US Corporate Default Swap Valuation: The Market Liquidity Hypothesis and Autonomous Credit Risk

This paper develops a reduced form three-factor model which includes a liquidity proxy of market conditions which is then used to provide implicit prices. The model prices are then compared with observed market prices of credit default swaps to determine if swap rates adequately reflect market risks. The findings of the analysis illustrate the importance of liquidity in the valuation process. Moreover, market liquidity, a measure of investors. willingness to commit resources in the credit default swap (CDS) market, was also found to improve the valuation of investors. autonomous credit risk. Thus a failure to include a liquidity proxy could underestimate the implied autonomous credit risk. Autonomous credit risk is defined as the fractional credit risk which does not vary with changes in market risk and liquidity conditions.

Market reactions to changes in the Nasdaq-100 Index membership

We examine stock market reactions around the Nasdaq-100 Index reconstitutions. We find a symmetric and transitory price response accompanied by a significant increase in trading volume on the effective date. Firms added to the Nasdaq-100 Index experience significant increases in institutional ownership, the number of market makers, and the number of shareholders. In contrast, firms removed from the index show significant decreases in the number of institutional shareholders. Additions to the Nasdaq-100 Index also show significant increases in four liquidity measures, whereas deletions demonstrate significant decreases in two liquidity measures. These changes in liquidity are related to the abnormal return on the announcement day. Taken together, the results suggest support for the price pressure, liquidity, and investor awareness hypotheses.

Essays on volatility and liquidity in financial markets

The price formation of financial assets is a complex process. It extends beyond the standard economic paradigm of supply and demand to the understanding of the dynamic behavior of price variability, the price impact of information, and the implications of trading behavior of market participants on prices. In this thesis, I study aggregate market and individual assets volatility, liquidity dimensions, and causes of mispricing for US equities over a recent sample period. How volatility forecasts are modeled, what determines intradaily jumps and causes changes in intradaily volatility and what drives the premium of traded equity indexes? Are they induced, for example, by the information content of lagged volatility and return parameters or by macroeconomic news, changes in liquidity and volatility? Besides satisfying our intellectual curiosity, answers to these questions are of direct importance to investors developing trading strategies, policy makers evaluating macroeconomic policies and to arbitrageurs exploiting mispricing in exchange-traded funds. Results show that the leverage effect and lagged absolute returns improve forecasts of continuous components of daily realized volatility as well as jumps. Implied volatility does not subsume the information content of lagged returns in forecasting realized volatility and its components. The reported results are linked to the heterogeneous market hypothesis and demonstrate the validity of extending the hypothesis to returns. Depth shocks, signed order flow, the number of trades, and resiliency are the most important determinants of intradaily volatility. In contrast, spread shock and resiliency are predictive of signed intradaily jumps. There are fewer macroeconomic news announcement surprises that cause extreme price movements or jumps than those that elevate intradaily volatility. Finally, the premium of exchange-traded funds is significantly associated with momentum in net asset value and a number of liquidity parameters including the spread, traded volume, and illiquidity. The mispricing of industry exchange traded funds suggest that limits to arbitrage are driven by potential illiquidity.

Asset Liquidity and Stock Liquidity: International Evidence

This study examines the relationship between asset liquidity and stock liquidity across 47 countries. In support of the valuation uncertainty hypothesis, we find that firms with greater asset liquidity on average have higher stock liquidity. More importantly, our study shows that asset liquidity plays amore significant role in resolving valuation uncertainty in countries with poor information environment. For example, we find that the asset–stock liquidity relationship is stronger in countries with poor accounting standards. We further find evidence that after the adoption of IFRS, the improved accounting information environment results in a weaker asset–stock liquidity relation, but only in countries with a strong legal regime. Finally, our study shows that the positive asset–stock liquidity relationship may be attributed to transparency and/or liquidity reasons.

Bank market concentration, relationship banking and small business liquidity

This paper examines two contrasting interpretations of how bank market concentration (Market Power Hypothesis) and banking relationships (Information Hypothesis) affect three sources of small firm liquidity (cash, lines of credit and trade credit). Supportive of a market power interpretation, we find that in a highly concentrated banking market, small firms hold less cash, have less access to lines of credit, and are more likely to be financially constrained, use greater amounts of more expensive trade credit and face higher penalties for trade credit late payment. We also find support for the information hypothesis: relationship banking improves small business liquidity, particularly in a concentrated banking market, thereby mitigating the adverse effects of bank market concentration derived from market power. Our results are robust to different cash, lines of credit and trade credit measures and to alternative empirical approaches.

A multi-hypothesis topological SLAM approach for loop closing on edge-ordered graphs

We present a method for topological SLAM that specifically targets loop closing for edge-ordered graphs. Instead of using a heuristic approach to accept or reject loop closing, we propose a probabilistically grounded multi-hypothesis technique that relies on the incremental construction of a map/state hypothesis tree. Loop closing is introduced automatically within the tree expansion, and likely hypotheses are chosen based on their posterior probability after a sequence of sensor measurements. Careful pruning of the hypothesis tree keeps the growing number of hypotheses under control and a recursive formulation reduces storage and computational costs. Experiments are used to validate the approach.

