INTERBANK CREDIT RISK MODELING WITH SELF-EXCITING JUMP PROCESSES

The credit crunch of 2007 caused major changes in the market of interbank rates making the existing interest rate theory inconsistent. This paper puts forward one way to reconcile practice and theory by modifying the arbitrage-free condition. In this framework, the forward Libor rate is no longer considered as a risk-free rate and the credit and liquidity risks within the interbank market partly drive its dynamics. In a similar manner to the multiple-curve approach, we model the evolution of default-free rates, assimilated to overnight interest swap rates, and the default times of an interbank market segment determined by its tenor. For each segment, we use the reduced form approach to model the arrival rate of defaults with a self-exciting jump-diffusion process. Then, we deduce the dynamics of the spot forward Libor rates and provide closed-form approximation pricing formulae for options on forward Libor rates and swap rates. Even in a context of negative interest rates and compared to other forms of intensity processes such as a CIR, the self-excitation property allows a better understanding of the spread OIS-IRS and provides information about the interbank credit risk. Furthermore, our framework enables to parse the impact of the interbank credit risk on forward Libor as well as on interest rates derivatives like caps, floors, and swaptions.

Characterization and remediation of sample index swaps by non-redundant dual indexing on massively parallel sequencing platforms

ABSTRACTHere, we present an in-depth characterization of the index swapping mechanism on Illumina instruments that employ the ExAmp chemistry for cluster generation (HiSeqX, HiSeq4000, and NovaSeq). We discuss best practices for eliminating the effects of index swapping on data integrity by utilizing unique dual indexing for complete filtering of index swapped reads. We calculate mean swap rates across multiple sample preparation methods and sequencer models, demonstrating that different methods can have vastly different swap rates, and show that even non-ExAmp chemistry instruments display trace levels of index swapping. Finally, using computational methods we provide a greater insight into the mechanism of index swapping.