A Non-parametric Approach to Incorporating Incomplete Workouts Into Loss Given Default Estimates

When estimating Loss Given Default (LGD) parameters using a workout approach, i.e. discounting cash flows over the workout period, the problem arises of how to take into account partial recoveries from incomplete work-outs. The simplest approach would see LGD based on complete recovery profiles only. Whilst simple, this approach may lead to data selection bias, which may be at the basis of regulatory guidance requiring the assessment of the relevance of incomplete workouts to LGD estimation. Despite its importance, few academic contributions have covered this topic. We enhance this literature by developing a non-parametric estimator that -under certain distributional assumptions on the recovery profiles- aggregates complete and incomplete workout data to produce unbiased and more efficient estimates of mean LGD than those obtained from the estimator based on resolved cases only. Our estimator is appropriate in LGD estimation for wholesale portfolios, where the exposure-weighted LGD estimators available in the literature would not be applicable under Basel II regulatory guidance.Credit risk; bank loans; loss-given-default; LGD; incomplete observations; mortality curves

Bank equity stakes in borrowing firms and credit market competition

In this paper we analyse the effect of banks holding equity stakes in borrowing firms on the equilibrium level of interest rates and on the tendency of the borrowing firm to establish tighter links with the shareholding bank. Equity claims are defined as rights to receive dividend payments as well as private information about the firm. By modeling competition as an asymmetric common value auction, we show that when one of the competing banks in the credit market holds an equity claim in the firm, the equilibrium expected cost of debt increases with the size of the equity stake and the firm tends to concentrate his credit relationships around the shareholding bank

A Non-parametric Approach to Incorporating Incomplete Workouts Into Loss Given Default Estimates

When estimating Loss Given Default (LGD) parameters using a workout approach, i.e. discounting cash flows over the workout period, the problem arises of how to take into account partial recoveries from incomplete work-outs. The simplest approach would see LGD based on complete recovery profiles only. Whilst simple, this approach may lead to data selection bias, which may be at the basis of regulatory guidance requiring the assessment of the relevance of incomplete workouts to LGD estimation. Despite its importance, few academic contributions have covered this topic. We enhance this literature by developing a non-parametric estimator that -under certain distributional assumptions on the recovery profiles- aggregates complete and incomplete workout data to produce unbiased and more efficient estimates of mean LGD than those obtained from the estimator based on resolved cases only. Our estimator is appropriate in LGD estimation for wholesale portfolios, where the exposure-weighted LGD estimators available in the literature would not be applicable under Basel II regulatory guidance

A Non-parametric Approach to Incorporating Incomplete Workouts Into Loss Given Default Estimates

When estimating Loss Given Default (LGD) parameters using a workout approach, i.e. discounting cash flows over the workout period, the problem arises of how to take into account partial recoveries from incomplete work-outs. The simplest approach would see LGD based on complete recovery profiles only. Whilst simple, this approach may lead to data selection bias, which may be at the basis of regulatory guidance requiring the assessment of the relevance of incomplete workouts to LGD estimation. Despite its importance, few academic contributions have covered this topic. We enhance this literature by developing a non-parametric estimator that -under certain distributional assumptions on the recovery profiles- aggregates complete and incomplete workout data to produce unbiased and more efficient estimates of mean LGD than those obtained from the estimator based on resolved cases only. Our estimator is appropriate in LGD estimation for wholesale portfolios, where the exposure-weighted LGD estimators available in the literature would not be applicable under Basel II regulatory guidance

Fluoro-edenitic fibres in the sputum of subjects from Biancavilla (Sicily): a pilot study

