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

Bank insolvencies, priority claims and systemic risk

We review an extensive literature debating the merits of alternative priority structures for banking liabilities put forward by financial economists, legal scholars and policymakers. Up to now, this work has focused exclusively on the relative advantages of each group of creditors to monitor the activities of bankers. We argue that systemic risk is another dimension that this discussion must include. The main message of our work is that when bank failures are contagious then when regulators assign priority rights need also to take into account how the bankruptcy resolution of one institution might affect the survival of other institutions that have acted as its creditors. When the network structure is fixed the solution is straightforward. Other banks should have priority to minimize the risk of their downfall. However, if the choice of policy can affect the structure of the network, policy design becomes more complex.This is a fruitful avenue for future research

Non-invasive measurements of exhaled NO and CO associated with methacholine responses in mice

<p>Abstract</p> <p>Background</p> <p>Nitric oxide (NO) and carbon monoxide (CO) in exhaled breath are considered obtainable biomarkers of physiologic mechanisms. Therefore, obtaining their measures simply, non-invasively, and repeatedly, is of interest, and was the purpose of the current study.</p> <p>Methods</p> <p>Expired NO (E_NO) and CO (E_CO) were measured non-invasively using a gas micro-analyzer on several strains of mice (C57Bl6, IL-10^-/-, A/J, MKK3^-/-, JNK1^-/-, NOS-2^-/-and NOS-3^-/-) with and without allergic airway inflammation (AI) induced by ovalbumin systemic sensitization and aerosol challenge, compared using independent-sample t-tests between groups, and repeated measures analysis of variance (ANOVA) within groups over time of inflammation induction. E_NOand E_COwere also measured in C57Bl6 and IL-10-/- mice, ages 8–58 weeks old, the relationship of which was determined by regression analysis. S-methionyl-L-thiocitrulline (SMTC), and tin protoporphyrin (SnPP) were used to inhibit neuronal/constitutive NOS-1 and heme-oxygenase, respectively, and alter NO and CO production, respectively, as assessed by paired t-tests. Methacholine-associated airway responses (AR) were measured by the enhanced pause method, with comparisons by repeated measures ANOVA and post-hoc testing.</p> <p>Results</p> <p>E_NOwas significantly elevated in naïve IL-10^-/-(9–14 ppb) and NOS-2^-/-(16 ppb) mice as compared to others (average: 5–8 ppb), whereas E_COwas significantly higher in naïve A/J, NOS-3^-/-(3–4 ppm), and MKK3^-/-(4–5 ppm) mice, as compared to others (average: 2.5 ppm). As compared to C57Bl6 mice, AR of IL-10^-/-, JNK1^-/-, NOS-2^-/-, and NOS-3^-/-mice were decreased, whereas they were greater for A/J and MKK3^-/-mice. SMTC significantly decreased E_NOby ~30%, but did not change AR in NOS-2^-/-mice. SnPP reduced E_COin C57Bl6 and IL-10^-/-mice, and increased AR in NOS-2^-/-mice. E_NOdecreased as a function of age in IL-10^-/-mice, remaining unchanged in C57Bl6 mice.</p> <p>Conclusion</p> <p>These results are consistent with the ideas that: 1) E_NOis associated with mouse strain and knockout differences in NO production and AR, 2) alterations of E_NOand E_COcan be measured non-invasively with induction of allergic AI or inhibition of key gas-producing enzymes, and 3) alterations in AR may be dependent on the relative balance of NO and CO in the airway.</p

Systemic importance of financial institutions: regulations, research, open issues, proposals

In the field of risk management, scholars began to bring together the quantitative methodologies with the banking management issues about 30 years ago, with a special focus on market, credit and operational risks. After the systemic effects of banks defaults during the recent financial crisis, and despite a huge amount of literature in the last years concerning the systemic risk, no standard methodologies have been set up to now. Even the new Basel 3 regulation has adopted a heuristic indicator-based approach, quite far from an effective quantitative tool. In this paper, we refer to the different pieces of the puzzle: definition of systemic risk, a set of coherent and useful measures, the computability of these measures, the data set structure. In this challenging field, we aim to build a comprehensive picture of the state of the art, to illustrate the open issues, and to outline some paths for a more successful future research. This work appropriately integrates other useful surveys and it is directed to both academic researchers and practitioners

Family involvement and firms’ establishment mode choice in foreign markets

Extant literature on foreign entry increasingly recognizes firms’ heterogeneity as a potential reason for inconsistency in results on the establishment mode choice, i.e. whether and under which conditions firms should choose to enter a new country through a greenfield investment or an acquisition. Our study contributes to this debate by identifying family ownership and family involvement in management as potential powerful sources of such heterogeneity. Integrating international business studies with both corporate finance literature on family firms and recent contributions from the Socio Emotional Wealth perspective on family ownership, we claim that, due to greater risk aversion and lower access to information, the family involvement either in the firm ownership and management leads to a higher propensity towards greenfield initiatives (vs. acquisitions). However, we also find that such a propensity decreases with international experience especially in family-owned firms given the greater ability of professionalized management to overcome family-related concerns on making acquisitions. Our analysis on 1,045 foreign initiatives undertaken by 311 Italian family and non-family firms between 2003 and 2013 confirms our expectations – indicating family ownership as a significant driver of international business choices

Strength of Hydrogen Bond Network Takes Crucial Roles in the Dissociation Process of Inhibitors from the HIV-1 Protease Binding Pocket

To understand the underlying mechanisms of significant differences in dissociation rate constant among different inhibitors for HIV-1 protease, we performed steered molecular dynamics (SMD) simulations to analyze the entire dissociation processes of inhibitors from the binding pocket of protease at atomistic details. We found that the strength of hydrogen bond network between inhibitor and the protease takes crucial roles in the dissociation process. We showed that the hydrogen bond network in the cyclic urea inhibitors AHA001/XK263 is less stable than that of the approved inhibitor ABT538 because of their large differences in the structures of the networks. In the cyclic urea inhibitor bound complex, the hydrogen bonds often distribute at the flap tips and the active site. In contrast, there are additional accessorial hydrogen bonds formed at the lateral sides of the flaps and the active site in the ABT538 bound complex, which take crucial roles in stabilizing the hydrogen bond network. In addition, the water molecule W301 also plays important roles in stabilizing the hydrogen bond network through its flexible movement by acting as a collision buffer and helping the rebinding of hydrogen bonds at the flap tips. Because of its high stability, the hydrogen bond network of ABT538 complex can work together with the hydrophobic clusters to resist the dissociation, resulting in much lower dissociation rate constant than those of cyclic urea inhibitor complexes. This study may provide useful guidelines for design of novel potent inhibitors with optimized interactions

Credit Contagion in Financial Markets: A Network-Based Approach

We propose a network-based model of credit contagion and examine the e�ects of idiosyncratic and systemic shocks to individual banks and the banking system. The banking system is built as a network in which banks are connected to each other through the interbank market. The microstructure captures the relation between debtors and creditors, and the macroeconomic events capture the sensitivity of the banks' �nancial strenght to macroeconomic events, such as housing. We have demonstrated that while idiosyncratic shocks do not have a potential to substantially disturb the banking system, macroeconomic events of higher magnitudes could be highly harmful, especially if they also spur contagion. In a concerted default of more banks, the stability of a banking system tends to decrease disproportionately. In addition, credit risk analysis is highly sensitive to the network topology and exhibits a nonlinear characteristic. Capital ratio and recovery rates are two additional factors that contribute to the stability of the �nancial system