Managing sovereign credit risk in bond portfolios

With the recent development of the European debt crisis, traditional index bond management has been severely called into question. We focus here on the risk issues raised by the classical market-capitalization weighting scheme. We propose an approach to properly measure sovereign credit risk in a fixed-income portfolio. For that, we assume that CDS spreads follow a SABR process and we derive a sovereign credit risk measure based on CDS spreads and duration of portfolio bonds. We then consider two alternative weighting methods which are fundamental indexation and risk-based indexation. Fundamental indexation is based on GDP indexation whereas risk-based indexation uses a risk budgeting approach based on our sovereign credit risk measure. We then compare all these methods in terms of risk, diversification and performance. We show that the risk budgeting approach is the most appropriate scheme to manage sovereign credit risk in bond portfolios and gives very appealing results with respect to active management of bond portfolios.sovereign credit risk, credit spread, convex risk measure, sabr model, CDS, bond indices, fundamental indexation, risk-based indexation, risk budgeting

Numerical approximation for a superreplication problem under gamma constraints

International audienceWe study a superreplication problem of European options with gamma constraints, in mathematical finance. The initially unbounded control problem is set back to a problem involving a viscosity PDE solution with a set of bounded controls. Then a numerical approach is introduced, inconditionnally stable with respect to the mesh steps. A generalized finite difference scheme is used since basic finite differences cannot work in our case. Numerical tests illustrate the validity of our approach

Managing risk exposures using the risk budgeting approach

The ongoing economic crisis has profoundly changed the industry of the asset management, by putting risk management at the heart of most investment processes. This new risk-based investment style does not rely on returns forecasts and is therefore assumed to be more robust. In 2011, it has particularly encountered a great success with the achievement of minimum variance, ERC and risk parity strategies in portfolios of several large institutional investors. These portfolio constructions are special cases of a more general class of allocation models, known as the risk budgeting approach. In a risk budgeting portfolio, the risk contribution from each component is equal to the budget of risk defined by the portfolio manager. Unfortunately, even if risk budgeting techniques are widely used by market practitioners, they are few results about the behavior of such portfolios in the academic literature. In this paper, we derive the theoretical properties of the risk budgeting portfolio and show that its volatility is located between those of minimum variance and weight budgeting portfolios. We also discuss the existence, uniqueness and optimality of such a portfolio. In a second part of the paper, we propose several applications of risk budgeting techniques for risk-based allocation, like risk parity funds and strategic asset allocation, and equity and bond alternative indexations

Managing sovereign credit risk in bond portfolios

With the recent development of the European debt crisis, traditional index bond management has been severely called into question. We focus here on the risk issues raised by the classical market-capitalization weighting scheme. We propose an approach to properly measure sovereign credit risk in a fixed-income portfolio. For that, we assume that CDS spreads follow a SABR process and we derive a sovereign credit risk measure based on CDS spreads and duration of portfolio bonds. We then consider two alternative weighting methods which are fundamental indexation and risk-based indexation. Fundamental indexation is based on GDP indexation whereas risk-based indexation uses a risk budgeting approach based on our sovereign credit risk measure. We then compare all these methods in terms of risk, diversification and performance. We show that the risk budgeting approach is the most appropriate scheme to manage sovereign credit risk in bond portfolios and gives very appealing results with respect to active management of bond portfolios

„Always on“ – Einfluss der Fahrsituation auf die Nutzung von Smartphones und Infotainmentsystemen in Fahrzeugen

Der Beitrag beschäftigt sich mit der verkehrssituationsabhängigen Nutzung von Smartphones und Infotainmentsystemen in Fahrzeugen. Eine Online-Befragung mit 215 Probanden zeigt, dass Smartphones und Infotainmentsysteme situationsabhängig verwendet werden und situationsspezifische Gestaltungsmaßnahmen in Zukunft notwendig sind

Beta-Catenin Signaling Plays a Disparate Role in Different Phases of Fracture Repair: Implications for Therapy to Improve Bone Healing

In a study in mice Benjamin Alman and colleagues show that β-catenin functions differently in different stages of fracture repair; moreover, activation of β-catenin by lithium improves fracture healing when used in later phases of repair

Symmetry and Topology in Superconductors - Odd-frequency pairing and edge states -

