The shadow banking system: implications for fi nancial regulation

The current financial crisis has highlighted the changing role of financial institutions and the growing importance of the “shadow banking system” that grew on the back of the securitisation of assets and the integration of banking with capital market developments. This trend has been most pronounced in the United States, but has had a profound influence for the global financial system as a whole. In a market-based financial system, banking and capital market developments are inseparable, and funding conditions are closely tied to the fluctuations of leverage of market-based fi nancial intermediaries. Balance sheet growth of market-based financial intermediaries provides a window on liquidity in the sense of availability of credit, while contractions of balance sheets have tended to precede the onset of financial crises. Securitisation was intended as a way to disperse credit risk to those who were better able to absorb losses, but instead securitisation served to increase the fragility of the financial system as a whole by allowing banks and other intermediaries to leverage up by buying each others’ securities. In the new, post-crisis financial system, the role of securitisation is likely to be held in check by more stringent financial regulation and the recognition of the importance of preventing excessive leverage and maturity mismatch in undermining financial stability.

Liquidity and financial contagion.

There is an apparent puzzle at the heart of the 2007 credit crisis. The subprime mortgage sector is small relative to the financial system as a whole and the exposure was widely dispersed through securitization. Yet the crisis in the credit market has been potent. Traditionally, financial contagion has been viewed through the lens of defaults, where if A has borrowed from B and B has borrowed from C, then the default of A impacts B, which then impacts C, etc. However, in a modern market-based financial system, the channel of contagion is through price changes and the measured risks and marked-to-market capital of financial institutions. When balance sheets are marked to market, asset price changes show up immediately on balance sheets and elicit response from financial market participants. Even if exposures are dispersed widely throughout the financial system, the potential impact of a shock can be amplified many-fold through market price changes.

Analysis of iced wings

A method for computing ice shapes along the leading edge of a wing and a method for predicting its aerodynamic performance degradation due to icing is described. Ice shapes are computed using an extension of the LEWICE code which was developed for airfoils. The aerodynamic properties of the iced wing are determined with an interactive scheme in which the solutions of the inviscid flow equations are obtained from a panel method and the solutions of the viscous flow equations are obtained from an inverse three-dimensional finite-difference boundary-layer method. A new interaction law is used to couple the inviscid and viscous flow solutions. The application of the LEWICE wing code to the calculation of ice shapes on a MS-317 swept wing shows good agreement with measurements. The interactive boundary-layer method is applied to a tapered ice wing in order to study the effect of icing on the aerodynamic properties of the wing at several angles of attack

Dynamical evolution of the mass function and radial profile of the Galactic globular cluster system

Evolution of the mass function (MF) and radial distribution (RD) of the Galactic globular cluster (GC) system is calculated using an advanced and a realistic Fokker-Planck (FP) model that considers dynamical friction, disc/bulge shocks and eccentric cluster orbits. We perform hundreds of FP calculations with different initial cluster conditions, and then search a wide-parameter space for the best-fitting initial GC MF and RD that evolves into the observed present-day Galactic GC MF and RD. By allowing both MF and RD of the initial GC system to vary, which is attempted for the first time in the present Letter, we find that our best-fitting models have a higher peak mass for a lognormal initial MF and a higher cut-off mass for a power-law initial MF than previous estimates, but our initial total masses in GCs, M_{T,i} = 1.5-1.8x10^8 Msun, are comparable to previous results. Significant findings include that our best-fitting lognormal MF shifts downward by 0.35 dex during the period of 13 Gyr, and that our power-law initial MF models well-fit the observed MF and RD only when the initial MF is truncated at >~10^5 Msun. We also find that our results are insensitive to the initial distribution of orbit eccentricity and inclination, but are rather sensitive to the initial concentration of the clusters and to how the initial tidal radius is defined. If the clusters are assumed to be formed at the apocentre while filling the tidal radius there, M_{T,i} can be as high as 6.9x10^8 Msun, which amounts to ~75 per cent of the current mass in the stellar halo.Comment: To appear in May 2008 issue of MNRAS, 386, L6

Observation of Conduction Band Satellite of Ni Metal by 3p-3d Resonant Inverse Photoemission Study

Resonant inverse photoemission spectra of Ni metal have been obtained across the Ni 3$p$ absorption edge. The intensity of Ni 3$d$ band just above Fermi edge shows asymmetric Fano-like resonance. Satellite structures are found at about 2.5 and 4.2 eV above Fermi edge, which show resonant enhancement at the absorption edge. The satellite structures are due to a many-body configuration interaction and confirms the existence of 3$d^8$ configuration in the ground state of Ni metal.Comment: 4 pages, 3 figures, submitted to Physical Review Letter