Risk-Based Capital Standards and the Riskiness of Bank Portfolios: Credit and Factor Risks

Bank risk-based capital (RBC) standards require banks to hold differing amounts of capital for different classes of assets, based almost entirely on a credit risk criterion. The paper provides both a theoretical and empirical framework for evaluating such standards. A model outlining a pricing methodology for loans subject to default risk is presented. The model shows that the returns on such loans are affected by the complicated interaction of the likelihood of default, the consequences of default, term structure variables, and the pricing of factor risks in the economy. When we examine whether the risk weights accurately reflect bank asset risk, we find that the weights fail even in their limited goal of correctly quantifying credit risk. For example, our findings indicate that the RBC weights overpenalize home mortgages, which have an average credit loss of 13 basis points, relative to commercial and consumer loans. The RBC rules also contain a significant bias against direct mortgages relative to mortgage- backed securities. In addition, we find large differences in the credit riskiness of loans within the 100 percent weight class and potentially large benefits to loan diversification, neither of which are considered in the RBC regulations. We also examine other types of bank risk by estimating a simple factor model that decomposes loan risk into term structure, default, and market risk. One implication of our findings is that although banks have reallocated their portfolios in ways intended by the RBC standards, they may have merely substituted one type of risk (term structure risk) for others (default and market risk), of which the net effect is unknown.

Impacts of anthropogenic emissions and cold air pools on urban to montane gradients of snowpack ion concentrations in the Wasatch Mountains, Utah

pre-printUrban montane valleys are often characterized by periodic wintertime temperature inversions (cold air pools) that increase atmospheric particulate matter concentrations, potentially stimulating the deposition of major ions to these snow-covered ecosystems. We assessed spatial and temporal patterns of ion concentrations in snow across urban to montane gradients in Salt Lake City, Utah, USA, and the adjacent Wasatch Mountains during January 2011, a period of several persistent cold air pools. Ion concentrations in fresh snow samples were greatest in urban sites, and were lower by factors of 4 - 130 in a remote high-elevation montane site. Adjacent undeveloped canyons experienced significant incursions of particulate-rich urban air during stable atmospheric conditions, where snow ion concentrations were lower but not significantly different from urban sites. Surface snow ion concentrations on elevation transects in and adjacent to Salt Lake City varied with temporal and spatial trends in aerosol concentrations, increasing following exposure to particulate-rich air as cold air pools developed, and peaking at intermediate elevations (1500 - 1600 m above sea level, or 200 - 300 m above the valley floor). Elevation trends in ion concentrations, especially NH4 + and NO3, corresponded with patterns of aerosol exposure inferred from laser ceilometer data, suggesting that high particulate matter concentrations stimulated fog or dry ion deposition to snow-covered surfaces at the top of the cold air pools. Fog/dry deposition inputs were similar to wet deposition at mid-elevation montane sites, but appeared negligible at lower and higher-elevation sites. Overall, snow ion concentrations in our urban and adjacent montane sites exceeded many values reported from urban precipitation in North America, and greatly exceeded those reported for remote snowpacks. Sodium, Cl-, NH4 +, and NO3 concentrations in fresh snow were high relative to previously measured urban precipitation, with means of 120, 117, 42, and 39 ueq l-1, respectively. After exposure to atmospheric particulate matter during cold pool events, surface snow concentrations peaked at 2500, 3600, 93, and 90 ueq l-1 for these ions. Median nitrogen (N) deposition in fresh urban snow samples measured 0.8 kg N ha-1 uring January 2011, with similar fog/dry deposition inputs at mid-elevation montane sites. Wintertime anthropogenic air pollution represents a significant source of ions to snow-covered ecosystems proximate to urban montane areas, with important implications for ecosystem function

Robust control design with real parameter uncertainty using absolute stability theory

The purpose of this thesis is to investigate an extension of mu theory for robust control design by considering systems with linear and nonlinear real parameter uncertainties. In the process, explicit connections are made between mixed mu and absolute stability theory. In particular, it is shown that the upper bounds for mixed mu are a generalization of results from absolute stability theory. Both state space and frequency domain criteria are developed for several nonlinearities and stability multipliers using the wealth of literature on absolute stability theory and the concepts of supply rates and storage functions. The state space conditions are expressed in terms of Riccati equations and parameter-dependent Lyapunov functions. For controller synthesis, these stability conditions are used to form an overbound of the H2 performance objective. A geometric interpretation of the equivalent frequency domain criteria in terms of off-axis circles clarifies the important role of the multiplier and shows that both the magnitude and phase of the uncertainty are considered. A numerical algorithm is developed to design robust controllers that minimize the bound on an H2 cost functional and satisfy an analysis test based on the Popov stability multiplier. The controller and multiplier coefficients are optimized simultaneously, which avoids the iteration and curve-fitting procedures required by the D-K procedure of mu synthesis. Several benchmark problems and experiments on the Middeck Active Control Experiment at M.I.T. demonstrate that these controllers achieve good robust performance and guaranteed stability bounds

Dissipative control of energy flow in interconnected systems

Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/76668/1/AIAA-1993-3770-736.pd

