63 research outputs found
A systemic risk assessment of OTC derivatives reforms and skin‐in‐the‐game for CCPs
No full textThe G20 OTC (over-the-counter) derivatives reforms impose large collateral/liquidity demands on clearing members of Central Counterparty (CCP) clearing platforms in the form of initial margins, variation margins and contributions to the default fund. In Heath et al. (2016), it was shown how this introduces a trade-off between liquidity risk and solvency risk with the system manifesting considerable systemic risk from these two sources of risk while CCP penetration is at current levels. The authors extend this analysis to include the European Market Infrastructure Regulation (EMIR) skin-in-the-game requirements for CCPs, which aim to ameliorate the contributions to the default fund by clearing members and also to prevent moral hazard problems associated with the too-interconnected-to-fail (TITF) status of CCPs as more and more derivatives are centrally cleared. The authors provide a systemic risk assessment of these features of the OTC derivatives reforms using network analysis based on 2015-end data on the derivatives positions for 40 globally systemically important banks (G-SIBs)
Removing Maturity Effects of Implied Risk Neutral Densities and Related Statistics
No full textWhen studying a time series of implied Risk Neutral Densities (RNDs) or other implied statistics, one is faced with the problem of maturity dependence, given that option contracts have a fixed expiry date. Therefore, estimates from consecutive days are not directly comparable. Further, we can only obtain implied RNDs for a limited set of expiration dates. In this paper we introduce two new methods to overcome the time to maturity problem. First, we propose an alternative method for calculating constant time horizon Economic Value at Risk (EVaR), which is much simpler than the method currently being used at the Bank of England. Our method is based on an empirical scaling law for the quantiles in a log-log plot, and thus, we are able to interpolate and extrapolate the EVaR for any time horizon. The second method is based on an RND surface constructed across strikes and maturities, which enables us to obtain RNDs for any time horizon. Removing the maturity dependence of implied RNDs and related statistics is useful in many applications, such as in (i) the construction of implied volatility indices like the VIX, (ii) the assessment of market uncertainty by central banks (iii) time series analysis of EVaR, or (iv) event studies.
Too Interconnected To Fail: Financial Contagion and Systemic Risk in Network Model of CDS and Other Credit Enhancement Obligations of US Banks
No full textCredit default swaps (CDS) which constitute up to 98% of credit derivatives have had a unique, endemic and pernicious role to play in the current financial crisis. However, there are few in depth empirical studies of the financial network interconnections among banks and between banks and nonbanks involved as CDS protection buyers and protection sellers. The ongoing problems related to technical insolvency of US commercial banks is not just confined to the so called legacy/toxic RMBS assets on balance sheets but also because of their credit risk exposures from SPVs (Special Purpose Vehicles) and the CDS markets. The dominance of a few big players in the chains of insurance and reinsurance for CDS credit risk mitigation for banks� assets has led to the idea of �too interconnected to fail� resulting, as in the case of AIG, of having to maintain the fiction of non-failure in order to avert a credit event that can bring down the CDS pyramid and the financial system. This paper also includes a brief discussion of the complex system Agent-based Computational Economics (ACE) approach to financial network modeling for systemic risk assessment. Quantitative analysis is confined to the empirical reconstruction of the US CDS network based on the FDIC Q4 2008 data in order to conduct a series of stress tests that investigate the consequences of the fact that top 5 US banks account for 92% of the US bank activity in the $34 tn global gross notional value of CDS for Q4 2008 (see, BIS and DTCC). The May-Wigner stability condition for networks is considered for the hub like dominance of a few financial entities in the US CDS structures to understand the lack of robustness. We provide a Systemic Risk Ratio and an implementation of concentration risk in CDS settlement for major US banks in terms of the loss of aggregate core capital. We also compare our stress test results with those provided by SCAP (Supervisory Capital Assessment Program). Finally, in the context of the Basel II credit risk transfer and synthetic securitization framework, there is little evidence that the CDS market predicated on a system of offsets to minimize final settlement can provide the credit risk mitigation sought by banks for reference assets in the case of a significant credit event. The large negative externalities that arise from a lack of robustness of the CDS financial network from the demise of a big CDS seller undermines the justification in Basel II that banks be permitted to reduce capital on assets that have CDS guarantees. We recommend that the Basel II provision for capital reduction on bank assets that have CDS cover should be discontinued.
