Three essays on bankruptcy risk

Abstract Market prices of corporate bond spreads and of credit default swap (CDS) rates do not match each other. In this paper, we argue that the liquidity premium, the cheapest-to-deliver (CTD) option and actual market segmentation explain the pricing differences. Using the European transaction data from Reuters and Bloomberg, we estimate the liquidity premium that is time- varying and firm-specific. We show that when time-dependent liquidity premiums are considered, corporate bond spreads and CDS rates behave in a much closer way than previous studies have shown. We find that high equity volatility drives pricing differences that can be explained by the CTD option.

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.

Contact metamorphism and emplacement of the western Adamello tonalite

The geodynamic forces acting in the Earth's interior manifest themselves in a variety of ways. Volcanoes are amongst the most impressive examples in this respect, but like with an iceberg, they only represent the tip of a more extensive system hidden underground. This system consists of a source region where melt forms and accumulates, feeder connections in which magma is transported towards the surface, and different reservoirs where it is stored before it eventually erupts to form a volcano. A magma represents a mixture of melt and crystals. The latter can be extracted from the source region, or form anywhere along the path towards their final crystallization place. They will retain information of the overall plumbing system. The host rocks of an intrusion, in contrast, provide information at the emplacement level. They record the effects of thermal and mechanical forces imposed by the magma. For a better understanding of the system, both parts - magmatic and metamorphic petrology - have to be integrated. I will demonstrate in my thesis that information from both is complementary. It is an iterative process, using constraints from one field to better constrain the other. Reading the history of the host rocks is not always straightforward. This is shown in chapter two, where a model for the formation of clustered garnets observed in the contact aureole is proposed. Fragments of garnets, older than the intrusive rocks are overgrown by garnet crystallizing due to the reheating during emplacement of the adjacent pluton. The formation of the clusters is therefore not a single event as generally assumed but the result of a two-stage process, namely the alteration of the old grains and the overgrowth and amalgamation of new garnet rims. This makes an important difference when applying petrological methods such as thermobarometry, geochronology or grain size distributions. The thermal conditions in the aureole are a strong function of the emplacement style of the pluton. therefore it is necessary to understand the pluton before drawing conclusions about its aureole. A study investigating the intrusive rocks by means of field, geochemical, geochronologi- cal and structural methods is presented in chapter three. This provided important information about the assembly of the intrusion, but also new insights on the nature of large, homogeneous plutons and the structure of the plumbing system in general. The incremental nature of the emplacement of the Western Adamello tonalité is documented, and the existence of an intermediate reservoir beneath homogeneous plutons is proposed. In chapter four it is demonstrated that information extracted from the host rock provides further constraints on the emplacement process of the intrusion. The temperatures obtain by combining field observations with phase petrology modeling are used together with thermal models to constrain the magmatic activity in the immediate intrusion. Instead of using the thermal models to control the petrology result, the inverse is done. The model parameters were changed until a match with the aureole temperatures was obtained. It is shown, that only a few combinations give a positive match and that temperature estimates from the aureole can constrain the frequency of ancient magmatic systems. In the fifth chapter, the Anisotropy of Magnetic Susceptibility of intrusive rocks is compared to 3D tomography. The obtained signal is a function of the shape and distribution of ferromagnetic grains, and is often used to infer flow directions of magma. It turns out that the signal is dominated by the shape of the magnetic crystals, and where they form tight clusters, also by their distribution. This is in good agreement with the predictions made in the theoretical and experimental literature. In the sixth chapter arguments for partial melting of host rock carbonates are presented. While at first very surprising, this is to be expected when considering the prior results from the intrusive study and experiments from the literature. Partial melting is documented by compelling microstructures, geochemical and structural data. The necessary conditions are far from extreme and this process might be more frequent than previously thought. The carbonate melt is highly mobile and can move along grain boundaries, infiltrating other rocks and ultimately alter the existing mineral assemblage. Finally, a mineralogical curiosity is presented in chapter seven. The mineral assemblage magne§site and calcite is in apparent equilibrium. It is well known that these two carbonates are not stable together in the system Ca0-Mg0-Fe0-C02. Indeed, magnesite and calcite should react to dolomite during metamorphism. The presented explanation for this '"forbidden" assemblage is, that a calcite melt infiltrated the magnesite bearing rock along grain boundaries and caused the peculiar microstructure. This is supported by isotopie disequilibrium between calcite and magnesite. A further implication of partially molten carbonates is, that the host rock drastically looses its strength so that its physical properties may be comparable to the ones of the intrusive rocks. This contrasting behavior of the host rock may ease the emplacement of the intrusion. We see that the circle closes and the iterative process of better constraining the emplacement could start again. - La Terre est en perpétuel mouvement et les forces tectoniques associées à ces mouvements se manifestent sous différentes formes. Les volcans en sont l'un des exemples les plus impressionnants, mais comme les icebergs, les laves émises en surfaces ne représentent que la pointe