Destructive Effects of Constructive Ambiguity in Risky Times

Unclear bailout policy, underinvestment and calls for bankers? responsibility are some of the observations from the recent financial crisis. The paper explains underinvestment as an inefficient equilibrium. Under ambiguous bailout policy agents suffer from a lack of information with regards to the insolvency resolution methods. Beliefs of bankers regarding whether an insolvent bank is liquidated, may differ from those of depositors even if bankers and depositors possess absolutely symmetric information about the economy. It is shown that such an asymmetry in beliefs results in underinvestment if the investment climate is characterized by high aggregate risk. The paper suggests policy implications aimed at the reduction of anxiety of agents and at aligning their beliefs to restore efficiency

Do CDS spreads reflect default risks? Evidence from UK bank bailouts

CDS spreads are generally considered to reflect the credit risks of their reference entities. However, CDS spreads of the major UK banks remained relatively stable in response to the recent credit crisis. We suggest that this can be explained by changes in loss given default (LGD). To obtain the result we first derive the probabilities of default from stock option prices and then determine the LGD consistent with actual CDS spreads. Our results reveal a significant decrease in the LGD of bailed out banks over the observed period in contrast to banks which were not bailed out and non-financial companies

Measurement of streaming potential coupling coefficient in sandstones saturated with natural and artificial brines at high selenity

We report experimental measurements of the streaming potential coupling coefficient in sandstones saturated with NaCl-dominated artificial and natural brines up to 5.5 M (321.4 g L−1 of NaCl; electrical conductivity of 23 S m−1). We find that the magnitude of the coupling coefficient decreases with increasing brine salinity, as observed in previous experimental studies and predicted by models of the electrical double layer. However, the magnitude of the coupling coefficient remains greater than zero up to the saturated brine salinity. The magnitude of the zeta potential we interpret from our measurements also decreases with increasing brine salinity in the low-salinity domain (0.4 M). We hypothesize that the constant value of zeta potential observed at high salinity reflects the maximum packing of counterions in the diffuse part of the electrical double layer. Our hypothesis predicts that the zeta potential becomes independent of brine salinity when the diffuse layer thickness is similar to the diameter of the hydrated counterion. This prediction is confirmed by our experimental data and also by published measurements on alumina in KCl brine. At high salinity (>0.4 M), values of the streaming potential coupling coefficient and the corresponding zeta potential are the same within experimental error regardless of sample mineralogy and texture and the composition of the brine

Tidal influence on self-potential measurements

DJM was supported by NERC CASE studentship NE/I018417/1. The authors would also like to thank Southern Water for access to the borehole at Saltdean. Atkins Global and Southern Water are thanked for funding installation of the equipment and for additional funding under the NERC studentship. The laboratory components of this work were carried out in the TOTAL Reservoir Physics Laboratory at Imperial College London and their support is gratefully acknowledged. Jackson acknowledges partial support from TOTAL under the TOTAL Chairs programme. The data supporting the conclusions of this work are available through the corresponding author.Peer reviewedPublisher PD

Evidence, Mechanisms and Improved Understanding of Controlled Salinity Waterflooding Part 1 : Sandstones

Acknowledgements TOTAL are thanked for partial supporting Jackson through the TOTAL Chairs programme at Imperial College London, for supporting Vinogradov through the TOTAL Laboratory for Reservoir Physics at Imperial College London, and for granting permission to publish this work.Peer reviewedPostprin

Separating Solution of a Quadratic Recurrent Equation

In this paper we consider the recurrent equation $$\Lambda_{p+1}=\frac1p\sum_{q=1}^pf\bigg(\frac{q}{p+1}\bigg)\Lambda_{q}\Lambda_{p+1-q}$$ for $p\ge 1$ with $f\in C[0,1]$ and $\Lambda_1=y>0$ given. We give conditions on $f$ that guarantee the existence of $y^{(0)}$ such that the sequence $\Lambda_p$ with $\Lambda_1=y^{(0)}$ tends to a finite positive limit as $p\to \infty$.Comment: 13 pages, 6 figures, submitted to J. Stat. Phy

Banks, Credibility and Macroeconomic Evolution after a Production Shock

One of the important functions of financial intermediation is intertemporal risk smoothing. This paper studies the effects of a production shock in a closed economy and compares the abilities of market-based and bank-based financial systems in processing the shock. The analysis of the shock propagation indicates that a competitive banking system may collapse in absence of a proper regulation. Paradoxically, it is the credibility of banks that makes bank-based economies fragile. A necessary and sufficient condition for successfull bailout schemes is proposed

Belinfante Tensors Induced by Matter-Gravity Couplings

We show that any generally covariant coupling of matter fields to gravity gives rise to a conserved, on-shell symmetric energy-momentum tensor equivalent to the canonical energy-momentum tensor of the flat-space theory. For matter fields minimally coupled to gravity our algorithm gives the conventional Belinfante tensor. We establish that different matter-gravity couplings give metric energy-momentum tensors differing by identically conserved tensors. We prove that the metric energy-momentum tensor obtained from an arbitrary gravity theory is on-shell equivalent to the canonical energy-momentum tensor of the flat-space theory.Comment: 10 pages, LaTex; misprints corrected, references added; to appear in Physical Review

Low-temperature specific heat of real crystals: Possibility of leading contribution of optical and short-wavelength acoustical vibrations

We point out that the repeatedly reported glass-like properties of crystalline materials are not necessarily associated with localized (or quasilocalized) excitations. In real crystals, optical and short-wavelength acoustical vibrations remain damped due to defects down to zero temperature. If such a damping is frequency-independent, e.g. due to planar defects or charged defects, these optical and short-wavelength acoustical vibrations yield a linear-in-$T$ contribution to the low-temperature specific heat of the crystal lattices. At low enough temperatures such a contribution will prevail over that of the long-wavelength acoustical vibrations (Debye contribution). The crossover between the linear and the Debye regime takes place at $T^* \propto \sqrt N$, where $N$ is the concentration of the defects responsible for the damping. Estimates show that this crossover could be observable.Comment: 5 pages. v4: Error in Appendix corrected, which does not change the main results of the pape