Parametric Immunization in Bond Portfolio Management

In this paper, we evaluate the relative immunization performance of the multifactor parametric interest rate risk model based on the Nelson-Siegel-Svensson specification of the yield curve with that of standard benchmark investment strategies, using European Central Bank yield curve data in the period between January 3, 2005 and December 31, 2011. In addition, we examine the role of portfolio design in the success of immunization strategies, particularly the role of the maturity bond. Considering multiperiod tests, the goal is to assess, in a highly volatile interest rate period, whether the use of the multifactor parametric immunization model contributes to improve immunization performance when compared to traditional single-factor duration strategies and whether durationmatching portfolios constrained to include a bond maturing near the end of the holding period prove to be an appropriate immunization strategy. Empirical results show that: (i) immunization models (single- and multi-factor) remove most of the interest rate risk underlying a naïve or maturity strategy; (ii) duration-matching portfolios constrained to include the maturity bond and formed using a single-factor model outperform the traditional duration-matching portfolio set up using a ladder portfolio and provide appropriate protection against interest rate risk; (iii) the multifactor parametric model outperforms all the other non-duration and duration-matching strategies, behaving almost like a perfect immunization asset; (iv) these results are consistent to changes in the rebalancing frequency of bond portfolios

Primordial non-Gaussianity from mixed inflaton-curvaton perturbations

We characterise the primordial perturbations produced due to both inflaton and curvaton fluctuations in models where the curvaton has a quadratic, cosine or hyperbolic potential, and the inflaton potential is characterised by the usual slow-roll parameters. Isocurvature curvaton field perturbations can produce significant non-Gaussianity in the primordial density field, in contrast with adiabatic inflaton field perturbations which produce negligible non-Gaussianity for canonical scalar fields. A non-self-interacting curvaton with quadratic potential produces a local-type non-Gaussianity that is well described by the non-linearity parameter fNL, which may be scale-dependent when the inflaton perturbations dominate the power spectrum. We show how observational bounds on non-linearity parameters and the tensor-scalar ratio can be used to constrain curvaton and inflaton parameters. We find a consistency relation between the bispectrum and trispectrum parameters in a mixed inflaton-curvaton model for a quadratic curvaton potential. Self-interaction terms in the curvaton potential can lead to both a large trispectrum parameter, gNL, and scale-dependence of the non-linearity parameters.Comment: 17 pages, 8 figures, (v2 references added

Tilted Ekpyrosis

We consider a simple model of cosmological collapse driven by canonical fields with exponential potentials. We generalise the two-field ekpyrotic collapse to consider non-orthogonal or tilted potentials and give the general condition for isocurvature field fluctuations to have a scale-invariant spectrum in this model. In particular we show that tilted potentials allow for a slightly red spectrum of perturbations as required by current observations. However a red spectrum of fluctuations implies that the two-field ekpyrotic phase must have a finite duration and requires a preceding phase which sets the initial conditions for what otherwise appears to be a fine-tuned trajectory in the phase space.Comment: 5 pages, references adde

Portfolio selection in euro area with CAPM and Lower Partial Moments models

This article selects portfolios using estimates given by CAPM and three Lower Partial Moments models (LPM). The CAPM assumption about investors’ behaviour towards risk is that they are equally concerned with upside and downside risk. The LPM models, however, are based on the assumption that investors’ utility functions weight downside risk more heavily than upside risk. The major difference between LPM models is their definition of upside and downside risk. The asset pricing models estimations and the corresponding portfolio selection were conducted on several euro area domestic stock indexes and the European Monetary Union stock market index (EMU). A pairwise comparison of portfolio performance is conducted through Sharpe ratios calculated sepa- rately for upside and downside market conditions. The results of this comparative analysis of different pricing models provide evidence that CAPM and one LPM model offer better protection against adverse market conditions than the other two LPM models studied.info:eu-repo/semantics/publishedVersio

The Integration of European Stock Markets and Market Timing

In this research, a European index and a world index were used to test the integration of the national stock markets of fourteen EU countries into the world stock market. A market timing procedure was used to detect differences of performance between the national indexes. The main conclusions drawn are that the European factor is important in explaining the returns of all the national indexes, but the world portfolio seems unnecessary in the cases of nine countries whose stock markets are embedded in the global European stock market. Differences of performance were also detected: the market timing effect being particularly evident in relation to the European market portfolio. Non-participation in the single currency does not seem to have a perceptible influence on the results.

Has the Stability and Growth Pact stabilised? Evidence from a panel of 12 European countries and some implications for the reform of the Pact

Ever since its inception EMU has been subject to controversy. The fiscal policy rules embedded in the Treaty on European Union, and clarified in the Stability and Growth Pact (SGP), are probably the most contentious. The SGP is being accused of being too rigid and of forcing pro-cyclicality in fiscal policy. We test the impact of the SGP rules on the cyclical properties of fiscal policy for a panel of 12 European countries. We conclude that contrary to what might have been expected the euro fiscal rules have reinforced the counter-cyclicality of fiscal policy. However, the results also show that the SGP is not being applied symmetrically over the cycle, leading to insufficient fiscal consolidation during economic upswings. This explains the recent difficulties of Portugal, Germany and France in complying with SGP requirements. Based on these conclusions we argue for the creation of independent national technical committees that would define an appropriate deficit target on an annual basis.Fiscal policy, stabilisation, EMU, Stability and Growth Pact reform.

Probing the primordial Universe with MeerKAT and DES

It is usually assumed that we will need to wait until next-generation surveys like Euclid, LSST and SKA, in order to improve on the current best constraints on primordial non-Gaussianity from the Planck experiment. We show that two contemporary surveys, with the SKA precursor MeerKAT and the Dark Energy Survey (DES), can be combined using the multi-tracer technique to deliver an accuracy on measurement of $f_{\rm NL}$ that is up to three times better than Planck.Comment: 7 pages, 5 figures, 1 table. We now marginalise over the bias, and ensure that we exclude nonlinear scales, leading to small quantitative corrections. Version accepted by MNRA

A flexible matrix Libor model with smiles

We present a flexible approach for the valuation of interest rate derivatives based on Affine Processes. We extend the methodology proposed in Keller-Ressel et al. (2009) by changing the choice of the state space. We provide semi-closed-form solutions for the pricing of caps and floors. We then show that it is possible to price swaptions in a multifactor setting with a good degree of analytical tractability. This is done via the Edgeworth expansion approach developed in Collin-Dufresne and Goldstein (2002). A numerical exercise illustrates the flexibility of Wishart Libor model in describing the movements of the implied volatility surface

Vacuum stability with spontaneous violation of lepton number

The vacuum of the Standard Model is known to be unstable for the measured values of the top and Higgs masses. Here we show how vacuum stability can be achieved naturally if lepton number is violated spontaneously at the TeV scale. More precise Higgs measurements in the next LHC run should provide a crucial test of our symmetry breaking scenario. In addition, these schemes typically lead to enhanced rates for processes involving lepton flavour violation .Comment: 9 pages, 4+2 figures; some references added, some textual modifications: 2 figures added, appendices added. Results unchanged. Matches published versio