Test of the enemy release hypothesis: the native magpie moth prefers a native fireweed (Senecio pinnatifolius) to its introduced congener (S.Madagascariensis)

Abstract The enemy release hypothesis predicts that native herbivores will either prefer or cause more damage to native than introduced plant species. We tested this using preference and performance experiments in the laboratory and surveys of leaf damage caused by the magpie moth Nyctemera amica on a co-occuring native and introduced species of fireweed (Senecio) in eastern Australia. In the laboratory, ovipositing females and feeding larvae preferred the native S. pinnatifolius over the introduced S. madagascariensis. Larvae performed equally well on foliage of S. pinnatifolius and S. madagascariensis: pupal weights did not differ between insects reared on the two species, but growth rates were significantly faster on S. pinnatifolius. In the field, foliage damage was significantly greater on native S. pinnatifolius than introduced S. madagascariensis. These results support the enemy release hypothesis, and suggest that the failure of native consumers to switch to introduced species contributes to their invasive success. Both plant species experienced reduced, rather than increased, levels of herbivory when growing in mixed populations, as opposed to pure stands in the field; thus, there was no evidence that apparent competition occurred.

Age-related maculopathy : linking aetiology and pathophysiological changes to the ischaemia hypothesis

Age-related maculopathy (ARM) has remained a challenging topic with respect to its aetiology, pathomechanisms, early detection and treatment since the late 19th century when it was first described as its own entity. ARM was previously considered an inflammatory disease, a degenerative disease, a tumor and as the result of choroidal hemodynamic disturbances and ischaemia. The latter processes have been repeatedly suggested to have a key role in its development and progression. In vivo experiments under hypoxic conditions could be models for the ischaemic deficits in ARM. Recent research has also linked ARM with gene polymorphisms. It is however unclear what triggers a person's gene susceptibility. In this manuscript, a linking hypothesis between aetiological factors including ischaemia and genetics and the development of early clinicopathological changes in ARM is proposed. New clinical psychophysical and electrophysiological tests are introduced that can detect ARM at an early stage. Models of early ARM based upon hemodynamic, photoreceptor and post-receptoral deficits are described and the mechanisms by which ischaemia may be involved as a final common pathway are considered. In neovascular age-related macular degeneration (neovascular AMD), ischaemia is thought to promote release of vascular endothelial growth factor (VEGF) which induces chorioretinal neovascularisation. VEGF is critical in the maintenance of the healthy choriocapillaris. In the final section of the manuscript the documentation of the effect of new anti-VEGF treatments on retinal function in neovascular AMD is critically viewed.

The ultra-low friction of the articular surface is pH-dependent and is built on a hydrophobic underlay including a hypothesis on joint lubrication mechanism

In this study, the influence of pH on interfacial energy distributed over the phospholipids-bilayer surface model and the effect of hydrophobicity on coefficient of friction (f) were investigated by using microelectrophoresis. An important clinical implication of deficiency in hydrophobicity is the loss of phospholipids that is readily observed in osteoarthritis joints. This paper establishes the influence of pH on interfacial energy upon an increase f, which might be associated with a decrease of hydrophobicity of the articular surface.

Population structure of Bactrocera dorsalis s.s., B. papayae and B. philippinensis (Diptera: Tephritidae) in southeast Asia: evidence for a single species hypothesis using mitochondrial DNA and wingshape data

Background Bactrocera dorsalis s.s. is a pestiferous tephritid fruit fly distributed from Pakistan to the Pacific, with the Thai/Malay peninsula its southern limit. Sister pest taxa, B. papayae and B. philippinensis, occur in the southeast Asian archipelago and the Philippines, respectively. The relationship among these species is unclear due to their high molecular and morphological similarity. This study analysed population structure of these three species within a southeast Asian biogeographical context to assess potential dispersal patterns and the validity of their current taxonomic status. Results Geometric morphometric results generated from 15 landmarks for wings of 169 flies revealed significant differences in wing shape between almost all sites following canonical variate analysis. For the combined data set there was a greater isolation-by-distance (IBD) effect under a ‘non-Euclidean’ scenario which used geographical distances within a biogeographical ‘Sundaland context’ (r2 = 0.772, P < 0.0001) as compared to a ‘Euclidean’ scenario for which direct geographic distances between sample sites was used (r2 = 0.217, P < 0.01). COI sequence data were obtained for 156 individuals and yielded 83 unique haplotypes with no correlation to current taxonomic designations via a minimum spanning network. BEAST analysis provided a root age and location of 540kya in northern Thailand, with migration of B. dorsalis s.l. into Malaysia 470kya and Sumatra 270kya. Two migration events into the Philippines are inferred. Sequence data revealed a weak but significant IBD effect under the ‘non-Euclidean’ scenario (r2 = 0.110, P < 0.05), with no historical migration evident between Taiwan and the Philippines. Results are consistent with those expected at the intra-specific level. Conclusions Bactrocera dorsalis s.s., B. papayae and B. philippinensis likely represent one species structured around the South China Sea, having migrated from northern Thailand into the southeast Asian archipelago and across into the Philippines. No migration is apparent between the Philippines and Taiwan. This information has implications for quarantine, trade and pest management.