying the specimen but also make decisions on what materials should be biobanked, on the preservation conditions, and on the timeline of events that precede preservation and storage. This central position calls for increased recognition of the role of the pathologist by the biomolecular community and places new demands on the pathologist's workload and scope of scientific activities. These questions were addressed by an Expert Group Meeting of the European Biological and Biomolecular Research Infrastructure (BBMRI). While detailed recommendations are published elsewhere (Bevilacqua et al., Virchows Archivs, 2010, in press), this article outlines the strategic and technological issues identified by the Expert Group and identifies ways forward for better integration of pathology in the current thrust for development of biomarker-based "personalized medicine.

Unusual spread of a penicillin-susceptible methicillin-resistant Staphylococcus aureus clone in a geographic area of low incidence.

We describe the unusual spread of a penicillin-susceptible methicillin-resistant Staphylococcus aureus (MRSA) clone in hospitals in western Switzerland, where the incidence of MRSA is usually low. During a 2-year period, this clone had been responsible for several outbreaks and had been isolated from >156 persons in 21 institutions. Molecular typing by pulsed-field gel electrophoresis (PFGE) demonstrated that all of these isolates belonged to the same clone. In 1 of the outbreaks, involving 30 cases, the clone was responsible for at least 17 secondary cases. In contrast, during the period of the latter outbreak, 9 other patients harboring different MRSA strains, as assessed by PFGE, were hospitalized in the same wards, but no secondary cases occurred. These observations suggest that this clone, compared with other MRSA strains, had some intrinsic factor(s) that contributed to its ability to disseminate and could thus be considered epidemic.

A Possible Role for Rusa Deer (Cervus timorensis russa) and Wild Pigs in Spread of Trypanosoma evansi from Indonesia to Papua New Guinea

Movement of transmigrants and livestock from western Indonesia to southeastern areas of Irian Jaya near the border with Papua New Guinea may pose a risk of introducing Trypanosoma evansi into Papua New Guinea via feral Rusa deer (Cervus timorensis russa) and wild pigs which inhabit these areas in large numbers. Pilot experimental studies were conducted to observe infection in pigs and Rusa deer with a strain of T. evansi isolated in Indonesia. Parasitaemia and signs of clinical disease were monitored each second day for 120 days. Trypanosomes were observed in haematocrit tubes at the plasma-buffy coat interface of jugular blood of deer and pigs on 86% and 37% of sampling occasions respectively. Parasitaemia was at a high level in deer for 35% of the time but for only 11.5% of the time in pigs. Results indicate that both Rusa deer and pigs have a high tolerance for infection with T. evansi. The deer suffered mild anaemia evidenced by a 25% reduction in packed cell volume (PCV) 14 days after infection which coincided with the initial peak in parasitaemia. However, PCV had returned to pre infection values by the end of the experiment. The pigs showed no change in PCV. There were no visual indications of disease in either species and appetite was not noticeably affected. It was concluded that both Rusa deer and pigs were capable reservoir hosts for T. evansi but that Rusa deer, with their more persistent higher levels of parasitaemia, have more potential to spread T. evansi into Papua New Guinea from West Irian than pigs.

Promoting Corporate Responsibility in Private Banking: Necessary and Sufficient Conditions for Joining the Wolfsberg Initiative Against Money Laundering

In recent years, the fight against money laundering has emerged as a key issue of financial regulation. The Wolfsberg Group is an important multistakeholder agreement establishing corporate responsibility (CR) principles against money laundering in a domain where international coordination remains otherwise difficult. The fact that 10 out of the 25 top private banking institutions joined this initiative opens up an interesting puzzle concerning the conditions for the participation of key industry players in the Wolfsberg Group. The article presents a fuzzy-set analysis of seven hypotheses based on firm-level organizational factors, the macro-institutional context, and the regulatory framework. Results from the analysis of these 25 financial institutions show that public ownership of the bank and the existence of a code of conduct are necessary conditions for participation in the Wolfsberg Group, whereas factors related to the type of financial institution, combined with the existence of a black list, are sufficient for explaining participation.

Early infection and asymptomatic spread of hepatitis A virus in a public child care center in Rio de Janeiro, Brazil: should attending children under two years of age be vaccinated?

