Implied Volatilities of Caps: a Gaussian approach.

Implied volatilities of interest rate derivatives present some distinctive features, like the inverse relation with the underlying rates and the humped or decreasing shape of their term structure. The objective of this paper is to analyze and explain such features in a Gaussian framework. We will use an approximate relation which separates in a simple and natural way the effects on the implied volatility of the level and of the uncertainty of the interest rates. This is a useful tool for understanding the features of different models and to interpret some characteristics of the market.Implied volatility, forward rates, HJM models, calibration

Evaluating Discrete Dynamic Strategies in Affine Models

We consider the problem of measuring the performance of a dynamic strategy, rebalanced at a discrete set of dates, whose objective is that of replicating a claim in an incomplete market driven by a general multi-dimensional affine process. The main purpose of the paper is to propose a method to efficiently compute the expected value and variance of the hedging error of the strategy. Representing the pay-off the claim as an inverse Laplace transform, we are able to get semi-explicit formulas for strategies satisfying a certain property. The result is quite general and can be applied to a very rich class of models and strategies, including Delta hedging. We provide illustrations for the cases of interest rate models and Heston's stochastic volatility model.

Explicit formulas for the minimal variance hedging strategy in a martingale case

We explicitly compute the optimal strategy in discrete time for a European option and the variance of the corresponding hedging error under the hypothesis that the underlying is a martingale following a Geometric Brownian motion.minimal variance hedging

Measuring the error of dynamic hedging: a Laplace transform approach

We compute the expected value and the variance of the discretization error of delta hedging and of other strategies in the presence of proportional transaction costs. The method, based on Laplace transform, applies to a fairly general class of models, including Black-Scholes, Merton's jump-diffusion and Normal Inverse Gaussian. The results obtained are not asymptotical approximations but exact and efficient formulas, valid for any number of trading dates. They can also be employed under model mispecification, to measure the influence of model risk on a hedging strategy.hedging, Laplace transform

Monetary and macroprudential policies

We use a dynamic general equilibrium model featuring a banking sector to assess the interaction between macroprudential policy and monetary policy. We find that in "normal" times (when the economic cycle is driven by supply shocks) macroprudential policy generates only modest benefits for macroeconomic stability over a "monetary-policy-only" world. And lack of cooperation between the macroprudential authority and the central bank may even result in conflicting policies, hence suboptimal results. The benefits of introducing macroprudential policy tend to be sizeable when financial or housing market shocks, which affect the supply of loans, are important drivers of economic dynamics. In these cases a cooperative central bank will "lend a hand" to the macroprudential authority, working for broader objectives than just price stability in order to improve overall economic stability.macroprudential policy, monetary policy, capital requirements

Monetary Policy Rules for the Euro Area: What Role for National Information?

Using a simple multi-country econometric model covering the three main countries of the euro area, the paper focuses on the role that can be played by information at the national level in defining the monetary policy of the Union. We find that the performance of a central bank that chooses the nominal interest rate to minimize a standard quadratic loss function of area-wide inflation and output gap improves significantly if the reaction function includes national variables - as opposed to the case in which the interest rate reacts to area-wide variables only. Our results suggest that asymmetries within the euro area are relevant to the central bank; overall, we interpret them as making a case for exploiting the available national information in the conduct of the single monetary policy.monetary policy rules, Eurosystem

Pro-cyclicality of capital regulation: is it a problem? How to fix it?

We use a macroeconomic euro area model with a bank sector to study the pro-cyclical effect of the capital regulation, focusing on the extra pro-cyclicality induced by Basel II over Basel I. Our results suggest that this incremental effect is modest. We also find that regulators could offset the extra pro-cyclicality by a countercyclical capital-requirements policy. Our results also suggest that banks may have incentives to accumulate countercyclical capital buffers, making this policy less relevant, but this finding is depends on the type of economic shock posited. We also survey different policy options for dealing with procyclicality and discuss the pros and cons of the measures available.Basel accord, pro-cyclicality

Peptide-Based Inhibitors of ADAM and ADAMTS Metalloproteinases

ADAM and ADAMTS are two large metalloproteinase families involved in numerous physiological processes, such as shedding of cell-surface protein ectodomains and extra-cellular matrix remodelling. Aberrant expression or dysregulation of ADAMs and ADAMTSs activity has been linked to several pathologies including cancer, inflammatory, neurodegenerative and cardiovascular diseases. Inhibition of ADAM and ADAMTS metalloproteinases have been attempted using various small molecules and protein-based therapeutics, each with their advantages and disadvantages. While most of these molecular formats have already been described in detail elsewhere, this mini review focuses solely on peptide-based inhibitors, an emerging class of therapeutic molecules recently applied against some ADAM and ADAMTS members. We describe both linear and cyclic peptide-based inhibitors which have been developed using different approaches ranging from traditional medicinal chemistry and rational design strategies to novel combinatorial peptide-display technologies

Study of network composition in interpenetrating polymer networks of poly(N isopropylacrylamide) microgels:the role of poly(acrylic acid)

Hypothesis: The peculiar swelling behaviour of poly(N-isopropylacrylamide) (PNIPAM)-based responsive microgels provides the possibility to tune both softness and volume fraction with temperature, making these systems of great interest for technological applications and theoretical implications. Their intriguing phase diagram can be even more complex if poly(acrylic acid) (PAAc) is interpenetrated within PNIPAM network to form Interpenetrating Polymer Network (IPN) microgels that exhibit an additional pH-sensitivity. The effect of the PAAc/PNIPAM polymeric ratio on both swelling capability and dynamics is still matter of investigation. Experiments: Here we investigate the role of PAAc in the behaviour of IPN microgels across the volume phase transition through dynamic light scattering (DLS), transmission electron microscopy (TEM) and electrophoretic measurements as a function of microgel concentration and pH. Findings: Our results highlight that aggregation is favored at increasing weight concentration, PAAc content and pH and that a crossover PAAc content C*_{PAAc} exists above which the ionic charges on the microgel become relevant. Moreover we show that the softness of IPN microgels can be tuned ad hoc by changing the PAAc/PNIPAM ratio. These findings provide new insights into the possibility to control experimentally aggregation properties, charge and softness of IPN microgels by varying PAAc content.Comment: preprint versio