The Zeeman Effect in Finance: Libor Spectroscopy and Basis Risk Management

Once upon a time there was a classical financial world in which all the Libors were equal. Standard textbooks taught that simple relations held, such that, for example, a 6 months Libor Deposit was replicable with a 3 months Libor Deposits plus a 3x6 months Forward Rate Agreement (FRA), and that Libor was a good proxy of the risk free rate required as basic building block of no-arbitrage pricing theory. Nowadays, in the modern financial world after the credit crunch, some Libors are more equal than others, depending on their rate tenor, and classical formulas are history. Banks are not anymore too "big to fail", Libors are fixed by panels of risky banks, and they are risky rates themselves. These simple empirical facts carry very important consequences in derivative's trading and risk management, such as, for example, basis risk, collateralization and regulatory pressure in favour of Central Counterparties. Something that should be carefully considered by anyone managing even a single plain vanilla Swap. In this qualitative note we review the problem trying to shed some light on this modern animal farm, recurring to an analogy with quantum physics, the Zeeman effect

Two Curves, One Price :Pricing & Hedging Interest Rate Derivatives Decoupling Forwarding and Discounting Yield Curves

We revisit the problem of pricing and hedging plain vanilla single-currency interest rate derivatives using multiple distinct yield curves for market coherent estimation of discount factors and forward rates with dierent underlying rate tenors. Within such double-curve-single-currency framework, adopted by the market after the credit-crunch crisis started in summer 2007, standard single-curve no-arbitrage relations are no longer valid, and can be recovered by taking properly into account the forward basis bootstrapped from market basis swaps. Numerical results show that the resulting forward basis curves may display a richer micro-term structure that may induce appreciable effects on the price of interest rate instruments. By recurring to the foreign-currency analogy we also derive generalised no-arbitrage double-curve market-like formulas for basic plain vanilla interest rate derivatives, FRAs, swaps, caps/floors and swaptions in particular. These expressions include a quanto adjustment typical of cross-currency derivatives, naturally originated by the change between the numeraires associated to the two yield curves, that carries on a volatility and correlation dependence. Numerical scenarios confirm that such correction can be non negligible, thus making unadjusted double-curve prices, in principle, not arbitrage free. Both the forward basis and the quanto adjustment find a natural financial explanation in terms of counterparty risk.liquidity, crisis, counterparty risk, yield curve, forward curve, discount curve, pricing, hedging, interest rate derivatives, FRAs, swaps, basis swaps, caps, floors, swaptions, basis adjustment, quanto adjustment, measure changes, no arbitrage, QuantLib

Pricing and Risk Management with High-Dimensional Quasi Monte Carlo and Global Sensitivity Analysis

We review and apply Quasi Monte Carlo (QMC) and Global Sensitivity Analysis (GSA) techniques to pricing and risk management (greeks) of representative financial instruments of increasing complexity. We compare QMC vs standard Monte Carlo (MC) results in great detail, using high-dimensional Sobol' low discrepancy sequences, different discretization methods, and specific analyses of convergence, performance, speed up, stability, and error optimization for finite differences greeks. We find that our QMC outperforms MC in most cases, including the highest-dimensional simulations and greeks calculations, showing faster and more stable convergence to exact or almost exact results. Using GSA, we are able to fully explain our findings in terms of reduced effective dimension of our QMC simulation, allowed in most cases, but not always, by Brownian bridge discretization. We conclude that, beyond pricing, QMC is a very promising technique also for computing risk figures, greeks in particular, as it allows to reduce the computational effort of high-dimensional Monte Carlo simulations typical of modern risk management.Comment: 43 pages, 21 figures, 6 table

Métodos para superar a dormência de sementes de bracatinga (Mimosa scabrella Benth.).

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Clinical utility of anti-TNFα trough levels and anti-drug antibodies in the management of inflammatory bowel disease

Abstract 1. Introduction The inflammatory bowel diseases (IBD) are chronic inflammatory diseases of the gastrointestinal (GI) tract that are associated with significant morbidity and disability. Over the past few decades, biological therapy with anti-Tumor Necrosis Factor agents (anti TNF-α) has emerged as a corner stone of treatment for IBD. Despite significant response and remission rates, clinicians are often confronted to secondary loss of responses or side effects during long term maintenance. There is emerging data from the literature suggesting that infliximab trough levels might help clinicians tailoring therapy and overcome on-treatment IBD flares. 2. Study aims To evaluate the indications for trough anti-TNF-α and ADA serum testing, the prevalence of ADA and the therapeutic range of anti-TNF trough level measures and to assess the clinical impact of trough anti-TNF-α and ADA serum levels on routine management of IBD patients 3. Study Design This is a retrospective study of anti-TNF trough level and ADA serum determinations in IBD patients receiving anti-TNF agents. We included all therapeutic drug monitoring measurements performed from 05.03.2013 to 23.04.2014. A total of 70 patients where included between two tertiary referral centers. 3.1 Inclusion criteria 1. Adult patients affected with CD or UC. 2. Patients for whom an anti-TNF-α trough level and / or anti- drug antibodies were performed at CHUV. 3. Current treatment by anti-TNF- α agents. 3.2. Exclusion criteria 1.No IBD diagnosis. 2. Adults patients suffering from another chronic inflammatory disease requiring treatment with anti-TNF-α such as rheumatoid arthritis. 3. Treatment with anti-TNF-α interrupted before the assays. Results In our patients (n=70) appear no male or female predominance and the average age was 40 years. Most tests (n=117) were performed for Crohn's disease (73%). A large subset of our patients had been previously managed with immunomodulators (54.%). However, few cases were on combination therapy (10%). The great majority (79%) for the indication of the determinations were performed as "medical follow up". The percentage of patients with an IFX trough level within the desired range (3-8 μg/ml) is at first determination rather low, but tends to increase during the subsequent determinations. Of 117 total tests assessed the results impacted treatment decisions in approximately 40% of the cases. Conclusion Therapetic drug monitoring will guide the induction, the dose titration to prevent disease flares and finally it will guide interventions for cases with loss of response to biologicals. However, some knowledge gaps still need to be addressed to confirm this strategy. We feel that after testing drug and ADA levels, clinicians may gain a sense of saliency in relation to decision-making not only in cases with poor response to biologicals but even in stable cas

Substrato e temperatura para a germinação de sementes de caixeta (Tabebuia cassinoides (Lam.) DC.).

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