Risk Spillovers and Hedging: Why Do Firms Invest Too Much in Systemic Risk?

In this paper we show that free entry decisions may be socially inefficient, even in a perfectly competitive homogeneous goods market with non-lumpy investments. In our model, inefficient entry decisions are the result of risk-aversion of incumbent producers and consumers, combined with incomplete financial markets which limit risk-sharing between market actors. Investments in productive assets affect the distribution of equilibrium prices and quantities, and create risk spillovers. From a societal perspective, entrants underinvest in technologies that would reduce systemic sector risk, and may overinvest in risk-increasing technologies. The inefficiency is shown to disappear when a complete financial market of tradable risk-sharing instruments is available, although the introduction of any individual tradable instrument may actually decrease efficiency. We therefore believe that sectors without well-developed financial markets will benefit from sector-specific regulation of investment decisions.investments in productive assets;hedging;systemic risk;risk spillovers

Effect of immobilization on the EEG of the baboon. Comparison with telemetry results from unrestricted animals

The EEG of the baboon was studied under two very different sets of conditions: 37 were totally immobolized while 12 were studied in their free movements with 4 channel telemetry. For the immobilzed, 3 stages were described: (1) activation, record desynchronized; (2) rest with 13-15 cm/sec rhythm, like the human alpha rhythm stage but with eyes open or closed; (3)relaxation with a decrease in 13-15 rhythm and the appearance of 5-7 cm/sec theta waves, eyelids closed, animal apparently sleeping. For the free animals the rest stage appeared when the animal's attention was not directed anywhere and there was no relaxation stage. It is concluded that the EEG pattern of the immobilized animal that was described as the "relaxation" stage really represents a special functional state which one must distinguish clearly from the physiological stages of sleep

Brane World with Bulk Horizons

A brane world in the presence of a bulk black hole is constructed. The brane tension is fine tuned in terms of the black hole mass and cosmological constant. Gravitational perturbations localized on the brane world are discussed.Comment: 7 pages, 2 figures. Typos corrected and new references adde

Monetary overhang and the dynamics of prices, exchange rates, and income in the transition to a market economy

The long road from capitalism to capitalism the Eastern European economies have made has been paved with many economic problems, but the transition from a command economy into a market economy is likely to become a bumpy ride as well. Apart from the major real economic reforms that have to take place, combined with virtual turnaround of the political structure, several countries aiming to reform face a monetary problem as well. Due to persistent state budget deficits, financed by the printing press, a so called monetary overhang threatens the reform process. Monetary overhang is here defined as the excess of money supply over demand at the current price level and at world market interest rates. The consequences of the monetary overhang under a planning system are obvious: the fixity of prices prevents the real money supply from falling to its equilibrium level, and the situation of repressed inflation translates into long queues in front of shops, forced savings, and, if not checked, into a flourishing black market and corruption. The official exchange rate is overvalued, but import demand is checked by rationing of foreign exchange.

Twining characters, orbit Lie algebras, and fixed point resolution

We describe the resolution of field identification fixed points in coset conformal field theories in terms of representation spaces of the coset chiral algebra. A necessary ingredient from the representation theory of Kac Moody algebras is the recently developed theory of twining characters and orbit Lie algebras, as applied to automorphisms representing identification currents.Comment: Latex, 24 pages. Slightly extended version of lectures by J. Fuchs at a workshop in Razlog (Bulgaria) in August 199

A proposed group management scheme for XTP multicast

The purpose of a group management scheme is to enable its associated transfer layer protocol to be responsive to user determined reliability requirements for multicasting. Group management (GM) must assist the client process in coordinating multicast group membership, allow the user to express the subset of the multicast group that a particular multicast distribution must reach in order to be successful (reliable), and provide the transfer layer protocol with the group membership information necessary to guarantee delivery to this subset. GM provides services and mechanisms that respond to the need of the client process or process level management protocols to coordinate, modify, and determine attributes of the multicast group, especially membership. XTP GM provides a link between process groups and their multicast groups by maintaining a group membership database that identifies members in a name space understood by the underlying transfer layer protocol. Other attributes of the multicast group useful to both the client process and the data transfer protocol may be stored in the database. Examples include the relative dispersion, most recent update, and default delivery parameters of a group