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We have has performed the first measurement of the coherent ψ(2S) photo-production cross section in ultra-peripheral Pb-Pb collisions at the LHC. This charmonium excited state is reconstructed via the ψ(2S) →l+l− and ψ(2S) → J/ψπ+π− decays, where the J/ψ decays into two leptons. The analysis is based on an event sample corresponding to an integrated luminosity of about 22 μb−1. The cross section for coherent ψ(2S) production in the rapidity interval −0.9<y<0.9 is dσcohψ(2S)/dy=0.83±0.19(stat+syst) mb. The ψ(2S) to J/ψ coherent cross section ratio is 0.34+0.08−0.07(stat+syst). The obtained results are compared to predictions from theoretical models.
The production of J/ψ and ψ(2S) was measured with the ALICE detector in Pb-Pb collisions at the LHC. The measurement was performed at forward rapidity (2.5<y<4) down to zero transverse momentum (pT) in the dimuon decay channel. Inclusive J/ψ yields were extracted in different centrality classes and the centrality dependence of the average pT is presented. The J/ψ suppression, quantified with the nuclear modification factor (RAA), was studied as a function of centrality, transverse momentum and rapidity. Comparisons with similar measurements at lower collision energy and theoretical models indicate that the J/ψ production is the result of an interplay between color screening and recombination mechanisms in a deconfined partonic medium, or at its hadronization. Results on the ψ(2S) suppression are provided via the ratio of ψ(2S) over J/ψ measured in pp and Pb-Pb collisions.
The production of J/ψ and ψ(2S) was measured with the ALICE detector in Pb-Pb collisions at the LHC. The measurement was performed at forward rapidity (2.5<y<4) down to zero transverse momentum (pT) in the dimuon decay channel. Inclusive J/ψ yields were extracted in different centrality classes and the centrality dependence of the average pT is presented. The J/ψ suppression, quantified with the nuclear modification factor (RAA), was studied as a function of centrality, transverse momentum and rapidity. Comparisons with similar measurements at lower collision energy and theoretical models indicate that the J/ψ production is the result of an interplay between color screening and recombination mechanisms in a deconfined partonic medium, or at its hadronization. Results on the ψ(2S) suppression are provided via the ratio of ψ(2S) over J/ψ measured in pp and Pb-Pb collisions.
The production of J/ψ and ψ(2S) was measured with the ALICE detector in Pb-Pb collisions at the LHC. The measurement was performed at forward rapidity (2.5<y<4) down to zero transverse momentum (pT) in the dimuon decay channel.
Inclusive J/ψ yields were extracted in different centrality classes and the centrality dependence of the average pT is presented. The J/ψ suppression, quantified with the nuclear modification factor (RAA), was studied as a function of centrality, transverse momentum and rapidity. Comparisons with similar measurements at lower collision energy and theoretical models indicate that the J/ψ production is the result of an interplay between color screening and recombination mechanisms in a deconfined partonic medium, or at its hadronization. Results on the ψ(2S) suppression are provided via the ratio of ψ(2S) over J/ψ measured in pp and Pb-Pb collisions.
We present a measurement of inclusive J/ψ production in p-Pb collisions at sNN−−−√ = 5.02 TeV as a function of the centrality of the collision, as estimated from the energy deposited in the Zero Degree Calorimeters. The measurement is performed with the ALICE detector down to zero transverse momentum, pT, in the backward (−4.46<ycms<−2.96) and forward (2.03<ycms<3.53) rapidity intervals in the dimuon decay channel and in the mid-rapidity region (−1.37<ycms<0.43) in the dielectron decay channel. The backward and forward rapidity intervals correspond to the Pb-going and p-going direction, respectively. The pT-differential J/ψ production cross section at backward and forward rapidity is measured for several centrality classes, together with the corresponding average pT and p2T values. The nuclear modification factor, QpPb, is presented as a function of centrality for the three rapidity intervals, and, additionally, at backward and forward rapidity, as a function of pT for several centrality classes. At mid- and forward rapidity, the J/ψ yield is suppressed up to 40% compared to that in pp interactions scaled by the number of binary collisions. The degree of suppression increases towards central p-Pb collisions at forward rapidity, and with decreasing pT of the J/ψ. At backward rapidity, the QpPb is compatible with unity within the total uncertainties, with an increasing trend from peripheral to central p-Pb collisions.