d'un vaste système caché dans les profondeurs. Ce système est constitué d'une région source, région où la roche source fond et produit le magma ; ce magma peut s'accumuler dans cette région source ou être transporté à travers différents conduits dans des réservoirs où le magma est stocké. Ce magma peut cristalliser in situ et produire des roches plutoniques ou alors être émis en surface. Un magma représente un mélange entre un liquide et des cristaux. Ces cristaux peuvent être extraits de la source ou se former tout au long du chemin jusqu'à l'endroit final de cristallisation. L'étude de ces cristaux peut ainsi donner des informations sur l'ensemble du système magmatique. Au contraire, les roches encaissantes fournissent des informations sur le niveau d'emplacement de l'intrusion. En effet ces roches enregistrent les effets thermiques et mécaniques imposés par le magma. Pour une meilleure compréhension du système, les deux parties, magmatique et métamorphique, doivent être intégrées. Cette thèse a pour but de montrer que les informations issues de l'étude des roches magmatiques et des roches encaissantes sont complémentaires. C'est un processus itératif qui utilise les contraintes d'un domaine pour améliorer la compréhension de l'autre. Comprendre l'histoire des roches encaissantes n'est pas toujours aisé. Ceci est démontré dans le chapitre deux, où un modèle de formation des grenats observés sous forme d'agrégats dans l'auréole de contact est proposé. Des fragments de grenats plus vieux que les roches intru- sives montrent une zone de surcroissance générée par l'apport thermique produit par la mise en place du pluton adjacent. La formation des agrégats de grenats n'est donc pas le résultat d'un seul événement, comme on le décrit habituellement, mais d'un processus en deux phases, soit l'altération de vieux grains engendrant une fracturation de ces grenats, puis la formation de zone de surcroissance autour de ces différents fragments expliquant la texture en agrégats observée. Cette interprétation en deux phases est importante, car elle engendre des différences notables lorsque l'on applique des méthodes pétrologiques comme la thermobarométrie, la géochronologie ou encore lorsque l'on étudie la distribution relative de la taille des grains. Les conditions thermales dans l'auréole de contact dépendent fortement du mode d'emplacement de l'intrusion et c'est pourquoi il est nécessaire de d'abord comprendre le pluton avant de faire des conclusions sur son auréole de contact. Une étude de terrain des roches intrusives ainsi qu'une étude géochimique, géochronologique et structurale est présente dans le troisième chapitre. Cette étude apporte des informations importantes sur la formation de l'intrusion mais également de nouvelles connaissances sur la nature de grands plutons homogènes et la structure de système magmatique en général. L'emplacement incrémental est mis en évidence et l'existence d'un réservoir intermédiaire en-dessous des plutons homogènes est proposé. Le quatrième chapitre de cette thèse illustre comment utiliser l'information extraite des roches encaissantes pour expliquer la mise en place de l'intrusion. Les températures obtenues par la combinaison des observations de terrain et l'assemblage métamorphique sont utilisées avec des modèles thermiques pour contraindre l'activité magmatique au contact directe de cette auréole. Au lieu d'utiliser le modèle thermique pour vérifier le résultat pétrologique, une approche inverse a été choisie. Les paramètres du modèle ont été changés jusqu'à ce qu'on obtienne une correspondance avec les températures observées dans l'auréole de contact. Ceci montre qu'il y a peu de combinaison qui peuvent expliquer les températures et qu'on peut contraindre la fréquence de l'activité magmatique d'un ancien système magmatique de cette manière. Dans le cinquième chapitre, les processus contrôlant l'anisotropie de la susceptibilité magnétique des roches intrusives sont expliqués à l'aide d'images de la distribution des minéraux dans les roches obtenues par tomographie 3D. Le signal associé à l'anisotropie de la susceptibilité magnétique est une fonction de la forme et de la distribution des grains ferromagnétiques. Ce signal est fréquemment utilisé pour déterminer la direction de mouvement d'un magma. En accord avec d'autres études de la littérature, les résultats montrent que le signal est dominé par la forme des cristaux magnétiques, ainsi que par la distribution des agglomérats de ces minéraux dans la roche. Dans le sixième chapitre, une étude associée à la fusion partielle de carbonates dans les roches encaissantes est présentée. Si la présence de liquides carbonatés dans les auréoles de contact a été proposée sur la base d'expériences de laboratoire, notre étude démontre clairement leur existence dans la nature. La fusion partielle est documentée par des microstructures caractéristiques pour la présence de liquides ainsi que par des données géochimiques et structurales. Les conditions nécessaires sont loin d'être extrêmes et ce processus pourrait être plus fréquent qu'attendu. Les liquides carbonatés sont très mobiles et peuvent circuler le long des limites de grain avant d'infiltrer d'autres roches en produisant une modification de leurs assemblages minéralogiques. Finalement, une curiosité minéralogique est présentée dans le chapitre sept. L'assemblage de minéraux de magnésite et de calcite en équilibre apparent est observé. Il est bien connu que ces deux carbonates ne sont pas stables ensemble dans le système CaO-MgO-FeO-CO.,. En effet, la magnésite et la calcite devraient réagir et produire de la dolomite pendant le métamorphisme. L'explication présentée pour cet assemblage à priori « interdit » est que un liquide carbonaté provenant des roches adjacentes infiltre cette roche et est responsable pour cette microstructure. Une autre implication associée à la présence de carbonates fondus est que la roche encaissante montre une diminution drastique de sa résistance et que les propriétés physiques de cette roche deviennent comparables à celles de la roche intrusive. Cette modification des propriétés rhéologiques des roches encaissantes peut faciliter la mise en place des roches intrusives. Ces différentes études démontrent bien le processus itératif utilisé et l'intérêt d'étudier aussi bien les roches intrusives que les roches encaissantes pour la compréhension des mécanismes de mise en place des magmas au sein de la croûte terrestre.

