5,673 research outputs found
Counterparty Credit Limits: An Effective Tool for Mitigating Counterparty Risk?
A counterparty credit limit (CCL) is a limit imposed by a financial
institution to cap its maximum possible exposure to a specified counterparty.
Although CCLs are designed to help institutions mitigate counterparty risk by
selective diversification of their exposures, their implementation restricts
the liquidity that institutions can access in an otherwise centralized pool. We
address the question of how this mechanism impacts trade prices and volatility,
both empirically and via a new model of trading with CCLs. We find empirically
that CCLs cause little impact on trade. However, our model highlights that in
extreme situations, CCLs could serve to destabilize prices and thereby
influence systemic risk
Weak Microlensing
A nearby star having a near-transit of a galaxy will cause a time-dependent
weak lensing of the galaxy. Because the effect is small, we refer to this as
weak microlensing. This could provide a useful method to weigh low-mass stars
and brown dwarfs. We examine the feasibility of measuring masses in this way
and we find that a star causes measurable weak microlensing in a galaxy even at
10 Einstein radii away. Of order one magnitude I < 25 galaxy comes close enough
to one or other of the ~100 nearest stars per year.Comment: Accepted for publication in MNRAS (4 pages, 5 figures, 1 table
A Bramble-Pasciak-like method with applications in optimization
Saddle-point systems arise in many applications areas, in fact in any situation where an extremum principle arises with constraints. The Stokes problem describing slow viscous flow of an incompressible fluid is a classic example coming from partial differential equations and in the area of Optimization such problems are ubiquitous.\ud
In this manuscript we show how new approaches for the solution of saddle-point systems arising in Optimization can be derived from the Bramble-Pasciak Conjugate Gradient approach widely used in PDEs and more recent generalizations thereof. In particular we derive a class of new solution methods based on the use of Preconditioned Conjugate Gradients in non-standard inner products and demonstrate how these can be understood through more standard machinery. We show connections to Constraint Preconditioning and give the results of numerical computations on a number of standard Optimization test examples
An Assessment of Alternative State Space Models for Count Time Series
This paper compares two alternative models for autocorrelated count time series. The first model can be viewed as a 'single source of error' discrete state space model, in which a time-varying parameter is specified as a function of lagged counts, with no additional source of error introduced. The second model is the more conventional 'dual source of error' discrete state space model, in which the time-varying parameter is driven by a random autocorrelated process. Using the nomenclature of the literature, the two representations can be viewed as observation-driven and parameter-driven respectively, with the distinction between the two models mimicking that between analogous models for other non-Gaussian data such as financial returns and trade durations. The paper demonstrates that when adopting a conditional Poisson specification, the two models have vastly different dispersion/correlation properties, with the dual source model having properties that are a much closer match to the empirical properties of observed count series than are those of the single source model. Simulation experiments are used to measure the finite sample performance of maximum likelihood (ML) estimators of the parameters of each model, and ML-based predictors, with ML estimation implemented for the dual source model via a deterministic hidden Markov chain approach. Most notably, the numerical results indicate that despite the very different properties of the two models, predictive accuracy is reasonably robust to misspecification of the state space form.Discrete state-space model; single source of error model; hidden Markov
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