The Movement To Cyberbanking

Five hundred financial institutions in the United States are randomly sampled each year in order to examine Internet participation present and planned by the financial institutions. Each year CEOs of selected institutions are asked about the institution’s present involvement with on?line banking and their internet plans for the next two years. The usable response rates achieved in these studies have exceeded 40 percent. This paper examines the responses for the year 2001

Covariance Averaging in the Analysis of Uncertain Systems

Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/57803/1/CovarianceAveragingTAC1993.pd

A Super-Earth Orbiting the Nearby Sun-like Star HD 1461

We present precision radial velocity data that reveal a Super-Earth mass planet and two probable additional planets orbiting the bright nearby G0V star HD 1461. Our 12.8 years of Keck HIRES precision radial velocities indicate the presence of a 7.4M_Earth planet on a 5.77-day orbit. The data also suggest, but cannot yet confirm, the presence of outer planets on low-eccentricity orbits with periods of 446.1 and 5017 days, and projected masses (M sin i) of 27.9 and 87.1M_Earth, respectively. Test integrations of systems consistent with the radial velocity data suggest that the configuration is dynamically stable. We present a 12.2-year time series of photometric observations of HD 1461, which comprise 799 individual measurements, and indicate that it has excellent long-term photometric stability. However, there are small amplitude variations with periods comparable to those of the suspected 2nd and 3rd signals in the radial velocities near 5000 and 446 days, thus casting some suspicion on those periodicities as Keplerian signals. If the 5.77-day companion has a Neptune-like composition, then its expected transit depth is of order ~0.5 millimags. The geometric a priori probability of transits is ~8%. Phase-folding of the ground-based photometry shows no indication that transits of the 5.77-day companion are occurring, but high-precision follow-up of HD 1461 during upcoming transit phase windows will be required to definitively rule out or confirm transits. This new system joins a growing list of solar-type stars in the immediate galactic neighborhood that are accompanied by at least one Neptune- (or lower) mass planets having orbital periods of 50 days or less.Comment: 33 pages, 7 figure

Identifying Novel Leads Using Combinatorial Libraries: Issues and Successes

Chemically generated libraries of small, non-oligomeric compounds are being widely embraced by researchers in both industry and academia. There has been a steady development of new chemistries and equipment applied to library generation so it is now possible to synthesize almost any desired class of compound. However, there are still important issues to consider that range from what specific types of compounds should be made to concerns such as sample resynthesis, structural confirmation of the hit identified, and how to best integrate this technology into a pharmaceutical drug discovery operation. This paper illustrates our approach to new lead discovery (individual, diverse, drug-like molecules of known structural identity using a simple, spatially addressable parallel synthesis approach to prepare Multiple Diverse as well as Universal Libraries) and describes some representative examples of chemistries we had developed within these approaches (preparation of bis-benzamide phenols, thiophenes, pyrrolidines, and highly substituted biphenyls). Finally, the manuscript concludes by addressing some the present concerns that still must be considered in this field

Comparative Pollination Biology of Sympatric and Allopatric Andean \u3ci\u3eIochroma\u3c/i\u3e (Solanaceae)

Field studies were conducted for 15 species of Iochroma Benth, and the nested genus Acnistus Schott to quantify the diversity of pollination systems and to assess the potential contribution of pollinator behavior to the persistence of closely related species in sympatry. We combined measures of pollinator visitation and pollen deposition to estimate the importance of major groups of pollinators for each species, and we calculated proportional similarity in the pollinator assemblage among species. We found that 12 species of Iochroma, encompassing a range of flower colors and sizes, were principally pollinated by hummingbirds and, in many cases, by the same hummingbird species. The remaining species were either pollinated by a mix of hummingbirds and insects (two species) or exclusively by insects (two species). Based on proportional similarity values, the overlap in pollinator assemblages was found to be higher for sympatric species than for allopatric ones, reflecting sharing of local pollinator fauna. However, observations of individual pollinator fidelity, perhaps related to territorial interactions among hummingbirds, suggested that pollinators may still contribute to the reproductive isolation of sympatric congeners. Nonetheless, because interspecific pollen flow does occur, the maintenance of species boundaries in sympatry probably requires postmating reproductive isolating mechanisms

The Lick-Carnegie Survey: A New Two-Planet System Around the Star HD 207832

Keck/HIRES precision radial velocities of HD 207832 indicate the presence of two Jovian-type planetary companions in Keplerian orbits around this G star. The planets have minimum masses of 0.56 and 0.73 Jupiter-masses with orbital periods of ~162 and ~1156 days, and eccentricities of 0.13 and 0.27, respectively. Stromgren b and y photometry reveals a clear stellar rotation signature of the host star with a period of 17.8 days, well separated from the period of the radial velocity variations, reinforcing their Keplerian origin. The values of the semimajor axes of the planets suggest that these objects have migrated from the region of giant planet formation to closer orbits. In order to examine the possibility of the existence of additional (small) planets in the system, we studied the orbital stability of hypothetical terrestrial-sized objects in the region between the two planets and interior to the orbit of the inner body. Results indicated that stable orbits exist only in a small region interior to planet b. However, the current observational data offer no evidence for the existence of additional objects in this system.Comment: 23 pages, 4 figures, 5 tables, accepted for publication in Ap