Euler consumption equation with non-separable preferences over consumption and leisure and collateral constraints

This paper derives and estimates an aggregate Euler consumption equation which allows one to compare the importance of collateral constraints and non-separability of consumption and leisure as alternative sources of excess sensitivity of consumption to current income. Estimation results suggest that during a severe financial distress both non-separability and collateral constraints are needed to capture excess sensitivity of consumption to current economic conditions. During more tranquil times, evidence on collateral effects is more limited and non-separability is sufficient to make the Euler consumption equation agree well with the data.housing; financial distress; excess sensitivity of consumption

The Collateral Channel under Imperfect Debt Enforcement

Does a country’s ability to enforce debt contracts affect the sensitivity of economic activity to collateral values? To answer this question, we introduce a novel industry-specific measure of real asset redeployability - the ease with which real assets are transfered to alternative uses - as a proxy for collateral liquidation values. Our measure exploits the heterogeneity of expenditures in new and used capital and the heterogeneity in the composition of real asset holdings across U.S. industries. Using a cross-industry cross-country approach, we find that industry size and growth are more sensitive to collateral values in countries with weaker debt enforcement. Our estimates indicate that the differential effect is sizeable. The sensitivity of economic activity to collateral values is not affected by a country’s financial development once the quality of debt enforcement is accounted for. We then rationalize our empirical findings based on a model of credit under imperfect enforcement and discuss an important implication of our empirical result: macroeconomic volatility generated by fluctuations in collateral values is higher in countries with weaker debt enforcement institutions.

Excess Collateral in the LVTS: How Much is Too Much?

The authors build a theoretical model that generates demand for collateral by Large Value Transfer System (LVTS) participants under the assumption that they minimize the cost of holding and managing collateral for LVTS purposes. The model predicts that the optimal amount of collateral held by each LVTS participant depends on the opportunity cost of collateral, the transactions costs of acquiring assets used as collateral and transferring them in and out of the LVTS, and the distribution of an LVTS participant's payment flows in the LVTS. The authors conclude that the aggregate amount of collateral pledged to the LVTS is quite close to that predicted by the model, when benchmark values are used for opportunity and transactions costs that are based on anecdotal evidence, despite the fact that these costs are likely to vary among participants. If one LVTS participant that appears to face a lower opportunity cost of collateral is excluded from the analysis, the model predicts an aggregate level of collateral that is within 5 per cent of the amount actually held by LVTS participants, on average, between February 1999 and May 2003. The authors also apply panel-data regressions to the level of collateral held in the LVTS. They find that the results are broadly supportive of the theoretical model. Sensitivity analysis of this model indicates that, when the opportunity cost of collateral increases, the amount of collateral that participants hold could be greatly reduced.

Polo like kinase 2 tumour suppressor and cancer biomarker: new perspectives on drug sensitivity/resistance in ovarian cancer

The polo-like kinase PLK2 has recently been identified as a potential theranostic marker in the management of chemotherapy sensitive cancers. The methylation status of the PLK2 CpG island varies with sensitivity to paclitaxel and platinum in ovarian cancer cell lines. Importantly, extrapolation of these in vitro data to the clinical setting confirms that the methylation status of the PLK2 CpG island predicts outcomes in patients treated with carboplatin and paclitaxel chemotherapy. A second cell cycle regulator, p57Kip2, is also subject to epigenetic silencing in carboplatin resistance in vitro and in vivo, emphasising that cell cycle regulators are important determinants of sensitivity to chemotherapeutic agents and providing insights into the phenomenon of collateral drug sensitivity in oncology. Understanding the mechanistic basis and identification of robust biomarkers to predict collateral sensitivity may inform optimal use of chemotherapy in patients receiving multiple lines of treatment

Alternative evolutionary paths to bacterial antibiotic resistance cause distinct collateral effects.