We present a measurement of inclusive J/ψ production in p-Pb collisions at sNN−−−√ = 5.02 TeV as a function of the centrality of the collision, as estimated from the energy deposited in the Zero Degree Calorimeters. The measurement is performed with the ALICE detector down to zero transverse momentum, pT, in the backward (−4.46<ycms<−2.96) and forward (2.03<ycms<3.53) rapidity intervals in the dimuon decay channel and in the mid-rapidity region (−1.37<ycms<0.43) in the dielectron decay channel. The backward and forward rapidity intervals correspond to the Pb-going and p-going direction, respectively. The pT-differential J/ψ production cross section at backward and forward rapidity is measured for several centrality classes, together with the corresponding average pT and p2T values. The nuclear modification factor, QpPb, is presented as a function of centrality for the three rapidity intervals, and, additionally, at backward and forward rapidity, as a function of pT for several centrality classes. At mid- and forward rapidity, the J/ψ yield is suppressed up to 40% compared to that in pp interactions scaled by the number of binary collisions. The degree of suppression increases towards central p-Pb collisions at forward rapidity, and with decreasing pT of the J/ψ. At backward rapidity, the QpPb is compatible with unity within the total uncertainties, with an increasing trend from peripheral to central p-Pb collisions.
We present a measurement of inclusive J/ψ production in p-Pb collisions at sNN−−−√ = 5.02 TeV as a function of the centrality of the collision, as estimated from the energy deposited in the Zero Degree Calorimeters. The measurement is performed with the ALICE detector down to zero transverse momentum, pT, in the backward (−4.46<ycms<−2.96) and forward (2.03<ycms<3.53) rapidity intervals in the dimuon decay channel and in the mid-rapidity region (−1.37<ycms<0.43) in the dielectron decay channel. The backward and forward rapidity intervals correspond to the Pb-going and p-going direction, respectively. The pT-differential J/ψ production cross section at backward and forward rapidity is measured for several centrality classes, together with the corresponding average pT and p2T values. The nuclear modification factor, QpPb, is presented as a function of centrality for the three rapidity intervals, and, additionally, at backward and forward rapidity, as a function of pT for several centrality classes. At mid- and forward rapidity, the J/ψ yield is suppressed up to 40% compared to that in pp interactions scaled by the number of binary collisions. The degree of suppression increases towards central p-Pb collisions at forward rapidity, and with decreasing pT of the J/ψ. At backward rapidity, the QpPb is compatible with unity within the total uncertainties, with an increasing trend from peripheral to central p-Pb collisions.
Transverse momentum (pT) spectra of pions, kaons, and protons up to pT=20 GeV/c have been measured in Pb-Pb collisions at sNN−−−√=2.76 TeV using the ALICE detector for six different centrality classes covering 0-80%. The proton-to-pion and the kaon-to-pion ratios both show a distinct peak at pT≈3 GeV/c in central Pb-Pb collisions that decreases towards more peripheral collisions. For pT>10 GeV/c, the nuclear modification factor is found to be the same for all three particle species in each centrality interval within systematic uncertainties of 10-20%. This suggests there is no direct interplay between the energy loss in the medium and the particle species composition in the hard core of the quenched jet. For pT<10 GeV/c, the data provide important constraints for models aimed at describing the transition from soft to hard physics.
Transverse momentum (pT) spectra of pions, kaons, and protons up to pT=20 GeV/c have been measured in Pb-Pb collisions at sNN−−−√=2.76 TeV using the ALICE detector for six different centrality classes covering 0-80%. The proton-to-pion and the kaon-to-pion ratios both show a distinct peak at pT≈3 GeV/c in central Pb-Pb collisions that decreases towards more peripheral collisions. For pT>10 GeV/c, the nuclear modification factor is found to be the same for all three particle species in each centrality interval within systematic uncertainties of 10-20%. This suggests there is no direct interplay between the energy loss in the medium and the particle species composition in the hard core of the quenched jet. For pT<10 GeV/c, the data provide important constraints for models aimed at describing the transition from soft to hard physics.
Long-range angular correlations on the near and away side in p–Pb collisions at √sNN=5.02 TeV
(2013)
Angular correlations between charged trigger and associated particles are measured by the ALICE detector in p–Pb collisions at a nucleon–nucleon centre-of-mass energy of 5.02 TeV for transverse momentum ranges within 0.5<pT,assoc<pT,trig<4 GeV/c. The correlations are measured over two units of pseudorapidity and full azimuthal angle in different intervals of event multiplicity, and expressed as associated yield per trigger particle. Two long-range ridge-like structures, one on the near side and one on the away side, are observed when the per-trigger yield obtained in low-multiplicity events is subtracted from the one in high-multiplicity events. The excess on the near-side is qualitatively similar to that recently reported by the CMS Collaboration, while the excess on the away-side is reported for the first time. The two-ridge structure projected onto azimuthal angle is quantified with the second and third Fourier coefficients as well as by near-side and away-side yields and widths. The yields on the near side and on the away side are equal within the uncertainties for all studied event multiplicity and pT bins, and the widths show no significant evolution with event multiplicity or pT. These findings suggest that the near-side ridge is accompanied by an essentially identical away-side ridge.