Dynamic Learning, Herding and Guru Effects in Networks
No full textIt has been widely accepted that herding is the consequence of mimetic responses by agents interacting locally on a communication network. In extant models, this communication network linking agents, by and large, has been assumed to be fixed. In this paper we allow it to evolve endogenously by enabling agents to adaptively modify the weights of their links to their neighbours by reinforcing �good� advisors and breaking away from �bad� advisors with the latter being replaced randomly from the remaining agents. The resulting network not only allows for herding of agents, but crucially exhibits realistic properties of socio-economic networks that are otherwise difficult to replicate: high clustering, short average path length and a small number of highly connected agents, called "gurus". These properties are now well understood to characterize �small world networks� of Watts and Strogatz (1998).
Too Interconnected To Fail: Financial Contagion and Systemic Risk In Network Model of CDS and Other Credit Enhancement Obligations of US Banks
No full textCredit default swaps (CDS) which constitute up to 98% of credit derivatives have had a unique, endemic and pernicious role to play in the current financial crisis. However, there are few in depth empirical studies of the financial network interconnections among banks and between banks and nonbanks involved as CDS protection buyers and protection sellers. The ongoing problems related to technical insolvency of US commercial banks is not just confined to the so called legacy/toxic RMBS assets on balance sheets but also because of their credit risk exposures from SPVs (Special Purpose Vehicles) and the CDS markets. The dominance of a few big players in the chains of insurance and reinsurance for CDS credit risk mitigation for banks’ assets has led to the idea of “too interconnected to fail” resulting, as in the case of AIG, of having to maintain the fiction of non-failure in order to avert a credit event that can bring down the CDS pyramid and the financial system. This paper also includes a brief discussion of the complex system Agent-based Computational Economics (ACE) approach to financial network modeling for systemic risk assessment. Quantitative analysis is confined to the empirical reconstruction of the US CDS network based on the FDIC Q4 2008 data in order to conduct a series of stress tests that investigate the consequences of the fact that top 5 US banks account for 92% of the US bank activity in the $34 tn global gross notional value of CDS for Q4 2008 (see, BIS and DTCC). The May-Wigner stability condition for networks is considered for the hub like dominance of a few financial entities in the US CDS structures to understand the lack of robustness. We provide a Systemic Risk Ratio and an implementation of concentration risk in CDS settlement for major US banks in terms of the loss of aggregate core capital. We also compare our stress test results with those provided by SCAP (Supervisory Capital Assessment Program). Finally, in the context of the Basel II credit risk transfer and synthetic securitization framework, there is little evidence that the CDS market predicated on a system of offsets to minimize final settlement can provide the credit risk mitigation sought by banks for reference assets in the case of a significant credit event. The large negative externalities that arise from a lack of robustness of the CDS financial network from the demise of a big CDS seller undermines the justification in Basel II that banks be permitted to reduce capital on assets that have CDS guarantees. We recommend that the Basel II provision for capital reduction on bank assets that have CDS cover should be discontinued.Credit Default Swaps; Financial Networks; Systemic Risk; Agent BasedCredit Default Swaps, Financial Networks, Systemic Risk, Agent Based Models, Complex Systems, Stress Testing
Genomic Intelligence as Über Bio-Cybersecurity: The Gödel Sentence in Immuno-Cognitive Systems.
No full textThis paper gives formal foundations and evidence from gene science in the post Barbara McClintock era that the Gödel Sentence, far from being an esoteric construction in mathematical logic, is ubiquitous in genomic intelligence that evolved with multi-cellular life. Conditions uniquely found in the Adaptive Immune System (AIS) and Mirror Neuron System (MNS), termed the genomic immuno-cognitive system, coincide with three building blocks in computation theory of Gödel, Turing and Post (G-T-P). (i) Biotic elements have unique digital identifiers with gene codes executing 3D self-assembly for morphology and regulation of the organism using the recursive operation of Self-Ref (Self-Reference) with the other being a self-referential projection of self. (ii) A parallel offline simulation meta/mirror environment in 1-1 relation to online machine executions of self-codes gives G-T-P Self-Rep (Self-Representation). (iii) This permits a digital biotic entity to self-report that it is under attack by a biotic malware or non-self antigen in the format of the Gödel sentence, resulting in the "smarts" for contextual novelty production. The proposed unitary G-T-P recursive machinery in AIS and in MNS for social cognition yields a new explanation that the Interferon Gamma factor, known for friend-foe identification in AIS, is also integral to social behaviors. New G-T-P bio-informatics of AIS and novel anti-body production is given with interesting testable implications for COVID-19 pathology
