Recent Trends in the Spread over Libor on the Domestic Straight Bond Trading Market in Japan

In this paper, we conduct a regression analysis on the spread over Libor (LS) on the domestic straight bond trading market in Japan from May 1997 through March 1998. Our analysis shows that, for non-construction issues, the lower the rating the higher the LS, and that the LS differential among issues with different ratings has expanded since around November 1997 against the background of a growing awareness of credit risk. Our analysis also shows that during the analysis period (May 1997 through March 1998) the coupon rate, which was previously a significant explanatory variable for the LS, lost its significance, and that the coefficient of the remaining maturity, which is also an explanatory variable, switched from negative to positive (the longer the period remaining until maturity, the higher the LS). The heightened awareness of credit risk among investors apparently contributed to both these phenomena, and the latter is particularly noteworthy because it is consistent with the results of empirical analyses in the United States. Finally, for construction issues, our analysis showed that the LS continued to increase following the bankruptcy of several construction companies during the summer of 1997, and that an extremely large premium has arisen for certain issues.

Risk Management for Equity Portfolios of Japanese Banks

This paper verifies the impact of equity portfolio on bank management, underscoring the importance of managing the risks involved and suggesting "management of sensitivity to equity price risk" as a risk management technique that takes into account the correlation between equity price risk and credit risk. To do this, the paper focuses on the high correlation between "expected default probability estimated by the option-approach (Merton method)" using equity price information and " spread over Libor" observed in the bond market. This is used to calculate sensitivity (delta and vega) to changes in the equity price and its volatility. According to calculations for a sample portfolio, these two sensitivities have a degree of utility in measuring the distribution of risk exposure and in using equity price index futures and options as hedges. In the hedging of vega risk (which tends to reflect credit risk) in particular, long put positions in equity price index options are shown to be potentially effective.

Magnetic anisotropy by Rashba spin-orbit coupling in antiferromagnetic thin films

Magnetic anisotropy in an antiferromagnet (AFM) with inversion symmetry breaking (ISB) is investigated. The magnetic anisotropy energy (MAE) resulting from the Rashba spin-orbit and s-d type exchange interactions is determined for two different models of AFMs. The global ISB model, representing the effect of a surface, an interface, or a gating electric field, results in an easy-plane magnetic anisotropy. In contrast, for a local ISB model, i.e., for a noncentrosymmetric AFM, perpendicular magnetic anisotropy (PMA) arises. Both results differ from the ferromagnetic case, in which the result for PMA depends on the band structure and dimensionality. These MAE contributions play a key role in determining the direction of the Neel order parameter in antiferromagnetic nanostructures, and reflect the possibility of electrical-field control of the Neel vector.Comment: 4 pages, 2 figure

On the Risk Capital Framework of Financial Institutions

In this paper, we consider the risk capital framework adopted by financial institutions. Specifically, we review the recent literature on this issue, and clarify the economic assumptions behind this framework. Based on these observations, we then develop a simple model for analyzing the economic implications of this framework. The main implications are as follows. First, risk capital allocations are theoretically unnecessary without deadweight costs for raising capital, which are not usually assumed in the business practices of financial institutions. Second, the risk-adjusted rate of return is redundant as it provides no additional information beyond the net present value. Third, risk capital allocation is intrinsically difficult because it is hard to incorporate the correlations among asset returns.

Stability of Spinmotive Force in Perpendicularly Magnetized Nanowires under High Magnetic Fields

Spinmotive force induced by domain wall motion in perpendicularly magnetized nanowires is numerically demonstrated. We show that using nanowires with large magnetic anisotropy can lead to a high stability of spinmotive force under strong magnetic fields. We observe spinmotive force in the order of tens of microvolt in a multilayered Co/Ni nanowire and in the order of several hundred microvolt in a FePt nanowire; the latter is two orders of magnitude greater than that in permalloy nanowires reported previously. The narrow structure and low mobility of a domain wall under magnetic fields in perpendicularly magnetized nanowires permits downsizing of spinmotive force devices.Comment: submitted to Applied Physics Letter