Financial stability reports: how useful during a financial crisis?

Many of the origins of the recent financial crisis were in the United States, beginning with subprime mortgages and mortgage securities. As the crisis spread globally, few market participants or regulatory authorities saw it coming and all underestimated its severity. ; In the United States, the crisis has sparked many proposals to address its perceived causes and prevent a recurrence. One approach already used in many other countries is publishing financial stability reports. These reports review the condition of the financial system, identify and assess risks to the system, and suggest market or policy changes to address significant risk concerns. They are usually prepared by the country’s central bank and appear on a regular basis. ; Wilkinson, Spong, and Christensson analyze the financial stability reports prepared by four European countries that were affected by the financial crisis the United Kingdom, Sweden, the Netherlands, and Spain. They find that these four reports were generally successful in identifying the risks that played important roles in the crisis although they underestimated the severity of this crisis. While it is not clear that the reports helped to reduce the damages, it would be a mistake to dismiss them as a useful tool. Overall, publishing financial stability reports appears to be a worthwhile exercise that encourages central banks and international authorities to identify and monitor important financial trends and emerging risks and to develop a better understanding of the underlying structure of domestic and global financial markets.

Effect of venting range hood flow rate on size-resolved ultrafine particle concentrations from gas stove cooking

Cooking is the main source of ultrafine particles (UFP) in homes. This study investigated the effect of venting range hood flow rate on size-resolved UFP concentrations from gas stove cooking. The same cooking protocol was conducted 60 times using three venting range hoods operated at six flow rates in twin research houses. Size-resolved particle (10–420 nm) concentrations were monitored using a NanoScan scanning mobility particle sizer (SMPS) from 15 min before cooking to 3 h after the cooking had stopped. Cooking increased the background total UFP number concentrations to 1.3 × 103 particles/cm3 on average, with a mean exposure-relevant source strength of 1.8 × 1012 particles/min. Total particle peak reductions ranged from 25% at the lowest fan flow rate of 36 L/s to 98% at the highest rate of 146 L/s. During the operation of a venting range hood, particle removal by deposition was less significant compared to the increasing air exchange rate driven by exhaust ventilation. Exposure to total particles due to cooking varied from 0.9 to 5.8 × 104 particles/cm3·h, 3 h after cooking ended. Compared to the 36 L/s range hood, higher flow rates of 120 and 146 L/s reduced the first-hour post-cooking exposure by 76% and 85%, respectively. © 2018 Crown Copyright. Published with license by Taylor & Francis Group, LLC

Regulating Systemic Risk: Towards an Analytical Framework

The global financial crisis demonstrated the inability and unwillingness of financial market participants to safeguard the stability of the financial system. It also highlighted the enormous direct and indirect costs of addressing systemic crises after they have occurred, as opposed to attempting to prevent them from arising. Governments and international organizations are responding with measures intended to make the financial system more resilient to economic shocks, many of which will be implemented by regulatory bodies over time. These measures suffer, however, from the lack of a theoretical account of how systemic risk propagates within the financial system and why regulatory intervention is needed to disrupt it. In this Article, we address this deficiency by examining how systemic risk is transmitted. We then proceed to explain why, in the absence of regulation, market participants cannot be relied upon to disrupt or otherwise limit the transmission of systemic risk. Finally, we advance an analytical framework to inform systemic risk regulation

Regulatory assessment of chemical mixtures: Requirements, current approaches and future perspectives

n/

Central Clearing Valuation Adjustment

This paper develops an XVA (costs) analysis of centrally cleared trading, parallel to the one that has been developed in the last years for bilateral transactions. We introduce a dynamic framework that incorporates the sequence of cash-flows involved in the waterfall of resources of a clearing house. The total cost of the clearance framework for a clearing member, called CCVA for central clearing valuation adjustment, is decomposed into a CVA corresponding to the cost of its losses on the default fund in case of defaults of other member, an MVA corresponding to the cost of funding its margins and a KVA corresponding to the cost of the regulatory capital and also of the capital at risk that the member implicitly provides to the CCP through its default fund contribution. In the end the structure of the XVA equations for bilateral and cleared portfolios is similar, but the input data to these equations are not the same, reflecting different financial network structures. The resulting XVA numbers differ, but, interestingly enough, they become comparable after scaling by a suitable netting ratio

Quantification of systemic risk from overlapping portfolios in the financial system