BACKGROUND: An excess of mortality for malignant neoplasms of the pleura in Biancavilla, promoted an investigation for pleural mesothelioma, disclosing 17 cases. As the absence of known sources of asbestos exposure, a local stone quarry, located near the inhabited area, used for the extraction of building materials, was investigated. Amphibolic fibres were found in the quarry and identified as fluoro-edenite "new end-member of the edenite / fluoro-edenite series" and recognized as the fluoro-edenite holotype by International Mineralogical Association – Commission on New Minerals and Mineral Names. A pilot study was performed to verify the feasibility of using spontaneous sputum as an exposure indicator for these fibres, in a context in which the use of aerosol-induced sputum technique would not be easily accepted. METHODS: Hypothesizing a behaviour of the new fibre analogous to that of asbestos, the determination of the free fibres and the ferruginous bodies in spontaneous sputum was carried out. Phase Contrast Optical Microscope and an Environmental Scanning Electron Microscope fitted with X-ray energy dispersive analysis system (micro-analysis) were used to examine the samples. The criteria for inclusion in the study were: 1) subjects hospitalized for exacerbation of chronic obstructive pulmonary disease symptoms, 2) age ≥ 45 years, 3) residence in Biancavilla for at least 30 years. RESULTS: The preliminary findings are related to 12 subjects (7 females and 5 males). Uncoated fibres (with length > 5 μm, diameter < 3 μm, aspect ratio 3.1) and ferruginous bodies were searched. Six out of twelve subjects (4 females, 2 males) had at least one of the three samples positive for the presence of fluoro-edenite, confirmed by micro-analysis. The fibre concentration found in the sputum ranged from 0.04 to 10 fibres/g; the length from 20 to 40 μm, the diameter was < 0.5 μm. No ferruginous bodies were found in any of the samples. The four women with a positive sample were housewives. Of the two men with a positive sample, one was a farmer and the other a mason. Therefore, it may be assumed that the exposure to fluoro-edenitic fibres was mainly environmental. CONCLUSION: The occurrence of the pleural mesothelioma cases and the presence of fluoro-edenitic fibres in spontaneous sputum, evidence the need to study the biological activity of fluoro-edenitic fibres and the implementation of epidemiological monitoring systems

AGILE detection of a rapid γ-ray flare from the blazar PKS 1510-089 during the GASP-WEBT monitoring

We report the detection by the AGILE satellite of a rapid gamma-ray flare from the powerful gamma-ray quasar PKS 1510-089, during a pointing centered on the Galactic Center region from 1 March to 30 March 2008. This source has been continuosly monitored in the radio-to-optical bands by the GLAST-AGILE Support Program (GASP) of the Whole Earth Blazar Telescope (WEBT). Moreover, the gamma-ray flaring episode triggered three ToO observations by the Swift satellite in three consecutive days, starting from 20 March 2008. In the period 1-16 March 2008, AGILE detected gamma-ray emission from PKS 1510-089 at a significance level of 6.2-sigma with an average flux over the entire period of (84 +/- 17) x 10^{-8} photons cm^{-2} s^{-1} for photon energies above 100 MeV. After a predefined satellite re-pointing, between 17 and 21 March 2008, AGILE detected the source at a significance level of 7.3-sigma, with an average flux (E > 100 MeV) of (134 +/- 29) x 10^{-8} photons cm^{-2} s^{-1} and a peak level of (281 +/- 68) x 10^{-8} photons cm^{-2} s^{-1} with daily integration. During the observing period January-April 2008, the source also showed an intense and variable optical activity, with several flaring episodes and a significant increase of the flux was observed at millimetric frequencies. Moreover, in the X-ray band the Swift/XRT observations seem to show an harder-when-brighter behaviour of the source spectrum. The spectral energy distribution of mid-March 2008 is modelled with a homogeneous one-zone synchrotron self Compton emission plus contributions from inverse Compton scattering of external photons from both the accretion disc and the broad line region. Indeed, some features in the optical-UV spectrum seem to indicate the presence of Seyfert-like components, such as the little blue bump and the big blue bump

AGILE detection of extreme γ -ray activity from the blazar PKS 1510-089 during March 2009: Multifrequency analysis

We report on the extreme gamma-ray activity from the FSRQ PKS 1510-089 observed by AGILE in March 2009. In the same period a radio-to-optical monitoring of the source was provided by the GASP-WEBT and REM. Moreover, several Swift ToO observations were triggered, adding important information on the source behaviour from optical/UV to hard X-rays. We paid particular attention to the calibration of the Swift/UVOT data to make it suitable to the blazars spectra. Simultaneous observations from radio to gamma rays allowed us to study in detail the correlation among the emission variability at different frequencies and to investigate the mechanisms at work. In the period 9-30 March 2009, AGILE detected an average gamma-ray flux of (311+/-21)x10^-8 ph cm^-2 s^-1 for E>100 MeV, and a peak level of (702+/-131)x10^-8 ph cm^-2 s^-1 on daily integration. The gamma-ray activity occurred during a period of increasing activity from near-IR to UV, with a flaring episode detected on 26-27 March 2009, suggesting that a single mechanism is responsible for the flux enhancement observed from near-IR to UV. By contrast, Swift/XRT observations seem to show no clear correlation of the X-ray fluxes with the optical and gamma-ray ones. However, the X-ray observations show a harder photon index (1.3-1.6) with respect to most FSRQs and a hint of harder-when-brighter behaviour, indicating the possible presence of a second emission component at soft X-ray energies. Moreover, the broad band spectrum from radio-to-UV confirmed the evidence of thermal features in the optical/UV spectrum of PKS 1510-089 also during high gamma-ray state. On the other hand, during 25-26 March 2009 a flat spectrum in the optical/UV energy band was observed, suggesting an important contribution of the synchrotron emission in this part of the spectrum during the brightest gamma-ray flare, therefore a significant shift of the synchrotron peak

