Contagious Synchronization and Endogenous Network Formation in Financial Networks

When banks choose similar investment strategies the financial system becomes vulnerable to common shocks. We model a simple financial system in which banks decide about their investment strategy based on a private belief about the state of the world and a social belief formed from observing the actions of peers. Observing a larger group of peers conveys more information and thus leads to a stronger social belief. Extending the standard model of Bayesian updating in social networks, we show that the probability that banks synchronize their investment strategy on a state non-matching action critically depends on the weighting between private and social belief. This effect is alleviated when banks choose their peers endogenously in a network formation process, internalizing the externalities arising from social learning.Comment: 41 pages, 10 figures, Journal of Banking & Finance 201

The dynamics of the leverage cycle

We present a simple agent-based model of a financial system composed of leveraged investors such as banks that invest in stocks and manage their risk using a Value-at-Risk constraint, based on historical observations of asset prices. The Value-at-Risk constraint implies that when perceived risk is low, leverage is high and vice versa, a phenomenon that has been dubbed pro-cyclical leverage. We show that this leads to endogenous irregular oscillations, in which gradual increases in stock prices and leverage are followed by drastic market collapses, i.e. a leverage cycle. This phenomenon is studied using simplified models that give a deeper understanding of the dynamics and the nature of the feedback loops and instabilities underlying the leverage cycle. We introduce a flexible leverage regulation policy in which it is possible to continuously tune from pro-cyclical to countercyclical leverage. When the policy is sufficiently countercyclical and bank risk is sufficiently low the endogenous oscillation disappears and prices go to a fixed point. While there is always a leverage ceiling above which the dynamics are unstable, countercyclical leverage can be used to raise the ceiling. We also study the impact on leverage cycles of direct, temporal control of the bank's riskiness via the bank's required Value-at-Risk quantile. Under such a rule the regulator relaxes the Value-at-Risk quantile following a negative stock price shock and tightens it following a positive shock. While such a policy rule can reduce the amplitude of leverage cycles, its effectiveness is highly dependent on the choice of parameters. Finally, we investigate fixed limits on leverage and show how they can control the leverage cycle.Comment: 35 pages, 9 figure

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

High-Level Fluorescence Labeling of Gram-Positive Pathogens

Fluorescence labeling of bacterial pathogens has a broad range of interesting applications including the observation of living bacteria within host cells. We constructed a novel vector based on the E. coli streptococcal shuttle plasmid pAT28 that can propagate in numerous bacterial species from different genera. The plasmid harbors a promoterless copy of the green fluorescent variant gene egfp under the control of the CAMP-factor gene (cfb) promoter of Streptococcus agalactiae and was designated pBSU101. Upon transfer of the plasmid into streptococci, the bacteria show a distinct and easily detectable fluorescence using a standard fluorescence microscope and quantification by FACS-analysis demonstrated values that were 10–50 times increased over the respective controls. To assess the suitability of the construct for high efficiency fluorescence labeling in different gram-positive pathogens, numerous species were transformed. We successfully labeled Streptococcus pyogenes, Streptococcus agalactiae, Streptococcus dysgalactiae subsp. equisimilis, Enterococcus faecalis, Enterococcus faecium, Streptococcus mutans, Streptococcus anginosus and Staphylococcus aureus strains utilizing the EGFP reporter plasmid pBSU101. In all of these species the presence of the cfb promoter construct resulted in high-level EGFP expression that could be further increased by growing the streptococcal and enterococcal cultures under high oxygen conditions through continuous aeration

Generationenbeziehungen und -konflikte im Kontext psychologischer Beratung

"Ausgehend von dem Befund, dass gravierende Konflikte zwischen Erwachsenen und ihren Eltern in Surveydaten vergleichsweise selten beachtet werden, wurden N=419 Experten aus Beratungseinrichtungen zum Stellenwert der Elternbeziehung in der Beratung erwachsener Ratsuchender sowie zur inhaltlichen Ausgestaltung von Generationenkonflikten im Beratungskontext postalisch befragt. Zur Veranschaulichung sollten die Berater zwei Falle aus Ihrer Beratungspraxis schildern und die perzipierte Elternbeziehung jeweils anhand von 15 Emotionsbegriffen beschreiben Nach Angaben der Berater wird die Beziehung zur Mutter in etwa der Hälfte der Fälle zum Gegenstand der Beratung, dabei berichtet etwa ein Drittel der erwachsenen Ratsuchenden von aktuellen Konflikten mit einem Elternteil. Die inhaltsanalytische Auswertung der Fallschilderungen ergab, dass die Generationenkonflikte v.a. die Themen 'Ablösung und Abgrenzung', 'mangelnde Anerkennung durch die Eltern' sowie 'Aufarbeitung belastender Kindheitserfahrungen' berühren. Eine Clusteranalyse über die Emotionsbegriffe erlaubte die Bildung von fünf Klientengruppen, die sich vornehmlich auf den Dimensionen 'Nähe - Distanz' und 'emotionale Verstrickung' unterschieden und die jeweils spezifische Problembelastungen aufwiesen.“ (Autorenreferat)"In view of the finding that reports on serious conflicts between adults and their parents are comparatively rare in survey data, 419 experts from counseling centers were asked to complete a postal survey on the role of relations with parents when counseling adult clients as well as the contents of the intergenerational-conflicts found within the counseling context. Counselors were asked to describe two cases from their counseling practice and use 15 emotion terms to rate the perceived relationship with the parents. According to these experts, the relationship to the mother became a subject of counseling in approximately one half of the cases, and approximately one third of their adult clients reported current conflicts with one of their parents. A content analysis of the case descriptions revealed that the mam topics of generation conflicts were Separation and individuation, lack of parental recognition, and processing stressful childhood experiences. A cluster analysis of the emotion terms led to the formation of five client groups with cluster-specific problems that differed predominantly on the dimensions 'closeness-distance' and 'emotional involvement'." (author’s abstract

Imaging neural activity in the ventral nerve cord of behaving adult Drosophila

To understand neural circuits that control limbs, one must measure their activity during behavior. Until now this goal has been challenging, because limb premotor and motor circuits have been largely inaccessible for large-scale recordings in intact, moving animals-a constraint that is true for both vertebrate and invertebrate models. Here, we introduce a method for 2-photon functional imaging from the ventral nerve cord (VNC) of behaving adult Drosophila melanogaster. We use this method to reveal patterns of activity across nerve cord populations during grooming and walking and to uncover the functional encoding of moonwalker ascending neurons (MANs), moonwalker descending neurons (MDNs), and a previously uncharacterized class of locomotion-associated A1 descending neurons. Finally, we develop a genetic reagent to destroy the indirect flight muscles and to facilitate experimental access to the VNC. Taken together, these approaches enable the direct investigation of circuits associated with complex limb movements