On the Computational Complexity of Measuring Global Stability of Banking Networks

Threats on the stability of a financial system may severely affect the functioning of the entire economy, and thus considerable emphasis is placed on the analyzing the cause and effect of such threats. The financial crisis in the current and past decade has shown that one important cause of instability in global markets is the so-called financial contagion, namely the spreading of instabilities or failures of individual components of the network to other, perhaps healthier, components. This leads to a natural question of whether the regulatory authorities could have predicted and perhaps mitigated the current economic crisis by effective computations of some stability measure of the banking networks. Motivated by such observations, we consider the problem of defining and evaluating stabilities of both homogeneous and heterogeneous banking networks against propagation of synchronous idiosyncratic shocks given to a subset of banks. We formalize the homogeneous banking network model of Nier et al. and its corresponding heterogeneous version, formalize the synchronous shock propagation procedures, define two appropriate stability measures and investigate the computational complexities of evaluating these measures for various network topologies and parameters of interest. Our results and proofs also shed some light on the properties of topologies and parameters of the network that may lead to higher or lower stabilities.Comment: to appear in Algorithmic

Pickup ion measurements by MAVEN: A diagnostic of photochemical oxygen escape from Mars

A key process populating the oxygen exosphere at Mars is the dissociative recombination of ionospheric O 2 + , which produces fast oxygen atoms, some of which have speeds exceeding the escape speed and thus contribute to atmospheric loss. Theoretical studies of this escape process have been carried out and predictions made of the loss rate; however, directly measuring the escaping neutral oxygen is difficult but essential. This paper describes how energetic pickup ion measurements to be made near Mars by the SEP (Solar Energetic Particle) instrument on board the MAVEN (Mars Atmosphere and Volatile EvolutioN) spacecraft can be used to constrain models of photochemical oxygen escape. In certain solar wind conditions, neutral oxygen atoms in the distant Martian exosphere that are ionized and picked up by the solar wind can reach energies high enough to be detected near Mars by SEP. Key Points Photochemical hot oxygen escape rate at Mars is predicted Martian exospheric neutral oxygen model is constructed Pickup ion fluxes measured by SEP will constrain neutral oxygen escape from MarsPeer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/108375/1/grl51888.pd

Bank disclosure and market assessment of financial fragility: Evidence from Turkish banks' equity prices

In this paper we explore whether Turkish banks with worsening indicators of financial fragility were subject to market monitoring during the years leading to the 2000/2001 crisis, and how the quality and timeliness of the disclosure affect market reaction. We find that shareholders reacted negatively to indicators of financial fragility such as increases in maturity mismatches, currency mismatches, and non-performing loans, showing shareholders’ concerns about the impact of financial fragility indicators on future profits. We also find that audited statements that show larger reporting lags, are not informative, pointing to the need of improving their timeliness. Finally, our study suggests that the finding that securities prices react to financial fragility indicators should not be taken as sufficient evidence of banks’ safety and soundness

Systemic Risk: Fire-Walling Financial Systems Using Network-Based Approaches

The latest financial crisis has painfully revealed the dangers arising from a globally interconnected financial system. Conventional approaches based on the notion of the existence of equilibrium and those which rely on statistical forecasting have seen to be inadequate to describe financial systems in any reasonable way. A more natural approach is to treat financial systems as complex networks of claims and obligations between various financial institutions present in an economy. The generic framework of complex networks has been successfully applied across several disciplines, e.g., explaining cascading failures in power transmission systems and epidemic spreading. Here we review various network models addressing financial contagion via direct inter-bank contracts and indirectly via overlapping portfolios of financial institutions. In particular, we discuss the implications of the "robust-yet-fragile" nature of financial networks for cost-effective regulation of systemic risk.Comment: 19 pages, 7 figure

Unequal allelic expression of wild-type and mutated β-myosin in familial hypertrophic cardiomyopathy

Familial hypertrophic cardiomyopathy (FHC) is an autosomal dominant disease, which in about 30% of the patients is caused by missense mutations in one allele of the β-myosin heavy chain (β-MHC) gene (MYH7). To address potential molecular mechanisms underlying the family-specific prognosis, we determined the relative expression of mutant versus wild-type MYH7-mRNA. We found a hitherto unknown mutation-dependent unequal expression of mutant to wild-type MYH7-mRNA, which is paralleled by similar unequal expression of β-MHC at the protein level. Relative abundance of mutated versus wild-type MYH7-mRNA was determined by a specific restriction digest approach and by real-time PCR (RT-qPCR). Fourteen samples from M. soleus and myocardium of 12 genotyped and clinically well-characterized FHC patients were analyzed. The fraction of mutated MYH7-mRNA in five patients with mutation R723G averaged to 66 and 68% of total MYH7-mRNA in soleus and myocardium, respectively. For mutations I736T, R719W and V606M, fractions of mutated MYH7-mRNA in M. soleus were 39, 57 and 29%, respectively. For all mutations, unequal abundance was similar at the protein level. Importantly, fractions of mutated transcripts were comparable among siblings, in younger relatives and unrelated carriers of the same mutation. Hence, the extent of unequal expression of mutated versus wild-type transcript and protein is characteristic for each mutation, implying cis-acting regulatory mechanisms. Bioinformatics suggest mRNA stability or splicing effectors to be affected by certain mutations. Intriguingly, we observed a correlation between disease expression and fraction of mutated mRNA and protein. This strongly suggests that mutation-specific allelic imbalance represents a new pathogenic factor for FHC

Banks’ liquidity buffers and the role of liquidity regulation

We assess the determinants of banks’ liquidity holdings using data for nearly 7000 banks from 25 OECD countries. We highlight the role of several bank-specific, institutional and policy variables in shaping banks’ liquidity risk management. Our main question is whether liquidity regulation neutralizes banks’ incentives to hold liquid assets. Without liquidity regulation, the determinants of banks’ liquidity buffers are a combination of bank-specific and country-specific variables. While most incentives are neutralized by liquidity regulation, a bank’s disclosure requirements remain important. The complementarity of disclosure and liquidity requirements provides a strong rationale for considering them jointly in the design of regulation