QUADRATIC TERM STRUCTURE MODELS FOR RISK-FREE AND DEFAULTABLE RATES

In this paper, quadratic term structure models (QTSMs) are analyzed and characterized in a general Markovian setting. The primary motivation for this work is to find a useful extension of the traditional QTSM, which is based on an Ornstein–Uhlenbeck (OU) state process, while maintaining the analytical tractability of the model. To accomplish this, the class of quadratic processes, consisting of those Markov state processes that yield QTSM, is introduced. The main result states that OU processes are the only conservative quadratic processes. In general, however, a quadratic potential can be added to allow QTSMs to model default risk. It is further shown that the exponent functions that are inherent in the definition of the quadratic property can be determined by a system of Riccati equations with a unique admissible parameter set. The implications of these results for modeling the term structure of risk-free and defaultable rates are discussed.     

EXPRESSING INVENTORY CONTROL POLICY IN THE TURNOVER CURVE

Estimation of the inventory level for an entire class of items is a valuable time saver when control of inventories at the aggregate level, rather than the item level, is of interest. Inventory approximation by location in supply chain network configuration and evaluation of inventory control policy shifts, are two examples of application. In this article, various popular inventory policies are related to a general function known as an inventory turnover curve that expresses inventory levels from the combined demand of multiple items. By knowing some basic item characteristics of representative items in a product class, the type of inventory policy being used, and the current aggregate inventory level, an inventory turnover curve can be constructed. This resulting turnover curve can be used to estimate inventory levels within 4.6%, on the average, of theoretically predicted ones.     

Comparison of the efficacy of oxidative processes and flocculation for the removal of colour from Eop effluent.

Up to 30% of the released colour arising from bleached kraft pulp and paper production comes from the alkaline extraction stage. This waste stream can therefore be readily targeted to remove colour at source in mills where improved colour management is required. The efficacy of five advanced oxidative treatment and physico-chemical technologies in removing colour from a typical Eop stage effluent was compared. The most effective oxidative treatment was peroxymonosulphate (79% colour removal in 15 minutes). Ozone and TAML treatments removed 74% and 58% of colour respectively within 30 minutes. In comparison, hydrogen peroxide alone was only able to remove 35% of the colour over 4 hours. Coagulation with polyaluminium chloride achieved 89% colour removal within 5 minutes. However, this treatment produced an undesirable sludge, and may cause toxicity in the treated wastewater. Overall, colour removal ability of the five technologies ranked from highest to lowest was polyaluminium chloride > peroxymonosulfate > ozone > TAML > hydrogen peroxide. Other factors, such as operating costs, feedstock modification and capital infrastructure, also need to be taken into account when selecting the most suitable colour management option.     

Wastewater treatment in tsunami affected areas of Thailand by constructed wetlands.

The tsunami of December 2004 destroyed infrastructure in many coastal areas in South-East Asia. In January 2005, the Danish Government gave a tsunami relief grant to Thailand to re-establish the wastewater management services in some of the areas affected by the tsunami. This paper describes the systems which have been built at three locations: (a) Baan Pru Teau: A newly-built township for tsunami victims which was constructed with the contribution of the Thai Red Cross. Conventional septic tanks were installed for the treatment of blackwater from each household and its effluent and grey water (40 m3/day) are collected and treated at a 220 m2 subsurface flow constructed wetland. (b) Koh Phi Phi Don island: A wastewater collection system for the main business and hotel area of the island, a pumping station and a pressure pipe to the treatment facility, a multi-stage constructed wetland system and a system for reuse of treated wastewater. The constructed wetland system (capacity 400 m3/day) consists of vertical flow, horizontal subsurface flow, free water surface flow and pond units. Because the treatment plant is surrounded by resorts, restaurants and shops, the constructed wetland systems are designed with terrains as scenic landscaping. (c) Patong: A 5,000 m2 constructed wetland system has been established to treat polluted water from drainage canals which collect overflow from septic tanks and grey water from residential areas. It is envisaged that these three systems will serve as prototype demonstration systems for appropriate wastewater management in Thailand and other tropical countries.     

Simultaneous visualisation of biofouling, organic and inorganic particle fouling on separation membranes.

Fouling is a major problem in membrane processes of water treatment. It can be caused by the deposition of inorganic and organic particulate material, and of microbial cells which may subsequently form biofilms. In practice, usually more than one foulant participates in the formation of membrane deposits. Knowledge of the composition of fouling layers is important for the development of appropriate countermeasures. For this purpose, an experimental system was established for the generation and microscopic visualisation of mixed deposits, using fluorescently labelled model foulants: (i) drinking-water bacteria stained with nucleic acid-specific dyes (biofouling), (ii) synthetic clay mineral laponite stained with rhodamine 6G (inorganic particle fouling), and (iii) fluorescently labelled polystyrene microspheres (organic particle fouling). Polycarbonate and polyethersulfone membranes were challenged with these foulants by dead-end filtration. On the basis of different fluorescent labels, the single foulants in these mixed deposits could be visualised separately by confocal laser scanning microscopy which, in combination with image analysis, allowed the generation of three-dimensional views of the complete deposits. This method offers the possibility for the estimation of quantitative surface coverage by foulants and for the determination of the efficacy of cleaning measures with respect to the removal of different foulants.     

Operating efficiency of Canadian banks

This article assesses Canadian banks' ability to realize scale economies and cost complementarities in joint production. The Canadian banking system, with its 10 or so large banks and 50 smaller ones, offers a good database for a study of efficiency, especially since previous work suggests that the system's concentration has had little impact on system competitiveness. This article estimates a system of cost and cost share equations using Zellner's iterative seemingly unrelated regression technique, then evaluates scale economies and cost complementarities from the estimated cost functions' first and second partial derivatives. The article compares a model that classifies deposits as inputs with another that classifies them as outputs. The empirical findings indicate that deposits are better modelled as outputs than inputs; that Canadian banks organize to exhaust available sources of scale economies and economies in joint production; and that conclusions regarding scale economies and cost complementarities differ importantly according to whether deposits are modelled as inputs or as outputs.