A Reduced Form Model of Default Spreads with Markov-Switching Macroeconomic Factors

An important research area of the corporate yield spread literature seeks to measure the proportion of the spread that can be explained by factors such as the possibility of default, liquidity, tax differentials and market risk. We contribute to this literature by assessing the ability of observed macroeconomic factors and the possibility of changes in regime to explain the proportion of yield spreads caused by the risk of default in the context of a reduced form model. For this purpose, we extend the Markov Switching risk-free term structure model of Bansal and Zhou (2002) to the corporate bond setting and develop recursive formulas for default probabilities, risk-free and risky zero-coupon bond yields as well as credit default swap premia. The model is calibrated with consumption, inflation, risk-free yields and default data for Aa, A and Baa bonds from the 1987-2008 period. We find that our macroeconomic factors are linked with two out of three sharp increases in the spreads during this sample period, indicating that the variations can be related to macroeconomic undiversifiable risk. The estimated default spreads can explain almost half of the 10 years to maturity industrial Baa zero-coupon yields in some regime. Much smaller proportions are found for Aa and A bonds with numbers around 10%. The proportions of default estimated with credit default swaps are higher, in many cases doubling those found with corporate yield spreads.Credit spread, default spread, Markov switching, macroeconomic factors, reduced form model of default, random subjective discount factor, credit default swap, CDS

Default Risk in Corporate Yield Spreads

An important research question examined in the recent credit risk literature focuses on the proportion of corporate yield spreads which can be attributed to default risk. Past studies have verified that only a small fraction of the spreads can be explained by default risk. In this paper, we reexamine this topic in the light of the different issues associated with the computation of transition and default probabilities obained with historical rating transition data. One significant finding of our research is that the estimated default-risk proportion of corporate yield spreads in highly sensitive to the term structure of the default probabilities estimated for each rating class. Moreover, this proportion can become a large fraction of the yield spread when sensitivity analyses are made with respect to recovery rates, default cycles in the economy, and information considered in the historical rating transition data.Credit risk, default risk, corporate yield spread, transition matrix, default probability, Moody's, Standard and Poor's, recovery rate, data filtration, default cycle

A Reduced Form Model of Default Spreads with Markov Switching Macroeconomic Factors

An important research area of the corporate yield spread literature seeks to measure the proportion of the spread explained by factors such as the possibility of default, liquidity or tax differentials. We contribute to this literature by assessing the ability of observed macroeconomic factors and the possibility of changes in regime to explain the proportion in yield spreads caused by the risk of default in the context of a reduced form model. For this purpose, we extend the Markov Switching risk-free term structure model of Bansal ad Zhou (2002) to the corporate bond setting and develop recursive formulas for default probabilities, risk-free and risky zero-coupon bond yields. The model is calibrated out of sample with consumption, inflation, risk-free yield and default data over the 1987-1996 period. Our results indicate that inflation is a key factor to consider for explaining default spreads during our sample period. We also find that the estimated default spreads can explain up to half of the 10 year to maturity Baa zero-coupon yield in certain regime with different sensitivities to consumption and inflation through time.Credit spread, default spread, Markov Switching, macroeconomic factors, reduced form model of default

Default Risk in Corporate Yield Spreads

An important research question examined in the recent credit risk literature focuses on the proportion of corporate yield spreads which can be attributed to default risk. Past studies have verified that only a small fraction of the spreads can be explained by default risk. In this paper, we reexamine this topic in the light of the different issues associated with the computation of transition and default probabilities obtained with historical rating transition data. One significant finding of our research is that the estimated default-risk proportion of corporate yield spreads is highly sensitive to the term structure of the default probabilities estimated for each rating class. Moreover, this proportion can become a large fraction of the yield spread when sensitivity analyses are made with respect to recovery rates, default cycles in the economy, and information considered in the historical rating transition data

A Reduced Form Model of Default Spreads with Markov-Switching Macroeconomics Factors

An important research area of the corporate yield spread literature seeks to measure the proportion of the spread that can be explained by factors such as the possibility of default, liquidity, tax differentials and market risk. We contribute to this literature by assessing the ability of observed macroeconomic factors and the possibility of changes in regime to explain the proportion of yield spreads caused by the risk of default in the context of a reduced form model. For this purpose, we extend the Markov Switching risk-free term structure model of Bansal and Zhou (2002) to the corporate bond setting and develop recursive formulas for default probabilities, risk-free and risky zero-coupon bond yields as well as credit default swap premia. The model is calibrated with consumption, inflation, risk-free yields and default data for Aa, A and Baa bonds from the 1987-2008 period. We find that our macroeconomic factors are linked with two out of three sharp increases in the spreads during this sample period, indicating that the variations can be related to macroeconomic undiversifiable risk. The estimated default spreads can explain almost half of the 10 years to maturity industrial Baa zero-coupon yields in some regime. Much smaller proportions are found for Aa and A bonds with numbers around 10%. The proportions of default estimated with credit default swaps are higher, in many cases doubling those found with corporate yield spreads.The authors acknowledge the financial support from the National Science and Engineering Research Council of Canada (NSERC), the Fonds québécois de recherche sur la nature et les technologies (FQRNT), the Social Sciences and Humanities Research Council of Canada (SSHRC), the Center for research on E-finance (CREF), the Canada Research Chair in Risk Management, and the Institut de Finance Mathématique de Montréal

