15,261 research outputs found

    Pricing default swaps: empirical evidence

    Get PDF
    In this paper we compare market prices of credit default swaps with model prices. We show that a simple reduced form model with a constant recovery rate outperforms the market practice of directly comparing bonds' credit spreads to default swap premiums. We find that the model works well for investment grade credit default swaps, but only if we use swap or repo rates as proxy for default-free interest rates. This indicates that the government curve is no longer seen as the reference default-free curve. We also show that the model is insensitive to the value of the assumed recovery ratecredit default swaps;credit risk;default risk;recovery rates;reduced form models

    Distribution on Warp Maps for Alignment of Open and Closed Curves

    Get PDF
    Alignment of curve data is an integral part of their statistical analysis, and can be achieved using model- or optimization-based approaches. The parameter space is usually the set of monotone, continuous warp maps of a domain. Infinite-dimensional nature of the parameter space encourages sampling based approaches, which require a distribution on the set of warp maps. Moreover, the distribution should also enable sampling in the presence of important landmark information on the curves which constrain the warp maps. For alignment of closed and open curves in Rd,d=1,2,3\mathbb{R}^d, d=1,2,3, possibly with landmark information, we provide a constructive, point-process based definition of a distribution on the set of warp maps of [0,1][0,1] and the unit circle S1\mathbb{S}^1 that is (1) simple to sample from, and (2) possesses the desiderata for decomposition of the alignment problem with landmark constraints into multiple unconstrained ones. For warp maps on [0,1][0,1], the distribution is related to the Dirichlet process. We demonstrate its utility by using it as a prior distribution on warp maps in a Bayesian model for alignment of two univariate curves, and as a proposal distribution in a stochastic algorithm that optimizes a suitable alignment functional for higher-dimensional curves. Several examples from simulated and real datasets are provided

    An efficient high-order algorithm for acoustic scattering from penetrable thin structures in three dimensions

    Get PDF
    This paper presents a high-order accelerated algorithm for the solution of the integral-equation formulation of volumetric scattering problems. The scheme is particularly well suited to the analysis of “thin” structures as they arise in certain applications (e.g., material coatings); in addition, it is also designed to be used in conjunction with existing low-order FFT-based codes to upgrade their order of accuracy through a suitable treatment of material interfaces. The high-order convergence of the new procedure is attained through a combination of changes of parametric variables (to resolve the singularities of the Green function) and “partitions of unity” (to allow for a simple implementation of spectrally accurate quadratures away from singular points). Accelerated evaluations of the interaction between degrees of freedom, on the other hand, are accomplished by incorporating (two-face) equivalent source approximations on Cartesian grids. A detailed account of the main algorithmic components of the scheme are presented, together with a brief review of the corresponding error and performance analyses which are exemplified with a variety of numerical results

    Business cycles in the equilibrium model of labor market search and self-insurance

    Get PDF
    The author introduces risk-averse preferences, labor-leisure choice, capital, individual productivity shocks, and market incompleteness to the standard Mortensen-Pissarides model of search and matching and explore the model's cyclical properties. There are four main findings. First and foremost, the baseline model can generate the observed large volatility of unemployment and vacancies with a realistic replacement ratio of the unemployment insurance benefits of 64 percent. Second, labor-leisure choice plays a crucial role in generating the large volatilities; additional utility from leisure when unemployed makes the value of unemployment close to the value of employment, which is crucial in generating a strong amplification, even with the moderate replacement ratio. Besides, it contributes to the amplification through an adjustment in the intensive margin of labor supply. Third, the borrowing constraint or uninsured individual productivity shocks do not significantly affect the cyclical properties of unemployment and vacancies: Most workers are well insured only with self-insurance. Fourth, the model better replicates the business cycle properties of the U.S. economy, thanks to the co-existence of adjustments in the intensive and extensive margins of labor supply and the stronger amplification.Employment (Economic theory) ; Business cycles

