The Market Price of Credit Risk: An Empirical Analysis of Interest Rate Swap Spreads

This paper studies the market price of credit risk incorporated into one of the most important credit spreads in the financial markets: interest rate swap spreads. Our approach consists of jointly modeling the swap and Treasury term structures using a general five-factor affine credit framework and estimating the parameters by maximum likelihood. We solve for the implied special financing rate for Treasury bonds and find that the liquidity component of on-the-run bond prices can be significant. We also find that credit premia in swap spreads are positive on average. These premia, however, vary significantly over time and were actually negative for much of the 1990s.

Non-adiabatic transitions through exceptional points in the band structure of a PT-symmetric lattice

Exceptional points, at which two or more eigenfunctions of a Hamiltonian coalesce, occur in non-Hermitian systems and lead to surprising physical effects. In particular, the behaviour of a system under parameter variation can differ significantly from the familiar Hermitian case in the presence of exceptional points. Here we analytically derive the probability of a non-adiabatic transition in a two-level system driven through two consecutive exceptional points at finite speed. The system is Hermitian far away from the exceptional points. In the adiabatic limit an equal redistribution between the states coalescing in the exceptional point is observed, which can be interpreted as a loss of information when passing through the exceptional point. For finite parameter variation this gets modified. We demonstrate how the transition through the exceptional points can be experimentally addressed in a PT-symmetric lattice using Bloch oscillations

Inhibition of Malignant Cell Invasion in vitro by a Proteinase Inhibitor

The inhibitory effect of the protease inhibitor aprotinin (Trasylol) on the invasion of mouse kidney explants by polyoma virus transformed BHK21 cells was investigated using a mixed cell/organ culture technique. The extent of invasion was monitored by following the changes in LDH isoenzyme pattern in the explants and by histological assessment. The kidney explants containing aprotinin were found to maintain a normal kidney LDH pattern and to suffer considerably less invasion than the explants not containing the drug. These results support the idea that proteolytic enzymes are associated with invasion and that inhibitors of protease activity could possibly be useful in the management of clinical cancer

Lytic and mechanical stability of clots composed of fibrin and blood vessel wall components.

Background Proteases expressed in atherosclerotic plaque lesions generate collagen fragments, release glycosaminoglycans (chondroitin sulfate [CS] and dermatan sulfate [DS]) and expose extracellular matrix (ECM) proteins (e.g. decorin) at sites of fibrin formation. Objective Here we address the effect of these vessel wall components on the lysis of fibrin by the tissue plasminogen activator (tPA)/plasminogen system and on the mechanical stability of clots. Methods and results MMP-8-digested collagen fragments, isolated CS, DS, glycosylated decorin and its core protein were used to prepare mixed matrices with fibrin (additives present at a 50-fold lower mass concentration than fibrinogen). Scanning electron microscopy (SEM) showed that the presence of ECM components resulted in a coarse fibrin structure, most pronounced for glycosylated decorin causing an increase in the median fiber diameter from 85 to 187 nm. Rheological measurements indicated that these structural alterations were coupled to decreased shear resistance (1.8-fold lower shear stress needed for gel/fluid transition of the clots containing glycosylated decorin) and rigidity (reduction of the storage modulus from 54.3 to 33.2 Pa). The lytic susceptibility of the modified fibrin structures was increased. The time to 50% lysis by plasmin was reduced approximately 2-fold for all investigated ECM components (apart from the core protein of decorin which produced a moderate reduction of the lysis time by 25%), whereas fibrin-dependent plasminogen activation by tPA was inhibited by up to 30%. Conclusion ECM components compromise the chemical and mechanical stability of fibrin as a result of changes in its ultrastructure

Note and Comment

Constitutionality of the LA Follette Amendment to the Internal Revenue Law of 1921 - The United States Senate on November 5, 1921, inserted in the Revenue Act, then before the Senate, a provision that taxpayers in their income tax returns must specify what state and municipal bonds they hold, or else be subject to a penalty of five per cent. That provision was dropped out in conference, but it will come up again, and it is well to look at its constitutionality under the Fourth Amendment to the Constitution prohibiting unreasonable searches