A generic framework for stochastic Loss-Given-Default

In this document a method is discussed to incorporate stochastic Loss-Given-Default (LGD) in factor models, i.e. structural models for credit risk. The general idea exhibited in this text is to introduce a common dependence of the LGD and the probability of default (PD) on a latent variable, representing the systemic risk. Though our theory can be applied to any arbitrary firm-value model and any underlying distribution for the LGD, provided its support is a compact subset of [0,1], special attention is given to the extension of the well-known cases of the Gaussian copula framework and the shifted Gamma one-factor model (a particular case of the generic one-factor Lévy model), and the LGD is modeled by a Beta distribution, in accordance with rating agency models and the Credit Metrics model.In order to introduce stochastic LGD, a monotonically decreasing relation is derived between the loss rate L, i.e. the loss as a percentage of the total exposure, and the standardized log-return R of the obligor’s asset value, which is assumed to be a function of one or more systematic and idiosyncratic risk factors. The property that the relation is decreasing guarantees that the LGD is negatively correlated to R and hence positively correlated to the default rate. From this relation, expressions are then derived for the cumulative distribution function (CDF) and the expected value of the loss rate and the LGD, conditionally on a realization of the systematic risk factor(s). It is important to remark that all our results are derived under the large homogeneous portfolio (LHP) assumption and that they are fully consistent with the IRB approach outlined by the Basel II Capital Accord.We will demonstrate the impact of incorporating stochastic LGD and using models based on skew and fat-tailed distributions in determining adequate capital requirements. Furthermore, we also skim the potential application of the proposed framework in a credit risk environment. It will turn out that both building blocks, i.e. stochastic LGD and fat-tailed distributions, separately, increase the projected loss and thus the required capital charge. Hence, the aggregation of a model based on a fat-tailed underlying distribution that accounts for stochastic LGD will lead to sound capital requirements.     

Jamming, yielding, and rheology of weakly vibrated granular media

We establish that the rheological curve of dry granular media is nonmonotonic, both in the presence and absence of external mechanical agitations. In the presence of weak vibrations, the nonmonotonic flow curves govern a hysteretic transition between slow but steady and fast, inertial flows. In the absence of vibrations, the nonmonotonic flow curve governs the yielding behavior of granular media. Finally, we show that nonmonotonic flow curves can be seen in at least two different flow geometries and for several granular materials.     

Second-order generalized estimating equations for correlated count data

Generalized estimating equations have been widely used in the analysis of correlated count data. Solving these equations yields consistent parameter estimates while the variance of the estimates is obtained from a sandwich estimator, thereby ensuring that, even with misspecification of the so-called working correlation matrix, one can draw valid inferences on the marginal mean parameters. That they allow misspecification of the working correlation structure, though, implies a limitation of these equations should scientific interest also be in the covariance or correlation structure. We propose herein an extension of these estimating equations such that, by incorporating the bivariate Poisson distribution, the variance-covariance matrix of the response vector can be properly modelled, which would permit inference thereon. A sandwich estimator is used for the standard errors, ensuring sound inference on the parameters estimated. Two applications are presented.     

Particles of nonzero rest mass and spin algebras

We construct a family of parametrized spin-Z_α algebras from the (canonical) spin-S and (helicity)spin-Z ones in the case of irreducible unitary representations [m, s] of the Poincaré group. The parameter α refers to a rotation angle around the third axis. Equivalences of such constructions are given through a family of unitary transformations containing, for definite values of α, well established and very useful transformations. General formulas referring to the so-called Shirokov-Foldy form of the Poincaré generators and to typical Shirokov's operators are given explicitly.     

Photolysis of formaldehyde: Relative quantum yields of H2 and CO in the wavelength range 270–360 nm

The ratio of H₂ and CO production from the photolysis of ppm concentrations of formaldehyde was measured at several wavelengths for two experimental conditions: in nitrogen with 80 ppm propene added, and in a 20:80 mixture of oxygne and nitrogen. The relative quantum yields for H atom generation are derived and compared with results of other authors.     

On a linear differential equation of the advanced type

A linear differential equation of the advanced type is considered. Existence of solutions for any finite interval is shown. Also, a method for generating all the solutions is described and justified.     

Electronic correlations in oligo-acene and -thiopene organic molecular crystals

From first-principles calculations we determine the Coulomb interaction between two holes on oligo-acene and -thiophene molecules in a crystal, as a function of the oligomer length. The electronic polarization of the molecules that surround the charged oligomer reduces the bare Coulomb repulsion between the holes by approximately a factor of 2. The effects of relaxing the molecular geometry in the presence of holes is found to be significantly smaller. In all cases the effective hole-hole repulsion is much larger than the valence bandwidth, which implies that at high doping levels the properties of these organic semiconductors are determined by electron-electron correlations.     

Covalently attached saccharides on silicon surfaces

This paper presents the first functionalization of silicon surfaces with well-defined, covalently attached monolayers containing saccharides. Two methods were used to this aim: a thermal method (refluxing in mesitylene) and a recently developed, extremely mild photochemical method (irradiation with 447 nm at room temperature). The results were analyzed by FT-IR and angle-resolved X-ray photoelectron spectroscopy. The use of a two-dimensional detector in ARXPS allows for unparalleled, subnanometer resolution in the determination of the elemental composition of monolayers. Even for monolayers with a total thickness of only approximately 1.5 nm, a clear elemental depth profile can be obtained. Such analyses display for sialic acid-containing monolayers that the mild photochemical attachment does not destroy the (rather fragile) sialic acid moiety and that the sugar is present at the top of the monolayer and thus available for biological interactions.