Financial Market Liquidity and the Lender of Last Resort.

It has been argued in the literature that emergency liquidity injections should be conducted preferably in the form of open market operations. As we show in the present paper, this is not necessarily the case when liquidity may be alternatively used for speculative purposes during the crisis. In such a situation, non-discriminating operations may attract unfunded market participants that divert funding resources away from its best uses in the financial sector. As a consequence, targeted liquidity assistance may become strictly superior. The analysis might have a bearing on recent developments in the context of the subprime crisis.Liquidity ; Financial markets ; Lender of last resort.

Financial market liquidity and the lender of last resort.

In the summer 2007, difficulties in the US subprime mortgage markets have led to disruptive developments in many financial market segments, in particular in interbank money markets, where central banks in the US and in Europe repeatedly intervened to restore smooth market functioning. This article investigates the circumstances in which liquidity shortages may appear in fi nancial markets and evaluates a number of options available to the lender of last resort wishing to restore fi nancial stability. It also suggests that the consideration of balance sheet data is not sufficient for evaluating the risks of leveraged financial entities. Instead, the analysis calls for an explicit consideration of collateral pledges, market illiquidity, and potential non-availability of market prices. Our main messages can be summarised as follows. First, we provide a clear hierarchy across policy alternatives. Taking a risk-efficiency perspective, it turns out that targeted liquidity assistance is preferable to market-wide non-discriminatory liquidity injections. In particular, when liquidity may be alternatively used for speculative purposes during the crisis, non-discriminating open market operations may attract unfunded market participants that divert funding resources away from its best uses in the financial sector. As a consequence, targeted liquidity assistance may become strictly superior. Second, we suggest that forced asset sales may lead to disruptive market developments in a context where financial investors are highly leveraged. Assuming away external funding or renegociability of debt contracts, a fully leveraged investor hit by a liquidity shock would have to liquidate some assets. When markets are not perfectly liquid, asset liquidation depresses market prices. Under standard risk management constraints, lower prices induce a re-evaluation of marked-to-market balance sheets, provoke margin calls, and trigger further selling. In the worst scenario, the leveraged investor may not be able to face the sum of liquidity outfl ows and subsequent margin calls. In that case, the market for illiquid assets breaks down, rendering the valuation of such assets an ambiguous exercise. For investors, such potential trading disruptions imply that the loss that triggers operational default is likely to be much smaller than suggested by standard risk measures.

Forced Portfolio Liquidation.

We study the problem of a leveraged investor that is forced to unwind a significant fraction of its portfolio in a collection of illiquid markets. It is shown that markets may become disrupted in response to a relatively small liquidity shock. As a consequence, the probability of default can be much higher than suggested by standard risk measures. We also study the impact of successful liquidation on relative asset prices. Our analysis suggests that effective risk management of leveraged financial entities should focus on the entity's potential to generate emergency cash-flows net of third-party claims for liquidity.Portfolio liquidation ; Market disruption ; Leverage ; Determinants of asset liquidity ; Hedge funds ; Structured credit.

Bank liquidity and financial stability.

Fluctuations in investor risk aversion are often cited as a factor explaining crises on financial markets. The alternation between periods of bullishness prompting investors to make risky investments, and periods of bearishness, when they retreat to the safest forms of investments, could be at the root of sharp fluctuations in asset prices. One problem in the assessment of these different periods is clearly distinguishing the risk perceived by agents from risk aversion itself. There are several types of risk aversion indicators used by financial institutions (the VIX, the LCVI, the GRAI, etc.). These indices, which are estimated in diverse ways, often show differing developments, although it is not possible to directly assess which is the most accurate. An interesting method in this respect is to link the indicators to financial crises. In principle, financial crises should coincide with periods in which risk aversion increases. Here we estimate probabilities of financial crises –currency and stock market crises– using the different risk aversion indicators as explanatory variables. This allows us to assess their respective predictive powers. The tests carried out show that risk aversion does tend to increase before crises, at least when it is measured by the most relevant indices. This variable is a good leading indicator of stock market crises, but is less so for currency crises.

