Solving asset pricing models with stochastic volatility

This paper provides a closed-form solution for the price-dividend ratio in a standard asset pricing model with stochastic volatility. The growth rate of the endowment is a first-order Gaussian autoregression, while the stochastic volatility innovations can be drawn from any distribution for which the moment-generating function exists. The solution is useful in allowing comparisons among numerical methods used to approximate the nontrivial closed form. The closed-form solution reveals that, when using perturbation methods around the deterministic steady state, the approximate solution needs to be sixth-order accurate in order for the parameter capturing the conditional standard deviation of the stochastic volatility process to be present.PostprintPeer reviewe

A financial accelerator through coordination failure

This paper studies the effect of liquidity crises in short-term debt markets in a dynamic general equilibrium framework. Creditors (retail banks) receive imperfect signals regarding the profitability of borrowers (wholesale banks) and, based on these signals and their beliefs about other creditors actions, choose whether to rollover funding, or not. The uncoordinated actions of creditors cause a suboptimal incidence of rollover, generating an illiquidity premium. Leverage magnifies the coordination inefficiency. Illiquidity shocks in credit markets result in sharp contractions in output. Policy responses are analyzed.Publisher PD

Cost of borrowing shocks and fiscal adjustment

Do capital markets impose fiscal discipline? To answer this question, we estimate the fiscal response to a change in the interest rate paid by 14 European governments over four decades in a panel VAR, using sign restrictions to identify structural shocks. A jump in the cost of borrowing leads to an improvement in the primary balance although insufficient to prevent a rise in the debt-to-GDP ratio. Adjustment mainly takes place via rising revenues rather than falling primary expenditures. For EMU countries, the primary balance response was stronger after 1992, when the Maastricht Treaty was signed, suggesting an important interaction between market discipline and fiscal rules.PostprintPeer reviewe

The Signalling Channel of Negative Interest Rates

Negative interest rates are a new (and controversial) monetary policy tool. This paper studies a novel signalling channel and asks whether negative rates can be 1) an effective and 2) an optimal policy tool. 1) We build a financial-friction new-Keynesian model in which monetary policy can set a negative reserve rate, but deposit rates are constrained by zero. All else equal, a negative rate contracts bank net worth and increases credit spreads (the costly "interest margin" channel). However, it also signals lower future deposit rates, even with current deposit rates constrained, boosting aggregate demand and net worth. Quantitatively, we find the signalling channel dominates, but the effectiveness of negative rates depends crucially on three factors: i) degree of policy inertia, ii) level of reserves, iii) zero lower bound duration. 2) In a simplified model we prove two necessary conditions for the optimality of negative rates: i) time-consistent policy setting, ii) preference for policy smoothing

The Signalling Channel of Negative Interest Rates

Negative interest rates are a new (and controversial) monetary policy tool. This paper studies a novel signalling channel and asks whether negative rates can be 1) an effective and 2) an optimal policy tool. 1) We build a financial-friction new-Keynesian model in which monetary policy can set a negative reserve rate, but deposit rates are constrained by zero. All else equal, a negative rate contracts bank net worth and increases credit spreads (the costly "interest margin" channel). However, it also signals lower future deposit rates, even with current deposit rates constrained, boosting aggregate demand and net worth. Quantitatively, we find the signalling channel dominates, but the effectiveness of negative rates depends crucially on three factors: i) degree of policy inertia, ii) level of reserves, iii) zero lower bound duration. 2) In a simplified model we prove two necessary conditions for the optimality of negative rates: i) time-consistent policy setting, ii) preference for policy smoothing

Gross karyotypic and phenotypic alterations among different progenies of the candida glabrata cbs138/atcc2001 reference strain

Peer reviewedPublisher PD

Glycosylation of Candida albicans cell wall proteins is critical for induction of innate immune responses and apoptosis of epithelial cells.

C. albicans is one of the most common fungal pathogen of humans, causing local and superficial mucosal infections in immunocompromised individuals. Given that the key structure mediating host-C. albicans interactions is the fungal cell wall, we aimed to identify features of the cell wall inducing epithelial responses and be associated with fungal pathogenesis. We demonstrate here the importance of cell wall protein glycosylation in epithelial immune activation with a predominant role for the highly branched N-glycosylation residues. Moreover, these glycan moieties induce growth arrest and apoptosis of epithelial cells. Using an in vitro model of oral candidosis we demonstrate, that apoptosis induction by C. albicans wild-type occurs in early stage of infection and strongly depends on intact cell wall protein glycosylation. These novel findings demonstrate that glycosylation of the C. albicans cell wall proteins appears essential for modulation of epithelial immunity and apoptosis induction, both of which may promote fungal pathogenesis in vivo

Efficacy of a synthetic calcium phosphate with submicron surface topography as autograft extender in lapine posterolateral spinal fusion.

Posterolateral spinal fusion (PLF) is a common procedure in orthopedic surgery that is performed to fuse adjacent vertebrae to reduce symptoms related to spinal conditions. In the current study, a novel synthetic calcium phosphate with submicron surface topography was evaluated as an autograft extender in a validated rabbit model of PLF. Fifty-nine skeletally mature New Zealand white rabbits were divided into three groups and underwent single-level intertransverse process PLF at L4-5 using (1) autologous bone graft (ABG) alone or in a 1:1 combination with (2) calcium phosphate granules (ABG/BCPgranules ), or (3) granules embedded in a fast-resorbing polymeric carrier (ABG/BCPputty ). After 6, 9, and 12 weeks, animals were sacrificed and spinal fusion was assessed by manual palpation, Radiographs, micro-CT, mechanical testing (12 weeks only), histology, and histomorphometry. Based on all endpoints, all groups showed a gradual progression in bone formation and maturation during time, leading to solid fusion masses between the transverse processes after 12 weeks. Fusion assessments by manual palpation, radiography and histology were consistent and demonstrated equivalent fusion rates between groups, with high bilateral fusion rates after 12 weeks. Mechanical tests after 12 weeks indicated substantially lower range of motion for all groups, compared to non-operated controls. By histology and histomorphometry, the gradual formation and maturation of bone in the fusion mass was confirmed for each graft type. With these results, we describe the equivalent performance between autograft and a novel calcium phosphate material as an autograft extender in a rabbit model of PLF using an extensive range of evaluation techniques. © 2019 Wiley Periodicals, Inc. J Biomed Mater Res B Part B, 2019

Valuation risk revalued

This paper shows the recent success of valuation risk (time-preference shocks in Epstein- Zin utility) in resolving asset pricing puzzles rests sensitively on an undesirable asymptote that occurs because the preference specification fails to satisfy a key restriction on the weights in the Epstein-Zin time-aggregator. In a Bansal-Yaron long-run risk model, our revised valuation risk specification that satisfies the restriction provides a superior empirical fit. The results also show that valuation risk no longer has a major role in matching the mean equity premium and risk-free rate but is crucial for matching the volatility and autocorrelation of the risk-free rate.Publisher PD