Predicting Financial Distress in a High-Stress Financial World: The Role of Option Prices as Bank Risk Metrics

The current financial crisis offers a unique opportunity to investigate the leading properties of market indicators in a stressed environment and their usefulness from a banking supervision perspective. One pool of relevant information that has been little explored in the empirical literature is the market for bank’s exchange-traded option contracts. In this paper, we first extract implied volatility indicators from the prices of the most actively traded option contracts on financial firms’ equity. We then examine empirically their ability to predict financial distress by applying survival analysis techniques to a sample of large US financial firms. We find that market indicators extracted from option prices significantly explain the survival time of troubled financial firms and do a better job in predicting financial distress than other time-varying covariates typically included in bank failure models. Overall, both accounting information and option prices contain useful information of subsequent financial problems and, more importantly, the combination produces good forecasts in a high-stress financial world, full of doubts and uncertainties.Financial distress; Financial system oversight; Market discipline; Options; Implied volatility; Survival analysis.

Two-way interplays between capital buffers, credit and output: evidence from French banks

We assess the extent to which capital buffers (the capital banks hold in excess of the regulatory minimum) exacerbate rather than reduce the cyclical behavior of credit. We empirically study the relationships between output gap, capital buffers and loan growth with firm-level data for French banks over the period 1993—2009. Our findings reveal that bank capital buffers intensify the cyclical credit fluctuations arising from the output gap developments, all the more as better quality capital is considered. Moreover, by performing Granger causality tests at the bank level, we find evidence of a two-way causality between capital buffers and loan growth, pointing to mutually reinforcing mechanisms. Overall, those empirical results lend support to a countercyclical financial regulation that focuses on highest-quality capital and aims at smoothing loan growth.Bank Capital Regulation, Procyclicality, Capital Buffers, Business Cycle Fluctuations, Basel III.

A new wavelength calibration for echelle spectrographs using Fabry-Perot etalons

The study of Earth-mass extrasolar planets via the radial-velocity technique and the measurement of the potential cosmological variability of fundamental constants call for very-high-precision spectroscopy at the level of \updelta\lambda/\lambda<10^{-9}. Wavelength accuracy is obtained by providing two fundamental ingredients: 1) an absolute and information-rich wavelength source and 2) the ability of the spectrograph and its data reduction of transferring the reference scale (wavelengths) to a measurement scale (detector pixels) in a repeatable manner. The goal of this work is to improve the wavelength calibration accuracy of the HARPS spectrograph by combining the absolute spectral reference provided by the emission lines of a thorium-argon hollow-cathode lamp (HCL) with the spectrally rich and precise spectral information of a Fabry-P\'erot-based calibration source. On the basis of calibration frames acquired each night since the Fabry-P\'erot etalon was installed on HARPS in 2011, we construct a combined wavelength solution which fits simultaneously the thorium emission lines and the Fabry-P\'erot lines. The combined fit is anchored to the absolute thorium wavelengths, which provide the `zero-point' of the spectrograph, while the Fabry-P\'erot lines are used to improve the (spectrally) local precision. The obtained wavelength solution is verified for auto-consistency and tested against a solution obtained using the HARPS Laser-Frequency Comb (LFC). The combined thorium+Fabry-P\'erot wavelength solution shows significantly better performances compared to the thorium-only calibration. The presented techniques will therefore be used in the new HARPS and HARPS-N pipeline, and will be exported to the ESPRESSO spectrograph.Comment: 15 pages, 8 figure

So close, so different:characterization of the K2-36 planetary system with HARPS-N