A measurement of the transverse momentum spectra of jets in Pb-Pb collisions at sNN−−−√=2.76 TeV is reported. Jets are reconstructed from charged particles using the anti-kT jet algorithm with jet resolution parameters R of 0.2 and 0.3 in pseudo-rapidity |η|<0.5. The transverse momentum pT of charged particles is measured down to 0.15 GeV/c which gives access to the low pT fragments of the jet. Jets found in heavy-ion collisions are corrected event-by-event for average background density and on an inclusive basis (via unfolding) for residual background fluctuations and detector effects. A strong suppression of jet production in central events with respect to peripheral events is observed. The suppression is found to be similar to the suppression of charged hadrons, which suggests that substantial energy is radiated at angles larger than the jet resolution parameter R=0.3 considered in the analysis. The fragmentation bias introduced by selecting jets with a high pT leading particle, which rejects jets with a soft fragmentation pattern, has a similar effect on the jet yield for central and peripheral events. The ratio of jet spectra with R=0.2 and R=0.3 is found to be similar in Pb-Pb and simulated PYTHIA pp events, indicating no strong broadening of the radial jet structure in the reconstructed jets with R<0.3.
This paper analyzes the risk properties of typical asset-backed securities (ABS), like CDOs or MBS, relying on a model with both macroeconomic and idiosyncratic components. The examined properties include expected loss, loss given default, and macro factor dependencies. Using a two-dimensional loss decomposition as a new metric, the risk properties of individual ABS tranches can directly be compared to those of corporate bonds, within and across rating classes. By applying Monte Carlo Simulation, we find that the risk properties of ABS differ significantly and systematically from those of straight bonds with the same rating. In particular, loss given default, the sensitivities to macroeconomic risk, and model risk differ greatly between instruments. Our findings have implications for understanding the credit crisis and for policy making. On an economic level, our analysis suggests a new explanation for the observed rating inflation in structured finance markets during the pre-crisis period 2004-2007. On a policy level, our findings call for a termination of the 'one-size-fits-all' approach to the rating methodology for fixed income instruments, requiring an own rating methodology for structured finance instruments. JEL Classification: G21, G28
This paper analyzes the risk properties of typical asset-backed securities (ABS), like CDOs or MBS, relying on a model with both macroeconomic and idiosyncratic components. The examined properties include expected loss, loss given default, and macro factor dependencies. Using a two-dimensional loss decomposition as a new metric, the risk properties of individual ABS tranches can directly be compared to those of corporate bonds, within and across rating classes. By applying Monte Carlo Simulation, we find that the risk properties of ABS differ significantly and systematically from those of straight bonds with the same rating. In particular, loss given default, the sensitivities to macroeconomic risk, and model risk differ greatly between instruments. Our findings have implications for understanding the credit crisis and for policy making. On an economic level, our analysis suggests a new explanation for the observed rating inflation in structured finance markets during the pre-crisis period 2004-2007. On a policy level, our findings call for a termination of the 'one-size-fits-all' approach to the rating methodology for fixed income instruments, requiring an own rating methodology for structured finance instruments. JEL Classification: G21, G28 Keywords: credit risk, risk transfer, systematic risk
Risk transfer with CDOs
(2008)
Modern bank management comprises both classical lending business and transfer of asset risk to capital markets through securitization. Sound knowledge of the risks involved in securitization transactions is a prerequisite for solid risk management. This paper aims to resolve a part of the opaqueness surrounding credit-risk allocation to tranches that represent claims of different seniority on a reference portfolio. In particular, this paper analyzes the allocation of credit risk to different tranches of a CDO transaction when the underlying asset returns are driven by a common macro factor and an idiosyncratic component. Junior and senior tranches are found to be nearly orthogonal, motivating a search for the whereabout of systematic risk in CDO transactions. We propose a metric for capturing the allocation of systematic risk to tranches. First, in contrast to a widely-held claim, we show that (extreme) tail risk in standard CDO transactions is held by all tranches. While junior tranches take on all types of systematic risk, senior tranches take on almost no non-tail risk. This is in stark contrast to an untranched bond portfolio of the same rating quality, which on average suffers substantial losses for all realizations of the macro factor. Second, given tranching, a shock to the risk of the underlying asset portfolio (e.g. a rise in asset correlation or in mean portfolio loss) has the strongest impact, in relative terms, on the exposure of senior tranche CDO-investors. Our findings can be used to explain major stylized facts observed in credit markets.