Published onlineJournal ArticleThis is the author accepted manuscript. The final version is available from Oxford University Press via the DOI in this record.When bacteria evolve resistance against a particular antibiotic, they may simultaneously gain increased sensitivity against a second one. Such collateral sensitivity may be exploited to develop novel, sustainable antibiotic treatment strategies aimed at containing the current, dramatic spread of drug resistance. To date, the presence and molecular basis of collateral sensitivity has only been studied in few bacterial species and is unknown for opportunistic human pathogens such as Pseudomonas aeruginosa. In the present study, we assessed patterns of collateral effects by experimentally evolving 160 independent populations of P. aeruginosa to high levels of resistance against eight commonly used antibiotics. The bacteria evolved resistance rapidly and expressed both collateral sensitivity and cross-resistance. The pattern of such collateral effects differed to those previously reported for other bacterial species, suggesting inter-specific differences in the underlying evolutionary trade-offs. Intriguingly, we also identified contrasting patterns of collateral sensitivity and cross-resistance among the replicate populations adapted to the same drug. Whole-genome sequencing of 81 independently evolved populations revealed distinct evolutionary paths of resistance to the selective drug, which determined whether bacteria became cross-resistant or collaterally sensitive towards others. Based on genomic and functional genetic analysis, we demonstrate that collateral sensitivity can result from resistance mutations in regulatory genes such as nalC or mexZ, which mediate aminoglycoside sensitivity in β-lactam-adapted populations, or the two-component regulatory system gene pmrB, which enhances penicillin sensitivity in gentamicin-resistant populations. Our findings highlight substantial variation in the evolved collateral effects among replicates, which in turn determine their potential in antibiotic therapy.We thank Anette Friedrichs, Lutz Becks, and the Schulenburg group for valuable advice and Melanie Vollstedt for technical support during genome sequencing. We are grateful for financial support from the German Science Foundation (DFG grant SCHU 1415/12-1) and the International Max-Planck Research School for Evolutionary Biology at the University of Kiel. We acknowledge infrastructural support by the DFG excellence cluster Inflammation at Interfaces

Conserved collateral antibiotic susceptibility networks in diverse clinical strains of Escherichia coli.

There is urgent need to develop novel treatment strategies to reduce antimicrobial resistance. Collateral sensitivity (CS), where resistance to one antimicrobial increases susceptibility to other drugs, might enable selection against resistance during treatment. However, the success of this approach would depend on the conservation of CS networks across genetically diverse bacterial strains. Here, we examine CS conservation across diverse Escherichia coli strains isolated from urinary tract infections. We determine collateral susceptibilities of mutants resistant to relevant antimicrobials against 16 antibiotics. Multivariate statistical analyses show that resistance mechanisms, in particular efflux-related mutations, as well as the relative fitness of resistant strains, are principal contributors to collateral responses. Moreover, collateral responses shift the mutant selection window, suggesting that CS-informed therapies may affect evolutionary trajectories of antimicrobial resistance. Our data allow optimism for CS-informed therapy and further suggest that rapid detection of resistance mechanisms is important to accurately predict collateral responses

Loss Given Default Modelling: Comparative Analysis

In this study we investigated several most popular Loss Given Default (LGD) models (LSM, Tobit, Three-Tiered Tobit, Beta Regression, Inflated Beta Regression, Censored Gamma Regression) in order to compare their performance. We show that for a given input data set, the quality of the model calibration depends mainly on the proper choice (and availability) of explanatory variables (model factors), but not on the fitting model. Model factors were chosen based on the amplitude of their correlation with historical LGDs of the calibration data set. Numerical values of non-quantitative parameters (industry, ranking, type of collateral) were introduced as their LGD average. We show that different debt instruments depend on different sets of model factors (from three factors for Revolving Credit or for Subordinated Bonds to eight factors for Senior Secured Bonds). Calibration of LGD models using distressed business cycle periods provide better fit than data from total available time span. Calibration algorithms and details of their realization using the R statistical package are presented. We demonstrate how LGD models can be used for stress testing. The results of this study can be of use to risk managers concerned with the Basel accord compliance

The Collateral Channel under Imperfect Debt Enforcement

Does a country's ability to enforce debt contracts affect the sensitivity of economic activity to collateral values? To answer this question, we introduce a novel industry-specific measure of real asset redeployability - the ease with which real assets are transfered to alternative uses - as a proxy for collateral liquidation values. Our measure exploits the heterogeneity of expenditures in new and used capital and the heterogeneity in the composition of real asset holdings across U.S. industries. Using a cross-industry cross-country approach, we find that industry size and growth are more sensitive to collateral values in countries with weaker debt enforcement. Our estimates indicate that the differential effect is sizeable. The sensitivity of economic activity to collateral values is not affected by a country's financial development once the quality of debt enforcement is accounted for. We then rationalize our empirical findings based on a model of credit under imperfect enforcement and discuss an important implication of our empirical result: macroeconomic volatility generated by fluctuations in collateral values is higher in countries with weaker debt enforcement institutions