Superconductivity is a phenomenon where the macroscopic quantum coherence appears due to the pairing of electrons. This offers a fascinating arena to study the physics of broken gauge symmetry. However, the important symmetries in superconductors are not only the gauge invariance. Especially, the symmetry properties of the pairing, i.e., the parity and spin-singlet/spin-triplet, determine the physical properties of the superconducting state. Recently it has been recognized that there is the important third symmetry of the pair amplitude, i.e., even or odd parity with respect to the frequency. The conventional uniform superconducting states correspond to the even-frequency pairing, but the recent finding is that the odd-frequency pair amplitude arises in the spatially non-uniform situation quite ubiquitously. Especially, this is the case in the Andreev bound state (ABS) appearing at the surface/interface of the sample. The other important recent development is on the nontrivial topological aspects of superconductors. As the band insulators are classified by topological indices into (i) conventional insulator, (ii) quantum Hall insulator, and (iii) topological insulator, also are the gapped superconductors. The influence of the nontrivial topology of the bulk states appears as the edge or surface of the sample. In the superconductors, this leads to the formation of zero energy ABS (ZEABS). Therefore, the ABSs of the superconductors are the place where the symmetry and topology meet each other which offer the stage of rich physics. In this review, we discuss the physics of ABS from the viewpoint of the odd-frequency pairing, the topological bulk-edge correspondence, and the interplay of these two issues. It is described how the symmetry of the pairing and topological indices determines the absence/presence of the ZEABS, its energy dispersion, and properties as the Majorana fermions.Comment: 91 pages, 38 figures, Review article, references adde

Impact of the TCR Signal on Regulatory T Cell Homeostasis, Function, and Trafficking

Signaling through the T cell antigen receptor (TCR) is important for the homeostasis of naïve and memory CD4+ T cells. The significance of TCR signaling in regulatory T (Treg) cells has not been systematically addressed. Using an Ox40-cre allele that is prominently expressed in Treg cells, and a conditional null allele of the gene encoding p56Lck, we have examined the importance of TCR signaling in Treg cells. Inactivation of p56Lck resulted in abnormal Treg homeostasis characterized by impaired turnover, preferential redistribution to the lymph nodes, loss of suppressive function, and striking changes in gene expression. Abnormal Treg cell homeostasis and function did not reflect the involvement of p56Lck in CD4 function because these effects were not observed when CD4 expression was inactivated by Ox40-cre.The results make clear multiple aspects of Treg cell homeostasis and phenotype that are dependent on a sustained capacity to signal through the TCR

Cellular processes of v-Src transformation revealed by gene profiling of primary cells - Implications for human cancer

<p>Abstract</p> <p>Background</p> <p>Cell transformation by the Src tyrosine kinase is characterized by extensive changes in gene expression. In this study, we took advantage of several strains of the Rous sarcoma virus (RSV) to characterize the patterns of v-Src-dependent gene expression in two different primary cell types, namely chicken embryo fibroblasts (CEF) and chicken neuroretinal (CNR) cells. We identified a common set of v-Src regulated genes and assessed if their expression is associated with disease-free survival using several independent human tumor data sets.</p> <p>Methods</p> <p>CEF and CNR cells were infected with transforming, non-transforming, and temperature sensitive mutants of RSV to identify the patterns of gene expression in response to v-Src-transformation. Microarray analysis was used to measure changes in gene expression and to define a common set of v-Src regulated genes (CSR genes) in CEF and CNR cells. A clustering enrichment regime using the CSR genes and two independent breast tumor data-sets was used to identify a 42-gene aggressive tumor gene signature. The aggressive gene signature was tested for its prognostic value by conducting survival analyses on six additional tumor data sets.</p> <p>Results</p> <p>The analysis of CEF and CNR cells revealed that cell transformation by v-Src alters the expression of 6% of the protein coding genes of the genome. A common set of 175 v-Src regulated genes (CSR genes) was regulated in both CEF and CNR cells. Within the CSR gene set, a group of 42 v-Src inducible genes was associated with reduced disease- and metastasis-free survival in several independent patient cohorts with breast or lung cancer. Gene classes represented within this group include DNA replication, cell cycle, the DNA damage and stress responses, and blood vessel morphogenesis.</p> <p>Conclusion</p> <p>By studying the v-Src-dependent changes in gene expression in two types of primary cells, we identified a set of 42 inducible genes associated with poor prognosis in breast and lung cancer. The identification of these genes provides a set of biomarkers of aggressive tumor behavior and a framework for the study of cancer cells characterized by elevated Src kinase activity.</p