    A discrete framework to find the optimal matching between manifold-valued curves

    Full text link
    The aim of this paper is to find an optimal matching between manifold-valued curves, and thereby adequately compare their shapes, seen as equivalent classes with respect to the action of reparameterization. Using a canonical decomposition of a path in a principal bundle, we introduce a simple algorithm that finds an optimal matching between two curves by computing the geodesic of the infinite-dimensional manifold of curves that is at all time horizontal to the fibers of the shape bundle. We focus on the elastic metric studied in the so-called square root velocity framework. The quotient structure of the shape bundle is examined, and in particular horizontality with respect to the fibers. These results are more generally given for any elastic metric. We then introduce a comprehensive discrete framework which correctly approximates the smooth setting when the base manifold has constant sectional curvature. It is itself a Riemannian structure on the product manifold of "discrete curves" given by a finite number of points, and we show its convergence to the continuous model as the size of the discretization goes to infinity. Illustrations of optimal matching between discrete curves are given in the hyperbolic plane, the plane and the sphere, for synthetic and real data, and comparison with dynamic programming is established

    Numerical Computation of Weil-Peterson Geodesics in the Universal Teichm\"uller Space

    Full text link
    We propose an optimization algorithm for computing geodesics on the universal Teichm\"uller space T(1) in the Weil-Petersson (WPW P) metric. Another realization for T(1) is the space of planar shapes, modulo translation and scale, and thus our algorithm addresses a fundamental problem in computer vision: compute the distance between two given shapes. The identification of smooth shapes with elements on T(1) allows us to represent a shape as a diffeomorphism on S1S^1. Then given two diffeomorphisms on S1S^1 (i.e., two shapes we want connect with a flow), we formulate a discretized WPW P energy and the resulting problem is a boundary-value minimization problem. We numerically solve this problem, providing several examples of geodesic flow on the space of shapes, and verifying mathematical properties of T(1). Our algorithm is more general than the application here in the sense that it can be used to compute geodesics on any other Riemannian manifold.Comment: 21 pages, 11 figure

    Uninsurable individual risk and the cyclical behavior of unemployment and vacancies

    Get PDF
    This paper is concerned with the business cycle dynamics in search-and-matching models of the labor market when agents are ex post heterogeneous. We focus on wealth heterogeneity that comes as a result of imperfect opportunities to insure against idiosyncratic risk. We show that this heterogeneity implies wage rigidity relative to a complete insurance economy. The fraction of wealth-poor agents prevents real wages from falling too much in recessions since small decreases in income imply large losses in utility. Analogously, wages rise less in expansions compared with the standard model because small increases are enough for poor workers to accept job offers. This mechanism reduces the volatility of wages and increases the volatility of vacancies and unemployment. This channel can be relevant if the lack of insurance is large enough so that the fraction of agents close to the borrowing constraint is significant. However, discipline in the parameterization implies an earnings variance and persistence in the unemployment state that result in a large degree of self-insurance.

    Assessing the Performance of Simple Contracts Empirically: The Case of Percentage Fees

    Get PDF
    This paper estimates the cost of using simple percentage fees rather than the broker optimal Bayesian mechanism, using data for real estate transactions in Boston in the mid-1990s. This counterfactual analysis shows that interme- diaries using the best percentage fee mechanisms with fees ranging from 5.4% to 7.4% achieve 85% or more of the maximum profit. With the empirically observed 6% fees intermediaries achieve at least 83% of the maximum profit and with an optimally structured linear fee, they achieve 98% or more of the maximum profit

    Stock Market Participation, Portfolio Choice and Pensions over the Life-cycle

    Get PDF
    In this paper we present a calibrated life-cycle model is able to simultaneously match asset allocations and stock market participation profiles over the life-cycle. The inclusion of per period fixed costs and a public pension scheme eradicates the need to assume heterogeneity in preferences, or implausible parameter values, in order to explain observed patterns. We find a per period fixed cost of less than two percent of the permanent component of annual labour income can explain the limited stock marker participation. More generous public pensions are seen to crowd out private savings and significantly reduce the estimates of these fixed costs. This is the first time that concurrent matching of participation and shares has been achieved within the standard preference framework
    corecore