Quadratic Variation by Markov Chains

We introduce a novel estimator of the quadratic variation that is based on the the- ory of Markov chains. The estimator is motivated by some general results concerning filtering contaminated semimartingales. Specifically, we show that filtering can in prin- ciple remove the effects of market microstructure noise in a general framework where little is assumed about the noise. For the practical implementation, we adopt the dis- crete Markov chain model that is well suited for the analysis of financial high-frequency prices. The Markov chain framework facilitates simple expressions and elegant analyti- cal results. The proposed estimator is consistent with a Gaussian limit distribution and we study its properties in simulations and an empirical application.Markov chain, Filtering Contaminated Semimartingale, Quadratic Variation, Integrated Variance, Realized Variance, High Frequency Data

Frailty Correlated Default

This paper shows that the probability of extreme default losses on portfolios of U.S. corporate debt is much greater than would be estimated under the standard assumption that default correlation arises only from exposure to observable risk factors. At the high confidence levels at which bank loan portfolio and CDO default losses are typically measured for economic-capital and rating purposes, our empirical results indicate that conventionally based estimates are downward biased by a full order of magnitude on test portfolios. Our estimates are based on U.S. public non-financial firms existing between 1979 and 2004. We find strong evidence for the presence of common latent factors, even when controlling for observable factors that provide the most accurate available model of firm-by-firm default probabilities. ∗ We are grateful for financial support from Moody’s Corporation and Morgan Stanley, and for research assistance from Sabri Oncu and Vineet Bhagwat. We are also grateful for remarks from Torben Andersen, André Lucas, Richard Cantor, Stav Gaon, Tyler Shumway, and especially Michael Johannes. This revision is much improved because of suggestions by a referee, an associate editor, and Campbell Harvey. We are thankful to Moodys and to Ed Altman for generous assistance with data. Duffie is at The Graduate School of Business, Stanford University. Eckner and Horel are at Merrill Lynch. Saita is at Lehma

A Markov chain estimator of multivariate volatility from high frequency data

We introduce a multivariate estimator of financial volatility that is based on the theory of Markov chains. The Markov chain framework takes advantage of the discreteness of high-frequency returns. We study the finite sample properties of the estimation in a simulation study and apply it to high-frequency commodity prices

Experimental assessment of vertical shear force and bending moment in severe sea conditions

International audienceRecent studies have benchmarked the prediction of wave vertical bending moment (VBM) of ship in waves [1][2], and found significant scatter among the numerical codes.Unfortunately, experimental data in extreme waves, that are relevant to ship design, are not often easily accessible, nor completely fitted to rigorous comparison to numerical codes. Then, the improvement of numerical tools and the modelling of ship’s internal loads still requires accurate experimental data measured in steep waves (ratio wave height H to wavelength λ, H/λ = 0.1) where the ship behavior and loads are modified by non-linearities.Thus, in order to validate simulation codes, which underlies rules requirement, and to establish criteria that makes ships safer to sail in severe sea conditions, experiments are carried out in the 50m × 30m × 5m hydrodynamic and ocean engineering tank of Ecole Centrale Nantes. A 1/65th scaled model of a 6750-TEU containership is used. The ship is moored and several combinations of wavelength and wave height are tested.While segmented hulls are commonly instrumented with strain gauges, the present experiments are performed on a segmented hull with a 6DOF sensor located close to the amidship. This setting allows for a very stiff model which dramatically reduces the hydroelastic effects. According to previous study [1], the position of the sensor is chosen where the bending moment is supposed to reach a maximum value. The model motion is measured through a Qualisys IR tracking system and accelerometers are located on the fore and aft of the beam.Also, each of the 9 segments is equipped with a 3DOF dynamometer to measure the hydrodynamic loads on the hull. This allows for recovering the hydrodynamic loads on the segments and then to compute the shear force and bending moment discretized all over the ship length. A comparison is therefore possible with the 6DOF sensor. Details of the computations are given in the paper.A particular attention is paid to the reproducibility and repeatability of the tests. The innovative experimental setup and the measured data are presented in the paper. Based on previous studies [3], the effects of the non-linearities are also discussed