A.C.C. acknowledges support from the Science & Technology Facilities Council (STFC) consolidated grant number ST/R000824/1. C.A.W. acknowledges support from the STFC grant ST/P000312/1. The HARPS-N project has been funded by the Prodex Program of the Swiss Space Office (SSO), the Harvard University Origins of Life Initiative (HUOLI), the Scottish Universities Physics Alliance (SUPA), the University of Geneva, the Smithsonian Astrophysical Observatory (SAO), and the Italian National Astrophysical Institute (INAF), the University of St Andrews, Queen’s University Belfast, and the University of Edinburgh. The research leading to these results received funding from the European Union Seventh Framework Programme (FP7/2007- 2013) under grant agreement number 313014 (ETAEARTH).Context. K2-36 is a K dwarf orbited by two small (Rb = 1.43 ± 0.08 R⊕ and Rc = 3.2 ± 0.3 R⊕), close-in (ab = 0.022 AU and ac = 0.054 AU) transiting planets discovered by the Kepler/K2 space observatory. They are representatives of two distinct families of small planets (Rp < 4 R⊕) recently emerged from the analysis of Kepler data, with likely a different structure, composition and evolutionary pathways. Aims. We revise the fundamental stellar parameters and the sizes of the planets, and provide the first measurement of their massesand bulk densities, which we use to infer their structure and composition. Methods. We observed K2-36 with the HARPS-N spectrograph over∼3.5 years, collecting 81 useful radial velocity measurements. The star is active, with evidence for increasing levels of magnetic activity during the observing time span. The radial velocity scatter is ∼17 m s−1 due to the stellar activity contribution, which is much larger than the semi-amplitudes of the planetary signals. We tested different methods for mitigating the stellar activity contribution to the radial velocity time variations and measuring the planet masses with good precision. Results. We found that K2-36 is likely a∼1 Gyr old system, and by treating the stellar activity through a Gaussian process regression, we measured the planet masses mb = 3.9 ± 1.1 M⊕ and mc = 7.8 ± 2.3 M⊕. The derived planet bulk densities ρb = 7.2+2.5−2.1 g cm−3 and ρc = 1.3+0.7-0.5 g cm−3 point out that K2-36 b has a rocky, Earth-like composition, and K2-36 c is a low-density sub-Neptune. Conclusions. Composed of two planets with similar orbital separations but different densities, K2-36 represents an optimal laboratory for testing the role of the atmospheric escape in driving the evolution of close-in, low-mass planets after ∼1 Gyr from their formation. Due to their similarities, we performed a preliminary comparative analysis between the systems K2-36 and Kepler-36, which we deem worthy of a more detailed investigation.PostprintPeer reviewe

An 11 Earth-mass, Long-period Sub-Neptune Orbiting a Sun-like Star

Although several thousands of exoplanets have now been detected and characterized, observational biases have led to a paucity of long-period, low-mass exoplanets with measured masses and a corresponding lag in our understanding of such planets. In this paper we report the mass estimation and characterization of the long-period exoplanet Kepler-538b. This planet orbits a Sun-like star (V = 11.27) with M_* = 0.892 +/- (0.051, 0.035) M_sun and R_* = 0.8717 +/- (0.0064, 0.0061) R_sun. Kepler-538b is a 2.215 +/- (0.040, 0.034) R_earth sub-Neptune with a period of P = 81.73778 +/- 0.00013 d. It is the only known planet in the system. We collected radial velocity (RV) observations with HIRES on Keck I and HARPS-N on the TNG. We characterized stellar activity by a Gaussian process with a quasi-periodic kernel applied to our RV and cross correlation function full width at half maximum (FWHM) observations. By simultaneously modeling Kepler photometry, RV, and FWHM observations, we found a semi-amplitude of K = 1.68 +/- (0.39, 0.38) m s^-1 and a planet mass of M_p = 10.6 +/- (2.5, 2.4) M_earth. Kepler-538b is the smallest planet beyond P = 50 d with an RV mass measurement. The planet likely consists of a significant fraction of ices (dominated by water ice), in addition to rocks/metals, and a small amount of gas. Sophisticated modeling techniques such as those used in this paper, combined with future spectrographs with ultra high-precision and stability will be vital for yielding more mass measurements in this poorly understood exoplanet regime. This in turn will improve our understanding of the relationship between planet composition and insolation flux and how the rocky to gaseous transition depends on planetary equilibrium temperature

HARPS-N radial velocities confirm the low densities of the Kepler-9 planets

We investigated the discrepancy between planetary mass determination using the transit timing variations (TTVs) and radial velocities (RVs), by analysing the multi-planet system Kepler-9. Despite being the first system characterised with TTVs, there are several discrepant solutions in the literature, with those reporting lower planetary densities being apparently in disagreement with high-precision RV observations. To resolve this, we gathered HARPS-N RVs at epochs that maximised the difference between the predicted RV curves from discrepant solutions in the literature. We also re-analysed the full Kepler data-set and performed a dynamical fit, within a Bayesian framework, using the newly derived central and duration times of the transits. We compared these results with the RV data and found that our solution better describes the RV observations, despite the masses of the planets being nearly half that presented in the discovery paper. We therefore confirm that the TTV method can provide mass determinations that agree with those determined using high-precision RVs. The low densities of the planets place them in the scarcely populated region of the super-Neptunes / inflated sub-Saturns in the mass-radius diagram.Comment: 11 pages, 9 figures, 5 tables. Accepted for publication in MNRA