Risk transfer with CDOs
(2008)
Modern bank management comprises both classical lending business and transfer of asset risk to capital markets through securitization. Sound knowledge of the risks involved in securitization transactions is a prerequisite for solid risk management. This paper aims to resolve a part of the opaqueness surrounding credit-risk allocation to tranches that represent claims of different seniority on a reference portfolio. In particular, this paper analyzes the allocation of credit risk to different tranches of a CDO transaction when the underlying asset returns are driven by a common macro factor and an idiosyncratic component. Junior and senior tranches are found to be nearly orthogonal, motivating a search for the where about of systematic risk in CDO transactions. We propose a metric for capturing the allocation of systematic risk to tranches. First, in contrast to a widely-held claim, we show that (extreme) tail risk in standard CDO transactions is held by all tranches. While junior tranches take on all types of systematic risk, senior tranches take on almost no non-tail risk. This is in stark contrast to an untranched bond portfolio of the same rating quality, which on average suffers substantial losses for all realizations of the macro factor. Second, given tranching, a shock to the risk of the underlying asset portfolio (e.g. a rise in asset correlation or in mean portfolio loss) has the strongest impact, in relative terms, on the exposure of senior tranche CDO-investors. Our findings can be used to explain major stylized facts observed in credit markets.
Decisions under ambiguity depend on both the belief regarding possible scenarios and the attitude towards ambiguity. This paper exclusively investigates the belief formation and belief updating process under ambiguity, using laboratory experiments. The results show that half of the subjects tend to adopt a simple heuristic strategy when updating beliefs, while the other half seems to partially adopt the Bayesian updates. We recover beliefs, represented by distributions of the priors/posteriors. The recoverable initial priors mostly follow a uniform distribution. We also find that subjects on average demonstrate slight pessimism in an ambiguous environment.
This paper provides a systematic analysis of individual attitudes towards ambiguity, based on laboratory experiments. The design of the analysis allows to capture individual behavior across various levels of ambiguity, ranging from low to high. Attitudes towards risk and attitudes towards ambiguity are disentangled, providing pure measures of ambiguity aversion. Ambiguity aversion is captured in several ways, i.e. as a discount factor net of a risk premium, and as an estimated parameter in a generalized utility function. We find that ambiguity aversion varies across individuals, and with the level of ambiguity, being most prominent for intermediate levels. Around one third of subjects show no aversion, one third show maximum aversion, and one third show intermediate levels of ambiguity aversion, while there is almost no ambiguity seeking. While most theoretical work on ambiguity builds on maxmin expected utility, our results provide evidence that MEU does not adequately capture individual attitudes towards ambiguity for the majority of individuals. Instead, our results support models that allow for intermediate levels of ambiguity aversion. Moreover, we find risk aversion to be statistically unrelated to ambiguity aversion on average. Taken together, the results support the view that ambiguity is an important and distinct argument in decision making under uncertainty.
This paper applies the theory of structured finance to the regulation of asset backed securities. We find the current regulation in Europe (Article 405 of the CRR) and the US (Section D of Dodd-Frank Act) to be severely flawed with respect to its key intention: the imposition of a strict loss retention requirement. While nominal retention is always 5%, the true level of loss retention varies across available retention options between zero loss retention and full loss retention at the extreme ends. Based on a standard model of structured finance transactions, we propose a new risk retention metric RM measuring the level of an issuer’s skin-in-the-game. The new metric could help to achieve a better implementation of CRR/CRD-IV and DFA, by making disclosure of the RM-number compulsory for all ABS transactions. There are also implications for the operation of rating agencies. On a general level, the RM metric will be instrumental in achieving simplicity and transparency in securitizations (STS).
We develop a state-space model to decompose bid and ask quotes of CDS into two components, fair default premium and liquidity premium. This approach gives a better estimate of the default premium than mid quotes, and it allows to disentangle and compare the liquidity premium earned by the protection buyer and the protection seller. In contrast to other studies, our model is structurally much simpler, while it also allows for correlation between liquidity and default premia, as supported by empirical evidence. The model is implemented and applied to a large data set of 118 CDS for a period ranging from 2004 to 2010. The model-generated output variables are analyzed in a difference-in-difference framework to determine how the default premium, as well as the liquidity premium of protection buyers and sellers, evolved during different periods of the financial crisis and to which extent they differ for financial institutions compared to non-financials.
