1,133 research outputs found
Taming the Basel leverage cycle
We investigate a simple dynamical model for the systemic risk caused by the use of Value-at-Risk, as mandated by Basel II. The model consists of a bank with a leverage target and an unleveraged fundamentalist investor subject to exogenous noise with clustered volatility. The parameter space has three regions: (i) a stable region, where the system has a fixed point equilibrium; (ii) a locally unstable region, characterized by cycles with chaotic behavior; and (iii) a globally unstable region. A calibration of parameters to data puts the model in region (ii). In this region there is a slowly building price bubble, resembling the period prior to the Global Financial Crisis, followed by a crash resembling the crisis, with a period of approximately 10-15 years. We dub this the Basel leverage cycle. To search for an optimal leverage control policy we propose a criterion based on the ability to minimize risk for a given average leverage. Our model allows us to vary from the procyclical policies of Basel II or III, in which leverage decreases when volatility increases, to countercyclical policies in which leverage increases when volatility increases. We find the best policy depends on the market impact of the bank. Basel II is optimal when the exogenous noise is high, the bank is small and leverage is low; in the opposite limit where the bank is large and leverage is high the optimal policy is closer to constant leverage. In the latter regime systemic risk can be dramatically decreased by lowering the leverage target adjustment speed of the banks. While our model does not show that the financial crisis and the period leading up to it were due to VaR risk management policies, it does suggest that it could have been caused by VaR risk management, and that the housing bubble may have just been the spark that triggered the crisis
Entangling credit and funding shocks in interbank markets
Credit and liquidity risks represent main channels of financial contagion for
interbank lending markets. On one hand, banks face potential losses whenever
their counterparties are under distress and thus unable to fulfill their
obligations. On the other hand, solvency constraints may force banks to recover
lost fundings by selling their illiquid assets, resulting in effective losses
in the presence of fire sales - that is, when funding shortcomings are
widespread over the market. Because of the complex structure of the network of
interbank exposures, these losses reverberate among banks and eventually get
amplified, with potentially catastrophic consequences for the whole financial
system. Building on Debt Rank [Battiston et al., 2012], in this work we define
a systemic risk metric that estimates the potential amplification of losses in
interbank markets accounting for both credit and liquidity contagion channels:
the Debt-Solvency Rank. We implement this framework on a dataset of 183
European banks that were publicly traded between 2004 and 2013, showing indeed
that liquidity spillovers substantially increase systemic risk, and thus cannot
be neglected in stress-test scenarios. We also provide additional evidence that
the interbank market was extremely fragile up to the 2008 financial crisis,
becoming slightly more robust only afterwards
Homeostatic plasticity and external input shape neural network dynamics
In vitro and in vivo spiking activity clearly differ. Whereas networks in
vitro develop strong bursts separated by periods of very little spiking
activity, in vivo cortical networks show continuous activity. This is puzzling
considering that both networks presumably share similar single-neuron dynamics
and plasticity rules. We propose that the defining difference between in vitro
and in vivo dynamics is the strength of external input. In vitro, networks are
virtually isolated, whereas in vivo every brain area receives continuous input.
We analyze a model of spiking neurons in which the input strength, mediated by
spike rate homeostasis, determines the characteristics of the dynamical state.
In more detail, our analytical and numerical results on various network
topologies show consistently that under increasing input, homeostatic
plasticity generates distinct dynamic states, from bursting, to
close-to-critical, reverberating and irregular states. This implies that the
dynamic state of a neural network is not fixed but can readily adapt to the
input strengths. Indeed, our results match experimental spike recordings in
vitro and in vivo: the in vitro bursting behavior is consistent with a state
generated by very low network input (< 0.1%), whereas in vivo activity suggests
that on the order of 1% recorded spikes are input-driven, resulting in
reverberating dynamics. Importantly, this predicts that one can abolish the
ubiquitous bursts of in vitro preparations, and instead impose dynamics
comparable to in vivo activity by exposing the system to weak long-term
stimulation, thereby opening new paths to establish an in vivo-like assay in
vitro for basic as well as neurological studies.Comment: 14 pages, 8 figures, accepted at Phys. Rev.
Partial differential equations for self-organization in cellular and developmental biology
Understanding the mechanisms governing and regulating the emergence of structure and heterogeneity within cellular systems, such as the developing embryo, represents a multiscale challenge typifying current integrative biology research, namely, explaining the macroscale behaviour of a system from microscale dynamics. This review will focus upon modelling how cell-based dynamics orchestrate the emergence of higher level structure. After surveying representative biological examples and the models used to describe them, we will assess how developments at the scale of molecular biology have impacted on current theoretical frameworks, and the new modelling opportunities that are emerging as a result. We shall restrict our survey of mathematical approaches to partial differential equations and the tools required for their analysis. We will discuss the gap between the modelling abstraction and biological reality, the challenges this presents and highlight some open problems in the field
Self-Triggered Formation Control of Nonholonomic Robots
In this paper, we report the design of an aperiodic remote formation controller applied to nonholonomic robots tracking nonlinear, trajectories using an external positioning sensor network. Our main objective is to reduce wireless communication with external sensors and robots while guaranteeing formation stability. Unlike most previous work in the field of aperiodic control, we design a self-triggered controller that only updates the control signal according to the variation of a Lyapunov function, without taking the measurement error into account. The controller is responsible for scheduling measurement requests to the sensor network and for computing and sending control signals to the robots. We design two triggering mechanisms: centralized, taking into account the formation state and decentralized, considering the individual state of each unit. We present a statistical analysis of simulation results, showing that our control solution significantly reduces the need for communication in comparison with periodic implementations, while preserving the desired tracking performance. To validate the proposal, we also perform experimental tests with robots remotely controlled by a mini PC through an IEEE 802.11g wireless network, in which robots pose is detected by a set of camera sensors connected to the same wireless network
A stability-theory perspective to synchronisation of heterogeneous networks
Dans ce mémoire, nous faisons une présentation de nos recherches dans le domaine de la synchronisation des systèmes dynamiques interconnectés en réseau. Une des originalités de nos travaux est qu'ils portent sur les réseaux hétérogènes, c'est à dire, des systèmes à dynamiques diverses. Au centre du cadre d'analyse que nous proposons, nous introduisons le concept de dynamique émergente. Il s'agit d'une dynamique "moyennée'' propre au réseau lui-même. Sous l'hypothèse qu'il existe un attracteur pour cette dynamique, nous montrons que le problème de synchronisation se divise en deux problèmes duaux : la stabilité de l'attracteur et la convergence des trajectoires de chaque système vers celles générées par la dynamique émergente. Nous étudions aussi le cas particulier des oscillateurs de Stuart-Landau
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