Domestic Violence and Football in Glasgow: Are Reference Points Relevant?

Much research suggests that sporting events can trigger domestic violence with recent evidence suggesting that pre-match expectations (which can be interpreted as reference points) play an especially important role in this relationship. In particular, unexpectedly disappointing results have been associated with large increases in domestic violence. This paper contributes to this literature using a new data set containing every domestic violence incident in Glasgow over a period of more than eight years. We find that Old Firm matches, where Glasgow rivals Celtic and Rangers play, are associated with large increases in domestic violence (regardless of the timing or the outcome of the match). Non-Old Firm matches tend to have little impact on domestic violence. Furthermore, we fi nd little evidence for the importance of reference points. Matches with disappointing outcomes, relative to pre-match expectations, are found to be associated with unusual increases in domestic violence only in a very limited set of matches.

Solid-phase synthesis and NMR studies of modified oligonucleotides forming triplex helix and of oligonucleopeptides mimicking the topoisomerase I-DNA covalent complex

Report for the scientific sojourn carried out at the Institut de Biologia Molecular de Barcelona of the CSIC –state agency – from april until september 2007. Topoisomerase I is an essential nuclear enzyme that modulates the topological status of DNA, facilitating DNA helix unwinding during replication and transcription. We have prepared the oligonucleotide-peptide conjugate Ac-NLeu-Asn-Tyr(p-3’TTCAGAAGC5’)-LeuC-CONH-(CH2)6-OH as model compound for NMR studies of the Topoisomerase I- DNA complex. Special attention was made on the synthetic aspects for the preparation of this challenging compound especially solid supports and protecting groups. The desired peptide was obtained although we did not achieve the amount of the conjugate needed for NMR studies. Most probably the low yield is due to the intrinsic sensitive to hydrolysis of the phosphate bond between oligonucleotide and tyrosine. We have started the synthesis and the structural characterization of oligonucleotides carrying intercalating compounds. At the present state we have obtained model duplex and quadruplex sequences modified with acridine and NMR studies are underway. In addition to this project we have successfully resolved the structure of a fusion peptide derived from hepatitis C virus envelope synthesized by the group of Dr. Haro and we have synthesized and started the characterization of a modified G-quadruplex.

Domestic Violence and Football in Glasgow: Are Reference Points Relevant?