A cross-sectional study was conducted in order to identify hepatitis A virus (HAV) serological markers in 418 individuals (mean age, 16.4 years; range, 1 month-80 years) at a public child care center in Rio de Janeiro, Brazil, as well as to analyze risk factors and determine circulating genotypes. Serum samples were tested using an enzyme immunoassay. Reverse transcription polymerase chain reaction (RT-PCR) was used to detect and characterize HAV RNA, and sequencing was performed. Anti-HAV antibodies and IgM anti-HAV antibodies were detected, respectively, in 89.5% (374/418) and 10.5% (44/418) of the individuals tested. Acute HAV infection in children was independently correlated with crawling (p < 0.05). In 56.8% (25/44) of the IgM anti-HAV-positive individuals and in 33.3% (5/15) of the IgM anti-HAV-negative individuals presenting clinical symptoms, HAV RNA was detected. Phylogenetic analysis revealed co-circulation of subgenotypes IA and IB in 93.3% (28/30) of the amplified samples. In present study, we verify that 79% (30/38) of children IgM anti-HAV-positive were asymptomatic. In child care centers, this asymptomatic spread is a more serious problem, promoting the infection of young children, who rarely show signs of infection. Therefore, vaccinating children below the age of two might prevent the asymptomatic spread of hepatitis A.

The spread of incompatibility-inducing parasites in sub-divided host populations.

BACKGROUND:Maternally transmitted symbionts have evolved a variety of ways to promote their spread through host populations. One strategy is to hamper the reproduction of uninfected females by a mechanism called cytoplasmic incompatibility (CI). CI occurs in crosses between infected males and uninfected females and leads to partial to near-complete infertility. CI-infections are under positive frequency-dependent selection and require genetic drift to overcome the range of low frequencies where they are counter-selected. Given the importance of drift, population sub-division would be expected to facilitate the spread of CI. Nevertheless, a previous model concluded that variance in infection between competing groups of breeding individuals impedes the spread of CI.RESULTS:In this paper we derive a model on the spread of CI-infections in populations composed of demes linked by restricted migration. Our model shows that population sub-division facilitates the invasion of CI. While host philopatry (low migration) favours the spread of infection, deme size has a non-monotonous effect, with CI-invasion being most likely at intermediate deme size. Individual-based simulations confirm these predictions and show that high levels of local drift speed up invasion but prevent high levels of prevalence across the entire population. Additional simulations with sex-specific migration rates further show that low migration rates of both sexes are required to facilitate the spread of CI.CONCLUSION:Our analyses show that population structure facilitates the invasion of CI-infections. Since some level of sub-division is likely to occur in most natural populations, our results help to explain the high incidence of CI-infections across species of arthropods. Furthermore, our work has important implications for the use of CI-systems in order to genetically modify natural populations of disease vectors.

Does it pay to be socially responsible? Evidence from spanish retail banking sector

This paper presents a theoretical and empirical analysis of strategic competition in retail banking when some of the financial firms are non-profit organisations that invest in social activities. Banking literature about competition is fairly large, but the strategic interaction between profit maximizing and non profit maximizers has not been extensively analysed except for Purroy and Salas (1999). In this paper, a completely different approach is taken. An adaptation of Hotelling’s two stage model of spatial competition is developed to take into account consumer perceptions respect to the two different types of financial institutions. The empirical analysis confirms that consumers take into account other features different from the price, such as social contribution or closer service to make a deposit or mortgage decision. These conclusions are of interest in the debate about a firm’s social or ethical activities. It is shown that if consumers value social activities, firms can improv

Metallo-β-lactamase-production in meropenem-susceptible Pseudomonas aeruginosa isolates: risk for silent spread

The aim of this study was to characterize two metallo-β-lactamases (MBLs)-producing Pseudomonas aeruginosa clinical isolates showing meropenem susceptibility. Antimicrobial susceptibility was assessed by automated testing and Clinical and Laboratory Standards Institute agar dilution method. MBL production was investigated by phenotypic tests. Molecular typing was determined by pulsed field gel electrophoresis (PFGE). MBL-encoding genes, as well as their genetic context, were identified by polymerase chain reaction (PCR) and sequencing. The location of blaIMP-16 was determined by plasmid electrophoresis, Southern blot and hybridization. Transcriptional levels of blaIMP-16, mexB, mexD, mexF, mexY, ampC and oprD were determined by semi-quantitative real time PCR. The P. aeruginosa isolates studied, Pa30 and Pa43, showed imipenem and meropenem susceptibility by automated testing. Agar dilution assays confirmed meropenem susceptibility whereas both isolates showed low level of imipenem resistance. Pa30 and Pa43 were phenotypically detected as MBL producers. PFGE revealed their clonal relatedness. blaIMP-16 was identified in both isolates, carried as a single cassette in a class 1 integron that was embedded in a plasmid of about 60-Kb. Pa30 and Pa43 overexpressed MexAB-OprM, MexCD-OprJ and MexXY-OprM efflux systems and showed basal transcriptional levels of ampC and oprD. MBL-producing P. aeruginosa that are not resistant to meropenem may represent a risk for therapeutic failure and act as silent reservoirs of MBL-encoding genes.