Pricing tranched credit products with generalized multifactor models

The market for tranched credit products (CDOs, Itraxx tranches) is one of the fastest growing segments in the credit derivatives industry. However, some assumptions underlying the standard Gaussian onefactor pricing model (homogeneity, single factor, Normality), which is the pricing standard widely used in the industry, are probably too restrictive. In this paper we generalize the standard model by means of a two by two model (two factors and two asset classes). We assume two driving factors (business cycle and industry) with independent tStudent distributions, respectively, and we allow the model to distinguish among portfolio assets classes. In order to illustrate the estimation of the parameters of the model, an empirical application with Moody's data is also included

Systemic risk measures: the simpler the better.

We compute six different sets of systemic risk measures for a sample of the 20 biggest European and 13 biggest US banks from January 2004 to November 2009. The six measures are based on i) Principal components of the bank’s Credit Default Swaps (CDSs), ii) Interbank interest rate spreads, iii) Structural credit risk models, iv) Collateralized Debt Obligations (CDOs) indexes and their tranches, v) Multivariate densities computed from CDS spreads and vi) Co-Risk measures. We then rank the measures using three different criteria: i) Causality tests, ii) Price discovery tests and iii) their correlation with an index of systemic events. For the European and US markets, the best indicators are the first Principal Component of the single-name CDSs and the LIBOR-OIS or LIBOR-TBILL spreads, respectively, whereas the least reliable indicators are the Co-Risk measures and the systemic spreads extracted from the CDO indexes and their tranches.Systemic risk; CDS; Libor spreads; CoVaR;

On the term structure of Interbank interest rates: jump-diffusion processes and option pricing

In this paper we study the dynamic behavior of the term structure of Interbank interest rates and the pricing of options on interest rate sensitive securities. We posit a generalized single factor model with jumps to take into account external influences in the market. Daily data is used to test for jump effects. Qualitative examination of the linkage between Monetary Authorities interventions and jumps are studied. Pricing results suggests a systematic underpricing in bonds and call options if the jump component is not inc1uded. However, the pricing of put options on bonds presents indeterminacies

Systemic risk measures: the simpler the better

We compute six different sets of systemic risk measures for a sample of the 20 biggest European and 13 biggest US banks from January 2004 to November 2009. The six measures are based on i) Principal components of the bank’s Credit Default Swaps (CDSs), ii) Interbank interest rate spreads, iii) Structural credit risk models, iv) Collateralized Debt Obligations (CDOs) indexes and their tranches, v) Multivariate densities computed from CDS spreads and vi) Co-Risk measures. We then rank the measures using three different criteria: i) Causality tests, ii) Price discovery tests and iii) their correlation with an index of systemic events. For the European and US markets, the best indicators are the first Principal Component of the single-name CDSs and the LIBOR-OIS or LIBOR-TBILL spreads, respectively, whereas the least reliable indicators are the Co-Risk measures and the systemic spreads extracted from the CDO indexes and their tranches

Liquidity Commonalities in the Corporate CDS Market around

This study presents robust empírical evidence suggesting the existence of significant liquidity commonalities in the corporate Credit Default Swap (CDS) market. Using daily data for 438 firms from 25 countries in the period 2005-2012 we find that these commonalities vary over time, being stronger in periods in which the global, counterparty, and funding liquidity risks increase. However, commonalities do not depend on finn's characteristics. The leve! of the liquidity commonalities differs across economic areas being on average stronger in the European Monetary Union. The effect of market liquidity is stronger than the effect of industry specific liquidity in most industries excluding the banking sector. We document the existence of asymmetries in commonalities around financia! distress episodes such that the effect of market 1iquidity is stronger when the CDS market price increases. The results are not driven by the CDS data imputation method or by the liquidity of firms with high credit risk and are robust to altemative liquidity measures

Impact of weather type variability on winter precipitation, temperature and annual snowpack in the Spanish Pyrenees