VCSEL Based on InAs Quantum-Dashes With a Lasing Operation Over a 117-nm Wavelength Span

International audienceWe report an InP based vertical cavity surface emitting laser (VCSEL) achieving a lasing operation between 1529 and 1646 nm. This optically-pumped VCSEL includes a wide-gain bandwidth active region based on InAs quantum dashes and wideband dielectric Bragg mirrors. Based on a wedge microcavity design, we obtain a spatial dependence of the resonant wavelength along the wafer, enabling thus to monitor the gain material bandwidth. We demonstrate a 117 nm continuous wavelength variation of the VCSEL emission, a consequence of the important and wide gain afforded by the use of optimized quantum dashes

Speech Technologies for African Languages: Example of a Multilingual Calculator for Education

International audienceThis paper presents our achievements after 18 months of the ALFFA project dealing with African languages technologies. We focus on a multilingual calculator (Android app) that will be demonstrated during the Show and Tell session

Pioglitazone improves fat distribution, the adipokine profile and hepatic insulin sensitivity in non-diabetic end-stage renal disease subjects on maintenance dialysis: a randomized cross-over pilot study.

BACKGROUND: Fat redistribution, increased inflammation and insulin resistance are prevalent in non-diabetic subjects treated with maintenance dialysis. The aim of this study was to test whether pioglitazone, a powerful insulin sensitizer, alters body fat distribution and adipokine secretion in these subjects and whether it is associated with improved insulin sensitivity. TRIAL DESIGN: This was a double blind cross-over study with 16 weeks of pioglitazone 45 mg vs placebo involving 12 subjects. METHODS: At the end of each phase, body composition (anthropometric measurements, dual energy X-ray absorptometry (DEXA), abdominal CT), hepatic and muscle insulin sensitivity (2-step hyperinsulinemic euglycemic clamp with 2H2-glucose) were measured and fasting blood adipokines and cardiometabolic risk markers were monitored. RESULTS: Four months treatment with pioglitazone had no effect on total body weight or total fat but decreased the visceral/sub-cutaneous adipose tissue ratio by 16% and decreased the leptin/adiponectin (L/A) ratio from 3.63×10-3 to 0.76×10-3. This was associated with a 20% increase in hepatic insulin sensitivity without changes in muscle insulin sensitivity, a 12% increase in HDL cholesterol and a 50% decrease in CRP. CONCLUSIONS/LIMITATIONS: Pioglitazone significantly changes the visceral-subcutaneous fat distribution and plasma L/A ratio in non diabetic subjects on maintenance dialysis. This was associated with improved hepatic insulin sensitivity and a reduction of cardio-metabolic risk markers. Whether these effects may improve the outcome of non diabetic end-stage renal disease subjects on maintenance dialysis still needs further evaluation. TRIAL REGISTRATION: ClinicalTrial.gov NCT01253928

Urban market gardening and rodent-borne pathogenic Leptospira in arid zones: a case study in Niamey, Niger

Leptospirosis essentially affects human following contact with rodent urine-contaminated water. As such, it was mainly found associated with rice culture, recreational activities and flooding. This is also the reason why it has mainly been investigated in temperate as well as warm and humid regions, while arid zones have been only very occasionally monitored for this disease. In particular, data for West African countries are extremely scarce. Here, we took advantage of an extensive survey of urban rodents in Niamey, Niger, in order to look for rodent-borne pathogenic[i] Leptospira[/i] species presence and distribution across the city. To do so, we used high throughput bacterial 16S-based metabarcoding, [i]lipL32[/i] gene-targeting RT-PCR, rrs gene sequencing and VNTR typing as well as GIS-based multivariate spatial analysis. Our results show that leptospires seem absent from the core city where usual [i]Leptospira[/i] reservoir rodent species (namely [i]R. rattus[/i] and [i]M. natalensis[/i]) are yet abundant. On the contrary, [i]L. kirschneri[/i] was detected in [i]Arvicanthis niloticus[/i] and [i]Cricetomys gambianus[/i], two rodent species that are restricted to irrigated cultures within the city. Moreover, the VNTR profiles showed that rodent-borne leptospires in Niamey belong to previously undescribed serovars. Altogether, our study points towards the importance of market gardening in maintain and circulation of leptospirosis within Sahelian cities. In Africa, irrigated urban agriculture constitutes a pivotal source of food supply, especially in the context of the ongoing extensive urbanization of the continent. With this in mind, we speculate that leptospirosis may represent a zoonotic disease of concern also in arid regions that would deserve to be more rigorously surveyed, especially in urban agricultural settings