Multi-Factor Bottom-Up Model for Pricing Credit Derivatives

In this note we continue the study of the stress event model, a simple and intuitive dynamic model for credit risky portfolios, proposed by Duffie and Singleton (1999). The model is a bottom-up version of the multi-factor portfolio credit model proposed by Longstaff and Rajan (2008). By a novel identification of independence conditions, we are able to decompose the loss distribution into a series expansion which not only provides a clear picture of the characteristics of the loss distribution but also suggests a fast and accurate approximation for it. Our approach has three important features: (i) it is able to match the standard CDS index tranche prices and the underlying CDS spreads, (ii) the computational speed of the loss distribution is very fast, comparable to that of the Gaussian copula, (iii) the computational cost for additional factors is mild, allowing for more flexibility for calibrations and opening the possibility of studying multi-factor default dependence of a portfolio via a bottom-up approach. We demonstrate the tractability and efficiency of our approach by calibrating it to investment grade CDS index tranches.credit derivatives, CDO, bottom-up approach, multi-name, intensity-based, risk and portfolio.

Determination of the internal structure of neutron stars from gravitational wave spectra

In this paper the internal structure of a neutron star is shown to be inferrable from its gravitational-wave spectrum. Iteratively applying the inverse scheme of the scaled coordinate logarithmic perturbation method for neutron stars proposed by Tsui and Leung [Astrophys. J. {\bf 631}, 495 (2005)], we are able to determine the mass, the radius and the mass distribution of a star from its quasi-normal mode frequencies of stellar pulsation. In addition, accurate equation of state of nuclear matter can be obtained from such inversion scheme. Explicit formulas for the case of axial $w$-mode oscillation are derived here and numerical results for neutron stars characterized by different equations of state are shown.Comment: 26 pages, 14 figures, submitted to Physical Review

Perturbative Analysis of Universality and Individuality in Gravitational Waves from Neutron Stars

The universality observed in gravitational wave spectra of non-rotating neutron stars is analyzed here. We show that the universality in the axial oscillation mode can be reproduced with a simple stellar model, namely the centrifugal barrier approximation (CBA), which captures the essence of the Tolman VII model of compact stars. Through the establishment of scaled co-ordinate logarithmic perturbation theory (SCLPT), we are able to explain and quantitatively predict such universal behavior. In addition, quasi-normal modes of individual neutron stars characterized by different equations of state can be obtained from those of CBA with SCLPT.Comment: 29 pages, 10 figures, submitted to Astrophysical Journa