Frailty Correlated Default

The probability of extreme default losses on portfolios of U.S. corporate debt is much greater than would be estimated under the standard assumption that default correlation arises only from exposure to observable risk factors. At the high confidence levels at which bank loan portfolio and collateralized debt obligation (CDO) default losses are typically measured for economic capital and rating purposes, conventionally based loss estimates are downward biased by a full order of magnitude on test portfolios. Our estimates are based on U.S. public nonfinancial firms between 1979 and 2004. We find strong evidence for the presence of common latent factors, even when controlling for observable factors that provide the most accurate available model of firm-by-firm default probabilities. Copyright (c) 2009 the American Finance Association.

More humid interglacials in Ecuador during the past 500 kyr linked to latitudinal shifts of the Equatorial Front and the Intertropical Convergence Zone in the eastern tropical Pacific

Studying past changes in the eastern equatorial Pacific Ocean dynamics and their impact on precipitation on land gives us insight into how the Intertropical Convergence Zone (ITCZ) movements and the El Niño‐Southern Oscillation modulate regional and global climate. In this study we present a multiproxy record of terrigenous input from marine sediments collected off the Ecuadorian coast spanning the last 500 kyr. In parallel we estimate sea surface temperatures (SST) derived from alkenone paleothermometry for the sediments off the Ecuadorian coast and complement them with alkenone‐based SST data from the Panama Basin to the north in order to investigate SST gradients across the equatorial front. Near the equator, today's river runoff is tightly linked to SST, reaching its maximum either during the austral summer when the ITCZ migrates southward or during El Niño events. Our multiproxy reconstruction of riverine runoff indicates that interglacial periods experienced more humid conditions than the glacial periods. The north‐south SST gradient is systematically steeper during glacial times, suggesting a mean background climatic state with a vigorous oceanic cold tongue, resembling modern La Niña conditions. This enhanced north‐south SST gradient would also imply a glacial northward shift of the Intertropical Convergence Zone at least in vicinity of the cold tongue: a pattern that has not yet been reproduced in climate models

Le temps des hommes doubles

Le temps des hommes doubles : Louis Aragon a désigné ainsi la séparation voire l’opposition entre l’homme social et l’homme privé dans la société capitaliste. Pour les auteurs réunis ici, il s’agit plutôt de signifier qu’au temps de la souveraineté nationale en armes, dès lors que sont plus rigoureusement assignées aux soldats et aux citoyens à la fois une « identité » et une « cause » supposées dépasser leur état civil et leurs intérêts particuliers, l’occupation militaire multiplie, dans la recherche d’une accommodation entre les deux camps, les tensions et les combinaisons possibles entre fonctions ou statuts publics, sociabilités et influences locales, opinions et besoins. Pour caractériser les évolutions qui ont eu lieu entre les guerres déclarées par la France à l’Autriche en 1792 et à la Prusse en 1870, le présent livre met l’accent sur trois thèmes. Il traite d’abord des enjeux politiques et administratifs de l’occupation, parmi lesquels la neutralité, son devenir en tant que concept dans les relations internationales, et le positionnement des États neutres dans des conflits où l’on s’efforce de mobiliser aussi les opinions publiques. L’attention se porte ensuite sur les armées occupantes. Quelle que soit la part d’idéologie que l’autorité politique introduit dans leurs missions, la première de ces missions est de garantir leur propre sécurité. La recherche des accommodements ou le constat de l’extrême difficulté d’en trouver sont enfin abordés du point de vue des sociétés en proie à l’occupation. Dans ces situations où le présent peut être vécu et interprété en fonction d’une mémoire individuelle et collective d’expériences antérieures, le rôle joué par les occupants ne se réduit pas à la brutalité de la soldatesque et à l’exploitation économique. Ainsi, occupants et occupés peuvent aussi être amenés à jouer, même dans un contexte conflictuel, le rôle de passeurs culturels « malgré eux »