Much research suggests that sporting events can trigger domestic violence with recent evidence suggesting that pre-match expectations (which can be interpreted as reference points) play an especially important role in this relationship. In particular, unexpectedly disappointing results have been associated with large increases in domestic violence. This paper contributes to this literature using a new data set containing every domestic violence incident in Glasgow over a period of more than eight years. We find that Old Firm matches, where Glasgow rivals Celtic and Rangers play, are associated with large increases in domestic violence (regardless of the timing or the outcome of the match). Non-Old Firm matches tend to have little impact on domestic violence. Furthermore, we find little evidence for the importance of reference points. Matches with disappointing outcomes, relative to pre-match expectations, are found to be associated with unusual increases in domestic violence only in a very limited set of matches.

Macroeconomics: Science or Faith Based Discipline?

Whether or not macroeconomics is a science depends on the scientific nature of macroeconomic theories and how the discipline responds when the empirical evidence fails to match the underlying assumptions and predictions of the theories. By way of an example, four conditions for macroeconomics to be a science are developed and used to examine the 'modern' theories of the Phillips curve. It is found that while the discipline in general maintains one condition it routinely violates the other three. This suggests the macroeconomics discipline has some way to go before it can call itself a 'pure science.'

Spatial Takeoff in the First Industrial Revolution

Using the framework of Desmet and Rossi-Hansberg (forthcoming), we present a model of spatial takeoff that is calibrated using spatially-disaggregated occupational data for England in c.1710. The model predicts changes in the spatial distribution of agricultural and manufacturing employment which match data for c.1817 and 1861. The model also matches a number of aggregate changes that characterise the first industrial revolution. Using counterfactual geographical distributions, we show that the initial concentration of productivity can matter for whether and when an industrial takeoff occurs. Subsidies to innovation in either sector can bring forward the date of takeoff while subsidies to the use of land by manufacturing firms can significantly delay a takeoff because it decreases spatial concentration of activity.

Spatial Takeoff in the First Industrial Revolution

Using the framework of Desmet and Rossi-Hansberg (forthcoming), we present a model of spatial takeoff that is calibrated using spatially-disaggregated occupational data for England in c.1710. The model predicts changes in the spatial distribution of agricultural and manufacturing employment which match data for c.1817 and 1861. The model also matches a number of aggregate changes that characterise the first industrial revolution. Using counterfactual geographical distributions, we show that the initial concentration of productivity can matter for whether and when an industrial takeoff occurs. Subsidies to innovation in either sector can bring forward the date of takeoff while subsidies to the use of land by manufacturing firms can significantly delay a takeoff because it decreases spatial concentration of activity.

Local adaptation and matching habitat choice in female barn owls with respect to melanic coloration.

Local adaptation is a major mechanism underlying the maintenance of phenotypic variation in spatially heterogeneous environments. In the barn owl (Tyto alba), dark and pale reddish-pheomelanic individuals are adapted to conditions prevailing in northern and southern Europe, respectively. Using a long-term dataset from Central Europe, we report results consistent with the hypothesis that the different pheomelanic phenotypes are adapted to specific local conditions in females, but not in males. Compared to whitish females, reddish females bred in sites surrounded by more arable fields and less forests. Colour-dependent habitat choice was apparently beneficial. First, whitish females produced more fledglings when breeding in wooded areas, whereas reddish females when breeding in sites with more arable fields. Second, cross-fostering experiments showed that female nestlings grew wings more rapidly when both their foster and biological mothers were of similar colour. The latter result suggests that mothers should particularly produce daughters in environments that best match their own coloration. Accordingly, whiter females produced fewer daughters in territories with more arable fields. In conclusion, females displaying alternative melanic phenotypes bred in habitats providing them with the highest fitness benefits. Although small in magnitude, matching habitat selection and local adaptation may help maintain variation in pheomelanin coloration in the barn owl.

Consumption Decisions When People Value Conformity

In this paper we assume that for some commodities individuals may wish to adjust their levels of consumption from their normal Marshallian levels so as to match the consumption levels of a group of other individuals, in order to signal that they conform to the consumption norms of that group. Unlike Veblen’s concept of conspicuous consumption this can mean that some individuals may reduce their consumption of the relevant commodities. We model this as a three-stage game in which individuals first decide whether or not they wish to adhere to a norm, then decide which norm they wish to adhere to, and finally decide their actual consumption. We present a number of examples of the resulting equilibria, and then discuss the potential policy implications of this model.

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.