Multiwavelength observations of 3C 454.3. III. Eighteen months of agile monitoring of the "crazy diamond"

We report on 18 months of multiwavelength observations of the blazar 3C 454.3 (Crazy Diamond) carried out in the period 2007 July-2009 January. In particular, we show the results of the AGILE campaigns which took place on 2008 May-June, 2008 July-August, and 2008 October-2009 January. During the 2008 May-2009 January period, the source average flux was highly variable, with a clear fading trend toward the end of the period, from an average γ-ray flux F E>100 MeV ≳ 200 × 10-8photonscm -2s-1 in 2008 May-June, to F E>100 MeV 80 × 10-8photonscm-2s-1 in 2008 October-2009 January. The average γ-ray spectrum between 100 MeV and 1 GeV can be fit by a simple power law, showing a moderate softening (from ΓGRID ∼ 2.0 to ΓGRID ∼ 2.2) toward the end of the observing campaign. Only 3σ upper limits can be derived in the 20-60 keV energy band with Super-AGILE, because the source was considerably off-axis during the whole time period. In 2007 July-August and 2008 May-June, 3C 454.3 was monitored by Rossi X-ray Timing Explorer (RXTE). The RXTE/Proportional Counter Array (PCA) light curve in the 3-20 keV energy band shows variability correlated with the γ-ray one. The RXTE/PCA average flux during the two time periods is F 3-20 keV = 8.4 × 10-11ergcm-2s -1, and F 3-20 keV = 4.5 × 10 -11ergcm-2s-1, respectively, while the spectrum (a power law with photon index ΓPCA = 1.65 0.02) does not show any significant variability. Consistent results are obtained with the analysis of the RXTE/High-Energy X-Ray Timing Experiment quasi-simultaneous data. We also carried out simultaneous Swift observations during all AGILE campaigns. Swift/XRT detected 3C 454.3 with an observed flux in the 2-10 keV energy band in the range (0.9-7.5) × 10-11ergcm-2s-1 and a photon index in the range ΓXRT = 1.33-2.04. In the 15-150 keV energy band, when detected, the source has an average flux of about 5mCrab. GASP-WEBT monitored 3C 454.3 during the whole 2007-2008 period in the radio, millimeter, near-IR, and optical bands. The observations show an extremely variable behavior at all frequencies, with flux peaks almost simultaneous with those at higher energies. A correlation analysis between the optical and the γ-ray fluxes shows that the γ-optical correlation occurs with a time lag of τ = -0.4+0.6-0.8 days, consistent with previous findings for this source. An analysis of 15 GHz and 43 GHz VLBI core radio flux observations in the period 2007 July-2009 February shows an increasing trend of the core radio flux, anti-correlated with the higher frequency data, allowing us to derive the value of the source magnetic field. Finally, the modeling of the broadband spectral energy distributions for the still unpublished data, and the behavior of the long-term light curves in different energy bands, allow us to compare the jet properties during different emission states, and to study the geometrical properties of the jet on a time-span longer than one year. © 2010. The American Astronomical Society. All rights reserved

Bank equity stakes in borrowing firms and credit market competition

In this paper we analyse the effect of banks holding equity stakes in borrowing firms on the equilibrium level of interest rates and on the tendency of the borrowing firm to establish tighter links with the shareholding bank. Equity claims are defined as rights to receive dividend payments as well as private information about the firm. By modeling competition as an asymmetric common value auction, we show that when one of the competing banks in the credit market holds an equity claim in the firm, the equilibrium expected cost of debt increases with the size of the equity stake and the firm tends to concentrate his credit relationships around the shareholding ban

Essays on pricing games with asymmetric players

Available from British Library Document Supply Centre- DSC:DXN059819 / BLDSC - British Library Document Supply CentreSIGLEGBUnited Kingdo