The annual frequency of the occurrence of 10 discriminated weather types were summarized using a principal component analysis that revealed 4 different prevailing winter conditions affecting the Spanish Pyrenees. Northeasterly and easterly flows lead to dry and cold winters where snow only accumulates on northern slopes and mainly in the central Pyrenees. North and northwesterly flows favor wet and cold winters and an increase of snow accumulation in the western Pyrenees and on the northern slopes at lower elevations. Cyclonic and westerly flows favor an increase in precipitation and snow accumulation in all the Pyrenees at lower elevations and cold winters. Finally, southerly flows are associated with milder conditions and high precipitation in the central sector of the Pyrenees, where snow only accumulates at high elevations. For most stations, there were no significant trends in precipitation or temperature during the current reference climatic period (1981−2010), which was in agreement with the lack of observed principal component trends during the same period. Focusing on the shorter 1985−2010 period for which snow data were available, snow depth at mid-March demonstrated significant positive trends associated with an increase in westerly, southwesterly and cyclonic weather during this period. The results demonstrate that the changes in precipitation, temperature and snow accumulation are clearly related to changes in circulation patterns, which are the main driver of temporal fluctuations in the considered climatologies.This study was funded by the research project: CGL2014-52599-P "Estudio del manto de nieve en la montaña española, y su respuesta a la variabilidad y cambio climatico" financed by the Spanish Ministry of Economy and Competitiveness

Bases psicopedagógicas del nuevo modelo didáctico para la enseñanza de las ciencias y de la ingeniería en el espacio europeo de educación superior

La aplicación de los criterios que derivan del marco formativo que establece y desarrolla el Espacio Europeo de Educación Superior, hace necesario el empleo de un nuevo modelo didáctico cuya aplicación requiere importantes modificaciones metodológicas en la práctica del proceso instructivo. La necesidad de una docencia centrada en el alumno, promoviendo aprendizajes activos, la oportunidad de una actuación del profesor como guía de la adquisición de conocimientos, mediante un proceso de instrucción compartido entre el profesor y el alumno, la necesidad de una nueva organización de las actividades de enseñanza aprendizaje y la búsqueda y el empleo de nuevos recursos docentes, son algunas de estas implicaciones metodológicas. Partiendo de la premisa de que todo modelo educativo tiene sus bases teóricas en las aportaciones de las teorías de aprendizaje, se analiza, en esta comunicación, como las bases psicopedagógicas que proporcionan las teorías psicológicas de aprendizaje subyacen en los principios metodológicos que el Nuevo Paradigma para la Educación Superior aporta a los procesos de enseñanza-aprendizaje de la ciencia y de la ingeniería, identificándose además algunas pautas de actuación para la puesta en práctica de ese muevo modelo didáctico

A control system for low-head diversion run-of-river small hydro plants with pressure conduits considering the tailwater level variation

This paper presents a control system for low-head diversion run-of-river small hydro plants with pressure conduits. Since these hydropower plants usually have low or null water storage capacity, the water discharged through the turbines should be adapted to the possible extent to the natural river inflow. For this purpose, a control scheme aimed at maintaining a constant water level in the head pond is normally used in these cases. As an alternative, the option of maintaining a constant water level in the surge tank is studied in this paper. Furthermore, since in low-head hydro plants the tailwater level variation may represent a relatively important contribution to total head losses, it has been explicitly considered in the proposed control system. A small-perturbation stability analysis has been carried out in order to analyze the influence of the plant design and controller parameters in the plant dynamic response. Finally, in order to illustrate the applicability of the proposed control system, several simulations have been carried out using data gathered from a real hydro plan

Point diffraction interferometer with a liquid crystal monopixel

In this work a novel point diffraction interferometer based on a variable liquid crystal wave plate (LCWP) has been implemented. The LCWP consists of a 3x3 cm2 monopixel cell with parallel alignment. The monopixel cell was manufactured such that the electrode covers the entire surface except in a centered circular area of 50 μm of diameter. This circle acts as a point perturbation which diffracts the incident wave front giving rise to a spherical reference wave. By applying a voltage to the LCWP we can change the phase of the wave front that passes through the monopixel, except at the center. Phase shifting techniques are used in order to calculate the amplitude and phase distribution of the object wave front. The system allows a digital hologram to be obtained, and by using the Fresnel diffraction integral it is possible to digitally reconstruct the different planes that constitute the three dimensional object

Stability Analysis of a Run-of-River Diversion Hydropower Plant With Surge Tank And Spillway in the Head Pond

Run-of-river hydropower plants usually lack significant storage capacity; therefore, the more adequate control strategy would consist of keeping a constant water level at the intake pond in order to harness the maximum amount of energy from the river flow or to reduce the surface flooded in the head pond. In this paper, a standard PI control system of a run-of-river diversion hydropower plant with surge tank and a spillway in the head pond that evacuates part of the river flow plant is studied. A stability analysis based on the Routh-Hurwitz criterion is carried out and a practical criterion for tuning the gains of the PI controller is proposed. Conclusions about the head pond and surge tank areas are drawn from the stability analysis. Finally, this criterion is applied to a real hydropower plant in design state; the importance of considering the spillway dimensions and turbine characteristic curves for adequate tuning of the controller gains is highlighte