K2-291b:A rocky super-Earth in a 2.2 day orbit

K2-291 (EPIC 247418783) is a solar-type star with a radius of R_star = 0.899 $\pm$ 0.034 R_sun and mass of M_star=0.934 $\pm$ 0.038 M_sun. From K2 C13 data, we found one super-Earth planet (R_p = 1.589+0.095-0.072 R_Earth) transiting this star on a short period orbit (P = 2.225177 +6.6e-5 -6.8e-5 days). We followed this system up with adaptive-optic imaging and spectroscopy to derive stellar parameters, search for stellar companions, and determine a planet mass. From our 75 radial velocity measurements using HIRES on Keck I and HARPS-N on Telescopio Nazionale Galileo, we constrained the mass of EPIC 247418783b to M_p = 6.49 $\pm$ 1.16 M_Earth. We found it necessary to model correlated stellar activity radial velocity signals with a Gaussian process in order to more accurately model the effect of stellar noise on our data; the addition of the Gaussian process also improved the precision of this mass measurement. With a bulk density of 8.84+2.50-2.03 g cm-3, the planet is consistent with an Earth-like rock/iron composition and no substantial gaseous envelope. Such an envelope, if it existed in the past, was likely eroded away by photo-evaporation during the first billion years of the star's lifetime.Comment: Accepted to AJ, 15 pages, 8 figure

Analytical and computational advances, opportunities, and challenges in marine organic biogeochemistry in an era of "Omics"

© The Author(s), 2020. This article is distributed under the terms of the Creative Commons Attribution License. The definitive version was published in Steen, A. D., Kusch, S., Abdulla, H. A., Cakic, N., Coffinet, S., Dittmar, T., Fulton, J. M., Galy, V., Hinrichs, K., Ingalls, A. E., Koch, B. P., Kujawinski, E., Liu, Z., Osterholz, H., Rush, D., Seidel, M., Sepulveda, J., & Wakeham, S. G. Analytical and computational advances, opportunities, and challenges in marine organic biogeochemistry in an era of "Omics". Frontiers in Marine Science, 7, (2020): 718, doi:10.3389/fmars.2020.00718.Advances in sampling tools, analytical methods, and data handling capabilities have been fundamental to the growth of marine organic biogeochemistry over the past four decades. There has always been a strong feedback between analytical advances and scientific advances. However, whereas advances in analytical technology were often the driving force that made possible progress in elucidating the sources and fate of organic matter in the ocean in the first decades of marine organic biogeochemistry, today process-based scientific questions should drive analytical developments. Several paradigm shifts and challenges for the future are related to the intersection between analytical progress and scientific evolution. Untargeted “molecular headhunting” for its own sake is now being subsumed into process-driven targeted investigations that ask new questions and thus require new analytical capabilities. However, there are still major gaps in characterizing the chemical composition and biochemical behavior of macromolecules, as well as in generating reference standards for relevant types of organic matter. Field-based measurements are now routinely complemented by controlled laboratory experiments and in situ rate measurements of key biogeochemical processes. And finally, the multidisciplinary investigations that are becoming more common generate large and diverse datasets, requiring innovative computational tools to integrate often disparate data sets, including better global coverage and mapping. Here, we compile examples of developments in analytical methods that have enabled transformative scientific advances since 2004, and we project some challenges and opportunities in the near future. We believe that addressing these challenges and capitalizing on these opportunities will ensure continued progress in understanding the cycling of organic carbon in the ocean.The Hanse-Wissenschaftskolleg Delmenhorst, Germany, sponsored the “Marine Organic Biogeochemistry” workshop in April 2019, of which this working group report was a part. The workshop was funded by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation) – project number: 422798570. The Geochemical Society provided additional funding for the conference. AS was supported by DOE grant DE-SC0020369