Bank incentives and optimal CDOs

The paper examines a delegated monitoring problem between investors and a bank holding a portfolio of correlated loans displaying “contagion.” Moral hazard prevents the bank from monitoring continuously unless it is compensated with the right incentive-compatible contract. The asset pool is liquidated when losses exceed a state-contingent cut-off rule. The bank bears a relatively high share of the risk initially, as it should have high-powered incentives to monitor, but its long term financial stake tapers off as losses unfold. Liquidity regulation based on securitization can replicate the optimal contract. The sponsor provides an internal credit enhancement out of the proceeds of the sale and extends protection in the form of weighted tranches of collateralized debt obligations. In compensation the trust pays servicing and rent-preserving fees if a long enough period elapses with no losses occurring. Rather than being detrimental, well-designed securitization seems an effective means of implementing the second best.Credit risk transfer, Default Risk, Contagion.

Optimal Supervisory Policies and Depositor-Preferences Laws.

When supervisors have imperfect information about the soundness of banks, they may be unaware of insolvency problems that develop in the interval between on-site examinations. Supervising banks more often will alleviate this problem but will increase the costs of supervision. This paper analyzes the trade-offs that supervisors face between the cost of supervision and their need to monitor banks effectively. We first characterize the optimal supervisory policy, in terms of the time between examinations and the closure rule at examinations, and compare it with the policy of an independent supervisor. We then show that making this supervisor accountable for deposit insurance losses in general reduces the excessive forbearance of the independent supervisor and may also improve on the time between examinations. Finally, we extend our analysis to the impact of depositor-preference laws on supervisors' monitoring incentives and show that these laws may lead to conflicting effects on the time between examinations and closure policy vis-a-vis the social optimum.Deposit Insurance; Depositor Preference; Supervision.

Optimal quantization for the pricing of swing options

In this paper, we investigate a numerical algorithm for the pricing of swing options, relying on the so-called optimal quantization method. The numerical procedure is described in details and numerous simulations are provided to assert its efficiency. In particular, we carry out a comparison with the Longstaff-Schwartz algorithm.Comment: 27

Quadratic optimal functional quantization of stochastic processes and numerical applications

In this paper, we present an overview of the recent developments of functional quantization of stochastic processes, with an emphasis on the quadratic case. Functional quantization is a way to approximate a process, viewed as a Hilbert-valued random variable, using a nearest neighbour projection on a finite codebook. A special emphasis is made on the computational aspects and the numerical applications, in particular the pricing of some path-dependent European options.Comment: 41 page

Lattice dynamics of mixed semiconductors (Be,Zn)Se from first-principles calculations

Vibration properties of Zn(1-x)Be(x)Se, a mixed II-VI semiconductor haracterized by a high contrast in elastic properties of its pure constituents, ZnSe and BeSe, are simulated by first-principles calculations of electronic structure, lattice relaxation and frozen phonons. The calculations within the local density approximation has been done with the Siesta method, using norm-conserving pseudopotentials and localized basis functions; the benchmark calculations for pure endsystems were moreover done also by all-electron WIEN2k code. An immediate motivation for the study was to analyze, at the microscopic level, the appearance of anomalous phonon modes early detected in Raman spectra in the intermediate region (20 to 80%) of ZnBe concentration. This was early discussed on the basis of a percolation phenomenon, i.e., the result of the formation of wall-to-wall --Be--Se-- chains throughout the crystal. The presence of such chains was explicitly allowed in our simulation and indeed brought about a softening and splitting off of particular modes, in accordance with experimental observation, due to a relative elongation of Be--Se bonds along the chain as compared to those involving isolated Be atoms. The variation of force constants with interatomic distances shows common trends in relative independence on the short-range order.Comment: 11 pages, 10 figures, to be published in Phys. Rev.

Whole genome sequencing of a single Bos taurus animal for single nucleotide polymorphism discovery

The next generation sequencing of a single cow genome with low-to-medium coverage has revealed 2.44 million new SNPs

Diagnostic applications of next generation sequencing: working towards quality standards

Over the past 6 years, next generation sequencing (NGS) has been established as a valuable high-throughput method for research in molecular genetics and has successfully been employed in the identification of rare and common genetic variations. All major NGS technology companies providing commercially available instruments (Roche 454, Illumina, Life Technologies) have recently marketed bench top sequencing instruments with lower throughput and shorter run times, thereby broadening the applications of NGS and opening the technology to the potential use for clinical diagnostics. Although the high expectations regarding the discovery of new diagnostic targets and an overall reduction of cost have been achieved, technological challenges in instrument handling, robustness of the chemistry and data analysis need to be overcome. To facilitate the implementation of NGS as a routine method in molecular diagnostics, consistent quality standards need to be developed. Here the authors give an overview of the current standards in protocols and workflows and discuss possible approaches to define quality criteria for NGS in molecular genetic diagnostics

Applications and data analysis of next-generation sequencing

Over the past 6 years, next-generation sequencing (NGS) has been established as a valuable high-throughput method for research in molecular genetics and has successfully been employed in the identification of rare and common genetic variations. Although the high expectations regarding the discovery of new diagnostic targets and an overall reduction of cost have been achieved, technological challenges in instrument handling, robustness of the chemistry, and data analysis need to be overcome. Each workflow and sequencing platform have their particular problems and caveats, which need to be addressed. Regarding NGS, there is a variety of different enrichment methods, sequencing devices, or technologies as well as a multitude of analyzing software products available. In this manuscript, the authors focus on challenges in data analysis when employing different target enrichment methods and the best applications for each of the

ERK1 as a therapeutic target for dendritic cell vaccination against high-grade gliomas

Glioma regression requires the recruitment of potent anti-tumor immune cells into the tumor microenvironment. Dendritic cells (DCs) play a role in immune responses to these tumors. The fact that DC vaccines do not effectively combat high-grade gliomas, however, suggests that DCs need to be genetically modified especially to promote their migration to tumor relevant sites. Previously, we identified extracellular signal-regulated kinase (ERK1) as a regulator of DC immunogenicity and brain autoimmunity. In the present study, we made use of modern magnetic resonance methods to study the role of ERK1 in regulating DC migration and tumor progression in a model of high-grade glioma. We found that ERK1-deficient mice are more resistant to the development of gliomas, and tumor growth in these mice is accompanied by a higher infiltration of leukocytes. ERK1-deficient DCs exhibit an increase in migration that is associated with sustained Cdc42 activation and increased expression of actin-associated cytoskeleton-organizing proteins. We also demonstrated that ERK1 deletion potentiates DC vaccination and provides a survival advantage in high-grade gliomas. Considering the therapeutic significance of these results, we propose ERK1-deleted DC vaccines as an additional means of eradicating resilient tumor cells and preventing tumor recurrence

Convergence of multi-dimensional quantized SDESDE's

We quantize a multidimensional $SDE$ (in the Stratonovich sense) by solving the related system of $ODE$'s in which the $d$-dimensional Brownian motion has been replaced by the components of functional stationary quantizers. We make a connection with rough path theory to show that the solutions of the quantized solutions of the $ODE$ converge toward the solution of the $SDE$. On our way to this result we provide convergence rates of optimal quantizations toward the Brownian motion for $\frac 1q$-H\" older distance, $q>2$, in $L^p(\P)$.Comment: 43 page