Hypercyclicity of operators that λ-commute with the differentiation operator on the space of entire functions
No full textAn operator T acting on a separable F-space X is called hypercyclic if there exists f∈X such that the orbit {Tnf} is dense in X. Here we determine when an operator that λ-commutes with the operator of differentiation on the space of entire functions is hypercyclic, extending results by G. Godefroy and J. H. Shapiro [16] and R. M. Aron and D. Markose [1]. © 2022 The AuthorsThe first author is supported by Aula Universitaria del Estrecho, Plan Propio UCA-Internacional . The remaining authors are supported by Ministerio de Ciencia, Innovación y Universidades (Spain), grants MTM2016-76958 , PGC2018-101514-B-I00 , PID2019-103961GB-C22 , and Vicerrectorado de Investigación de la Universidad de Cádiz . This work has been co-financed by the 2014-2020 ERDF Operational Programme and by the Department of Economy, Knowledge, Business and University of the Regional Government of Andalusia. Project reference: FEDER-UCA18-10841
A smart market for passenger road transport (SMPRT) congestion: an application of computational mechanism design
No full textTo control and price negative externalities in passenger road transport, we develop an innovative and integrated computational agent based economics (ACE) model to simulate a market oriented "cap" and trade system. (i) First, there is a computational assessment of a digitized road network model of the real world congestion hot spot to determine the "cap" of the system in terms of vehicle volumes at which traffic efficiency deteriorates and the environmental externalities take off exponentially. (ii) Road users submit bids with the market clearing price at the fixed "cap" supply of travel slots in a given time slice (peak hour) being determined by an electronic sealed bid uniform price Dutch auction. (iii) Cross-sectional demand data on car users who traverse the cordon area is used to model and calibrate the heterogeneous bid submission behaviour in order to construct the inverse demand function and demand elasticities. (iv) The willingness to pay approach with heterogeneous value of time is contrasted with the generalized cost approach to pricing congestion with homogeneous value of travel time.
Marginal contribution, reciprocity and equity in segregated groups: Bounded rationality and self-organization in social networks
No full textWe study the formation of social networks that are based on local interaction and simple rule following. Agents evaluate the profitability of link formation on the basis of the Myerson-Shapley principle that payoffs come from the marginal contribution they make to coalitions. The NP-hard problem associated with the Myerson-Shapley value is replaced by a boundedly rational 'spatially' myopic process. Agents consider payoffs from direct links with their neighbours (level 1) which can include indirect payoffs from neighbours' neighbours (level 2) and up to M-levels that are far from global. Agents dynamically break away from the neighbour to whom they make the least marginal contribution. Computational experiments show that when this self-interested process of link formation operates at level 2 neighbourhoods, agents self-organize into stable and efficient network structures that manifest reciprocity, equity and segregation reminiscent of hunter gather groups. A large literature alleges that this is incompatible with self-interested behaviour and market oriented marginality principle in the allocation of value. We conclude that it is not this valuation principle that needs to be altered to obtain segregated social networks as opposed to global components, but whether it operates at level 1 or level 2 of social neighbourhoods. Remarkably, all M>2 neighbourhood calculations for payoffs leave the efficient network structures identical to the case when M=2.
Planning of a day clinic with twelve treatment beds
No full textDie vorliegende Arbeit beschäftigt sich mit der Planung und Dimensionierung einer onkologischen Tagesklinik. In der onkologischen Tagesklinik werden Krebspatienten ambulant behandelt. Die geplante Station hat in drei Behandlungsräumen, zwölf Behandlungsplätze für die Therapie zur Verfügung. Andere Räume sind für den Betrieb der Tagesklinik von Bedeutung. Die räumliche Aufteilung kann dem Architekturplan entnommen werden. Die restlichen Planungen wie Workflow, Medizintechnik, HKLS und Elektrotechnik basieren auf jenem Plan. Bei dem Architekturplan wurde darauf Wert gelegt, dass die Behandlungsräume geräumig sind und die Patienten einen angenehmen Aufenthalt haben. Dies ist besonders bei Krebspatienten wichtig.
Bei der Planung wurden die, der Autorin bekannten Normen, Gesetze, Richtlinien und Empfehlungen berücksichtigt und eingehalten.The following paper deals with the planning and dimensioning of an oncology day clinic. The oncological day hospital treats cancer patients on an outpatient basis. The planned ward has twelve treatment beds available in three treatment rooms. Other rooms are important for the running of the day clinic and daily operations. The spatial distribution can be found in the architectural plan. The remaining plans such as workflow, medical technology, HVAC and electrical engineering are based on that plan.
All Standards, laws, guidelines and recommendations known to the author were considered and included in the planning
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