Reserve Requirements on Sovereign Debt in the Presence of Moral Hazard -- on Debtors or Creditors?

This paper characterizes the effects of reserve requirements on financial loans in the presence of moral hazard on the lender side (i.e., the anticipation that the taxpayer will bailout lending banks if large default will occur) and sovereign risk on the borrower side. The impacts of such reserve requirements on the equilibrium degree of default risk and borrowing are analyzed, and their welfare implications for both the borrowing and the lending nations discussed. More generous bailouts financed by the high income block encourage borrowing and increase the probability of default. We show that the introduction of a reserve requirement in either country reduces the risk of default and raises the welfare of both the high income block and the emerging market economies. In these circumstances, the lender's optimal reserve requirement is shown to increase with the expected bailout. Such a policy induces the lender to internalize the expected tax payer cost of the bailout. Thus a more generous bailout that is accompanied by an optimal adjustment in the lender's reserve requirements exactly neutralizes its effects on welfare, leaving welfare in both countries unchanged. Unlike the case of the lender, the effect of the more generous bailout on the borrower's optimal reserve requirement is ambiguous. The imposition of the reserve requirement may also improve the availability of information about the debt exposure of the emerging market economies, which by itself will reduce the optimal lender's reserve requirements, and may prevent drying up' the market for sovereign debt.

Localization Bounds for Multiparticle Systems

We consider the spectral and dynamical properties of quantum systems of $n$ particles on the lattice $\Z^d$, of arbitrary dimension, with a Hamiltonian which in addition to the kinetic term includes a random potential with iid values at the lattice sites and a finite-range interaction. Two basic parameters of the model are the strength of the disorder and the strength of the interparticle interaction. It is established here that for all $n$ there are regimes of high disorder, and/or weak enough interactions, for which the system exhibits spectral and dynamical localization. The localization is expressed through bounds on the transition amplitudes, which are uniform in time and decay exponentially in the Hausdorff distance in the configuration space. The results are derived through the analysis of fractional moments of the $n$-particle Green function, and related bounds on the eigenfunction correlators

Anderson localization for a class of models with a sign-indefinite single-site potential via fractional moment method

A technically convenient signature of Anderson localization is exponential decay of the fractional moments of the Green function within appropriate energy ranges. We consider a random Hamiltonian on a lattice whose randomness is generated by the sign-indefinite single-site potential, which is however sign-definite at the boundary of its support. For this class of Anderson operators we establish a finite-volume criterion which implies that above mentioned the fractional moment decay property holds. This constructive criterion is satisfied at typical perturbative regimes, e. g. at spectral boundaries which satisfy 'Lifshitz tail estimates' on the density of states and for sufficiently strong disorder. We also show how the fractional moment method facilitates the proof of exponential (spectral) localization for such random potentials.Comment: 29 pages, 1 figure, to appear in AH

Multi-Particle Anderson Localisation: Induction on the Number of Particles

This paper is a follow-up of our recent papers \cite{CS08} and \cite{CS09} covering the two-particle Anderson model. Here we establish the phenomenon of Anderson localisation for a quantum $N$-particle system on a lattice $\Z^d$ with short-range interaction and in presence of an IID external potential with sufficiently regular marginal cumulative distribution function (CDF). Our main method is an adaptation of the multi-scale analysis (MSA; cf. \cite{FS}, \cite{FMSS}, \cite{DK}) to multi-particle systems, in combination with an induction on the number of particles, as was proposed in our earlier manuscript \cite{CS07}. Similar results have been recently obtained in an independent work by Aizenman and Warzel \cite{AW08}: they proposed an extension of the Fractional-Moment Method (FMM) developed earlier for single-particle models in \cite{AM93} and \cite{ASFH01} (see also references therein) which is also combined with an induction on the number of particles. An important role in our proof is played by a variant of Stollmann's eigenvalue concentration bound (cf. \cite{St00}). This result, as was proved earlier in \cite{C08}, admits a straightforward extension covering the case of multi-particle systems with correlated external random potentials: a subject of our future work. We also stress that the scheme of our proof is \textit{not} specific to lattice systems, since our main method, the MSA, admits a continuous version. A proof of multi-particle Anderson localization in continuous interacting systems with various types of external random potentials will be published in a separate papers

The Number of Incipient Spanning Clusters in Two-Dimensional Percolation

Using methods of conformal field theory, we conjecture an exact form for the probability that n distinct clusters span a large rectangle or open cylinder of aspect ratio k, in the limit when k is large.Comment: 9 pages, LaTeX, 1 eps figure. Additional references and comparison with existing numerical results include

The Anderson Model as a Matrix Model

In this paper we describe a strategy to study the Anderson model of an electron in a random potential at weak coupling by a renormalization group analysis. There is an interesting technical analogy between this problem and the theory of random matrices. In d=2 the random matrices which appear are approximately of the free type well known to physicists and mathematicians, and their asymptotic eigenvalue distribution is therefore simply Wigner's law. However in d=3 the natural random matrices that appear have non-trivial constraints of a geometrical origin. It would be interesting to develop a general theory of these constrained random matrices, which presumably play an interesting role for many non-integrable problems related to diffusion. We present a first step in this direction, namely a rigorous bound on the tail of the eigenvalue distribution of such objects based on large deviation and graphical estimates. This bound allows to prove regularity and decay properties of the averaged Green's functions and the density of states for a three dimensional model with a thin conducting band and an energy close to the border of the band, for sufficiently small coupling constant.Comment: 23 pages, LateX, ps file available at http://cpth.polytechnique.fr/cpth/rivass/articles.htm

Exponential dynamical localization for the almost Mathieu operator

We prove that the exponential moments of the position operator stay bounded for the supercritical almost Mathieu operator with Diophantine frequency

Infrared bound and mean-field behaviour in the quantum Ising model

We prove an infrared bound for the transverse field Ising model. This bound is stronger than the previously known infrared bound for the model, and allows us to investigate mean-field behaviour. As an application we show that the critical exponent $\gamma$ for the susceptibility attains its mean-field value $\gamma=1$ in dimension at least 4 (positive temperature), respectively 3 (ground state), with logarithmic corrections in the boundary cases.Comment: 42 pages, 5 figures, to appear in CM

Localization criteria for Anderson models on locally finite graphs

We prove spectral and dynamical localization for Anderson models on locally finite graphs using the fractional moment method. Our theorems extend earlier results on localization for the Anderson model on \ZZ^d. We establish geometric assumptions for the underlying graph such that localization can be proven in the case of sufficiently large disorder