The pricing of an ambiguous asset, whose cash flow stream is uncertain, may be affected by three factors: the belief regarding the realization likelihood of cash flows, the subjective attitude towards risk, and the attitude towards ambiguity. While previous literature looks at the total price discount under ambiguity, this paper investigates with laboratory experiments how much effect each factor can induce. We apply both non-parametric and parametric methods to cleanly separate the belief effects, the risk premiums, and the ambiguity premiums from each other. Both methods lead to similar results: Overall, subjects have substantial ambiguity aversion, and ambiguity premiums account for the largest price deviation component when the degree of ambiguity is high. As information accumulates, ambiguity premiums decrease. We also find that beliefs do influence prices under ambiguity. This is not because beliefs are biased towards either good or bad scenarios per se, but because subjects display sticky belief updating as new information becomes available. The clear separation performed in this paper between belief and attitude also enables a more accurate estimation of the parameter of ambiguity aversion compared to previous studies, since the effect of beliefs is partialled out. Overall, we find empirically that both factors, belief and attitude towards ambiguity, are important factors in pricing under ambiguity.
This paper sets up an experimental asset market in the laboratory to investigate the effects of ambiguity on price formation and trading behavior in financial markets. The obtained trading data is used to analyze the effect of ambiguity on various market outcomes (the price level, volatility, trading activity, market liquidity, and the degree of speculative trading) and to test the quality of popular empirical market-based measures for the degree of ambiguity. We find that ambiguity decreases market prices and trading activity; ambiguity leads to lower market liquidity through wider bid-ask spreads; and ambiguity leads to less speculative trading. We also find that popular market-based measures of ambiguity used in the empirical literature do not seem to correctly capture the true degree of ambiguity.
Large banks often sell part of their loan portfolio in the form of collateralized debt obligations (CDO) to investors. In this paper we raise the question whether credit asset securitization affects the cyclicality (or commonality) of bank equity values. The commonality of bank equity values reflects a major component of systemic risks in the banking market, caused by correlated defaults of loans in the banks' loan books. Our simulations take into account the major stylized fact of CDO transactions, the non-proportional nature of risk sharing that goes along with tranching. We provide a theoretical framework for the risk transfer through securitization that builds on a macro risk factor and an idiosyncratic risk factor, allowing an identification of the types of risk that the individual tranche holders bear. This allows conclusions about the risk positions of issuing banks after risk transfer. Building on the strict subordination of tranches, we first evaluate the correlation properties both within and across risk classes. We then determine the effect of securitization on the systematic risk of all tranches, and derive its effect on the issuing bank's equity beta. The simulation results show that under plausible assumptions concerning bank reinvestment behaviour and capital structure choice, the issuing intermediary's systematic risk tends to rise. We discuss the implications of our findings for financial stability supervision. Klassifikation: G28
This paper uses laboratory experiments to provide a systematic analysis of how di↵erent presentation formats a↵ect individuals’ investment decisions. The results indicate that the type of presentation as well as personal characteristics influence both, the consistency of decisions and the riskiness of investment choices. However, while personal characteristics have a larger impact on consistency, the chosen risk level is determined more by framing e↵ects. On the level of personal characteristics, participants’ decisions show that better financial literacy and a better understanding of the presentation format enhance consistency and thus decision quality. Moreover, female participants on average make less consistent decisions and tend to prefer less risky alternatives. On the level of framing dimensions, subjects choose riskier investments when possible outcomes are shown in absolute values rather than rates of return and when the loss potential is less obvious. In particular, reducing the emphasis on downside risk and upside potential simultaneously leads to a substantial increase in risk taking.
The charged particle community is looking for techniques exploiting proton interactions instead of X-ray absorption for creating images of human tissue. Due to multiple Coulomb scattering inside the measured object it has shown to be highly non-trivial to achieve sufficient spatial resolution. We present imaging of biological tissue with a proton microscope. This device relies on magnetic optics, distinguishing it from most published proton imaging methods. For these methods reducing the data acquisition time to a clinically acceptable level has turned out to be challenging. In a proton microscope, data acquisition and processing are much simpler. This device even allows imaging in real time. The primary medical application will be image guidance in proton radiosurgery. Proton images demonstrating the potential for this application are presented. Tomographic reconstructions are included to raise awareness of the possibility of high-resolution proton tomography using magneto-optics.