Intraday liquidity management: a tale of games banks play

Over the last few decades, most central banks, concerned about settlement risks inherent in payment netting systems, have implemented real-time gross settlement (RTGS) systems. Although RTGS systems can significantly reduce settlement risk, they require greater liquidity to smooth nonsynchronized payment flows. Thus, central banks typically provide intraday credit to member banks, either as collateralized credit or priced credit. Because intraday credit is costly for banks, how intraday liquidity is managed has become a competitive parameter in commercial banking and a policy concern of central banks. This article uses a game-theoretical framework to analyze the intraday liquidity management behavior of banks in an RTGS setting. The games played by banks depend on the intraday credit policy of the central bank and encompass two well-known paradigms in game theory: "the prisoner's dilemma" and "the stag hunt." The former strategy arises in a collateralized credit regime, where banks have an incentive to delay payments if intraday credit is expensive, an outcome that is socially inefficient. The latter strategy occurs in a priced credit regime, where postponement of payments can be socially efficient under certain circumstances. The author also discusses how several extensions of the framework affect the results, such as settlement risk, incomplete information, heterogeneity, and repeated play.Payment systems ; Banks and banking, Central ; Bank liquidity ; Game theory ; Credit

Formulation of Complex Action Theory

We formulate a complex action theory which includes operators of coordinate and momentum $\hat{q}$ and $\hat{p}$ being replaced with non-hermitian operators $\hat{q}_{new}$ and $\hat{p}_{new}$, and their eigenstates ${}_m <_{new} q |$ and ${}_m <_{new} p |$ with complex eigenvalues $q$ and $p$. Introducing a philosophy of keeping the analyticity in path integration variables, we define a modified set of complex conjugate, real and imaginary parts, hermitian conjugates and bras, and explicitly construct $\hat{q}_{new}$, $\hat{p}_{new}$, ${}_m <_{new} q |$ and ${}_m <_{new} p |$ by formally squeezing coherent states. We also pose a theorem on the relation between functions on the phase space and the corresponding operators. Only in our formalism can we describe a complex action theory or a real action theory with complex saddle points in the tunneling effect etc. in terms of bras and kets in the functional integral. Furthermore, in a system with a non-hermitian diagonalizable bounded Hamiltonian, we show that the mechanism to obtain a hermitian Hamiltonian after a long time development proposed in our letter works also in the complex coordinate formalism. If the hermitian Hamiltonian is given in a local form, a conserved probability current density can be constructed with two kinds of wave functions.Comment: 29 pages, 2 figures, references added, presentation improved, typos corrected. (v5)The definition of $\hat{q}_{new}$ and $\hat{p}_{new}$ are corrected by replacing them with their hermitian conjugates. The errors and typos mentioned in the errata of PTP are corrected. arXiv admin note: substantial text overlap with arXiv:1009.044

The Cheshire Cat Principle from Holography

The Cheshire cat principle states that hadronic observables at low energy do not distinguish between hard (quark) or soft (meson) constituents. As a result, the delineation between hard/soft (bag radius) is like the Cheshire cat smile in Alice in wonderland. This principle reemerges from current holographic descriptions of chiral baryons whereby the smile appears in the holographic direction. We illustrate this point for the baryonic form factor.Comment: 11 pages, 2 figure

Seeking a Game in which the standard model Group shall Win

It is attempted to construct a group-dependent quantity that could be used to single out the Standard Model group S(U(2) x U(3)) as being the "winner" by this quantity being the biggest possible for just the Standard Model group. The suggested quantity is first of all based on the inverse quadratic Cassimir for the fundamental or better smallest faithful representation in a notation in which the adjoint representation quadratic Cassimir is normalized to unity. Then a further correction is added to help the wanted Standard Model group to win and the rule comes even to involve the Abelian group U(1) to be multiplied into the group to get this correction be allowed. The scheme is suggestively explained to have some physical interpretation(s). By some appropriate proceedure for extending the group dependent quantity to groups that are not simple we find a way to make the Standard Model Group the absolute "winner". Thus we provide an indication for what could be the reason for the Standard Model Group having been chosen to be the realized one by Nature.Comment: already publiched in 2011 in Bled Conference proceedings "What comes beyond the Stadard Models