Financial markets create endogenous systemic risk, the risk that a substantial fraction of the system ceases to function and collapses. Systemic risk can propagate through different mechanisms and channels of contagion. One important form of financial contagion arises from indirect interconnections between financial institutions mediated by financial markets. This indirect interconnection occurs when financial institutions invest in common assets and is referred to as overlapping portfolios. In this work we quantify systemic risk from indirect interconnections between financial institutions. Complete information of security holdings of major Mexican financial intermediaries and the ability to uniquely identify securities in their portfolios, allows us to represent the Mexican financial system as a bipartite network of securities and financial institutions. This makes it possible to quantify systemic risk arising from overlapping portfolios. We show that focusing only on direct interbank exposures underestimates total systemic risk levels by up to 50% under the assumptions of the model. By representing the financial system as a multi-layer network of direct interbank exposures (default contagion) and indirect external exposures (overlapping portfolios) we estimate the mutual influence of different channels of contagion. The method presented here is the first quantification of systemic risk on national scales that includes overlapping portfolios

Hydrogen and fuel cell technologies for heating: A review

The debate on low-carbon heat in Europe has become focused on a narrow range of technological options and has largely neglected hydrogen and fuel cell technologies, despite these receiving strong support towards commercialisation in Asia. This review examines the potential benefits of these technologies across different markets, particularly the current state of development and performance of fuel cell micro-CHP. Fuel cells offer some important benefits over other low-carbon heating technologies, and steady cost reductions through innovation are bringing fuel cells close to commercialisation in several countries. Moreover, fuel cells offer wider energy system benefits for high-latitude countries with peak electricity demands in winter. Hydrogen is a zero-carbon alternative to natural gas, which could be particularly valuable for those countries with extensive natural gas distribution networks, but many national energy system models examine neither hydrogen nor fuel cells for heating. There is a need to include hydrogen and fuel cell heating technologies in future scenario analyses, and for policymakers to take into account the full value of the potential contribution of hydrogen and fuel cells to low-carbon energy systems

Design and optimization under uncertainty of Energy Systems

In many engineering design and optimisation problems, the presence of uncertainty in data and parameters is a central and critical issue. The analysis and design of advanced complex energy systems is generally performed starting from a single operating condition and assuming a series of design and operating parameters as fixed values. However, many of the variables on which the design is based are subject to uncertainty because they are not determinable with an adequate precision and they can affect both performance and cost. Uncertainties stem naturally from our limitations in measurements, predictions and manufacturing, and we can say that any system used in engineering is subject to some degree of uncertainty. Different fields of engineering use different ways to describe this uncertainty and adopt a variety of techniques to approach the problem. The past decade has seen a significant growth of research and development in uncertainty quantification methods to analyse the propagation of uncertain inputs through the systems. One of the main challenges in this field are identifying sources of uncertainty that potentially affect the outcomes and the efficiency in propagating these uncertainties from the sources to the quantities of interest, especially when there are many sources of uncertainties. Hence, the level of rigor in uncertainty analysis depends on the quality of uncertainty quantification method. The main obstacle of this analysis is often the computational effort, because the representative model is typically highly non-linear and complex. Therefore, it is necessary to have a robust tool that can perform the uncertainty propagation through a non-intrusive approach with as few evaluations as possible. The primary goal of this work is to show a robust method for uncertainty quantification applied to energy systems. The first step in this direction was made doing a work on the analysis of uncertainties on a recuperator for micro gas turbines, making use of the Monte Carlo and Response Sensitivity Analysis methodologies to perform this study. However, when considering more complex energy systems, one of the main weaknesses of uncertainty quantification methods arises: the extremely high computational effort needed. For this reason, the application of a so-called metamodel was found necessary and useful. This approach was applied to perform a complete analysis under uncertainty of a solid oxide fuel cell hybrid system, starting from the evaluation of the impact of several uncertainties on the system up to a robust design including a multi-objective optimization. The response surfaces have allowed the authors to consider the uncertainties in the system when performing an acceptable number of simulations. These response were then used to perform a Monte Carlo simulation to evaluate the impact of the uncertainties on the monitored outputs, giving an insight on the spread of the resulting probability density functions and so on the outputs which should be considered more carefully during the design phase. Finally, the analysis of a complex combined cycle with a flue gas condesing heat pump subject to market uncertainties was performed. To consider the uncertainties in the electrical price, which would impact directly the revenues of the system, a statistical study on the behaviour of such price along the years was performed. From the data obtained it was possible to create a probability density function for each hour of the day which would represent its behaviour, and then those distributions were used to analyze the variability of the system in terms of revenues and emissions