Electronic structure basis for the titanic magnetoresistance in WTe2_2

The electronic structure basis of the extremely large magnetoresistance in layered non-magnetic tungsten ditelluride has been investigated by angle-resolved photoelectron spectroscopy. Hole and electron pockets of approximately the same size were found at the Fermi level, suggesting that carrier compensation should be considered the primary source of the effect. The material exhibits a highly anisotropic, quasi one-dimensional Fermi surface from which the pronounced anisotropy of the magnetoresistance follows. A change in the Fermi surface with temperature was found and a high-density-of-states band that may take over conduction at higher temperatures and cause the observed turn-on behavior of the magnetoresistance in WTe$_2$ was identified

Declining Valuations and Equilibrium Bidding Central Bank Refinancing Operations.

It is argued that bidders in liquidity-providing central bank operations should typically possess declining marginal valuations. Based on this hypothesis, we construct equilibrium in central bank refinancing operations organised as variable rate tenders. In the case of the discriminatory pricing rule, bid shading does not disappear in large populations. The predictions of the model are shown to be consistent with the data for the euro area.Open market operations ; Uniform price auction ; Discriminatory auction ; Eurosystem.

A review of feeding intolerance in critically ill children

© 2018, The Author(s). Ensuring optimal nutrition is vital in critically ill children and enteral feeding is the main route of delivery in intensive care. Feeding intolerance is the most commonly cited reason amongst pediatric intensive care unit healthcare professionals for stopping or withholding enteral nutrition, yet the definition for this remains inconsistent, nebulous, and entirely arbitrary. Not only does this pose problems clinically, but research in this field frequently uses feeding intolerance as an endpoint and the heterogeneity in this definition makes the comparison of studies difficult and meta-analysis impossible. We reviewed the use of, and definitions of, the term feed intolerance in pediatric intensive care research papers in the last 20years. Gastric residual volume remains the most common factor used to define feed intolerance, despite the lack of evidence for this. Healthcare professionals would benefit from further education to improve their awareness of the limitations of the markers to define feeding intolerance, and the international PICU community needs to agree a consistent definition of this phenomenon to improve consistency in both practice and research. Conclusion: This paper will provide a narrative review of the definitions of, evidence for, and markers of feeding intolerance in critically ill children.What is Known?:• Feeding intolerance is a commonly cited reason amongst pediatric intensive care unit healthcare professionals for stopping or withholding enteral nutrition.• There is no agreed definition for feeding intolerance in critically ill children.What is New?:• This paper provides an up to date review of the definitions of, evidence for, and markers of feeding intolerance in critically ill children.• Despite no evidence, gastric residual volume continues to drive clinical bedside decisions about enteral feeding and feeding tolerance

Gapped Surface States in a Strong-Topological-Semimetal

A three-dimensional strong-topological-insulator or -semimetal hosts topological surface states which are often said to be gapless so long as time-reversal symmetry is preserved. This narrative can be mistaken when surface state degeneracies occur away from time-reversal-invariant momenta. The mirror-invariance of the system then becomes essential in protecting the existence of a surface Fermi surface. Here we show that such a case exists in the strong-topological-semimetal Bi$_4$Se$_3$. Angle-resolved photoemission spectroscopy and \textit{ab initio} calculations reveal partial gapping of surface bands on the Bi$_2$Se$_3$-termination of Bi$_4$Se$_3$(111), where an 85 meV gap along $\bar{\Gamma}\bar{K}$ closes to zero toward the mirror-invariant $\bar{\Gamma}\bar{M}$ azimuth. The gap opening is attributed to an interband spin-orbit interaction that mixes states of opposite spin-helicity.Comment: 5 pages, 3 figure

Application of the scattering rate sum-rule to the interplane optical conductivity of high temperature superconductors: pseudogap and bi-layer effects

We use a recently proposed model of the interplane conductivity of high temperature superconductors to investigate the `scattering rate sum-rule' introduced by Basov and co-workers. We present a new derivation of the sum-rule. The quantal and thermal fluctuations of the order parameter which have been argued to produce the observed pseudogap behavior are shown to increase the total integrated `scattering rate' but may either increase or decrease the `quasiparticle' contribution from frequencies greater than twice the superconducting gap.Comment: 4 pages, 5 figures, revise