A Dynamical Theory of Electron Transfer: Crossover from Weak to Strong Electronic Coupling

We present a real-time path integral theory for the rate of electron transfer reactions. Using graph theoretic techniques, the dynamics is expressed in a formally exact way as a set of integral equations. With a simple approximation for the self-energy, the rate can then be computed analytically to all orders in the electronic coupling matrix element. We present results for the crossover region between weak (nonadiabatic) and strong (adiabatic) electronic coupling and show that this theory provides a rigorous justification for the salient features of the rate expected within conventional electron transfer theory. Nonetheless, we find distinct characteristics of quantum behavior even in the strongly adiabatic limit where classical rate theory is conventionally thought to be applicable. To our knowledge, this theory is the first systematic dynamical treatment of the full crossover region.Comment: 11 pages, LaTeX, 8 Postscript figures to be published in J. Chem. Phy

Developing the ECU Markets: Perspectives on Financial Innovation

The European Currency Unit (ECU) was officially introduced in March 1979 and has joined the ranks of innovative financial products that are rapidly appearing. The purpose of the paper is to explore the properties of the ECU and analyze those characteristics of the ECU, and products denominated in ECU, that offer value-added. Changes in communications and information technology, changes in the regulatory climate, and changes in the macroeconomic environment have generally encouraged recent financial innovations. We argue that the ECU has gained an edge on its component currencies because of its portfolio properties, its role in reducing transaction costs, the role of the European Monetary System, and trading factors peculiar to the ECU. Private participants should continue to gravitate toward the ECU as a useful vehicle to fulfill the services of money.

Analyzing the Accuracy of Foreign Exchange Advisory Services: Theory AndEvidence

With the introduction of floating exchange rates, the variability of unanticipated exchange rate changes has increased dramatically. A small forecasting industry has developed to provide information about future exchange rates. From an academic viewpoint, it is of interest to examine some of the statistical properties of these forecasts and to relate the forecast errors to other fundamental economic variables in a model with rational behavior. Second, from a more practical viewpoint, we would like to know if foreign exchange forecasts are useful to decision makers. The purpose of this paper is to provide an objective analysis which addresses some of the above questions for a large sample of forecasts. On the basis of the current research, we can draw several conclusions. First, most advisory service forecasts are not as accurate as the forward rate in terms of mean squared error. Second, judgmental forecasters are superior to econometric forecasters for short-term forecasts; the relationship is reversed for longer-term forecasts (one year). Third, two statistical tests indicate that the fraction of "correct" forecasts is significantly larger than what would be expected if the advisory services were only guessing at the direction of the future spot rate. In this sense, the forecast services appear to demonstrate expertise and usefulness. However, a full analysis of the risk-return opportunities available to advisory service users is still incomplete. It should be cautioned that if the forward rate contains a risk premium, then we expect advisory service models to beat the forward rate according to the tests we have outlined. In this case we must measure speculative returns relative to a risk measure. While advisory service forecasts may lead to profits, they may not be unusual after adjusting for risk.

Beyond the carry trade: optimal currency portfolios

This article has been accepted for publication in the Journal of Financial and Quantitative Analysis and will appear in a revised form, subsequent to peer review and/or editorial input by Cambridge University Press. Copyright (c) 2013 Cambridge University PressWe test the relevance of technical and fundamental variables in forming currency portfolios. Carry, momentum and reversal all contribute to portfolio performance, whereas the real exchange rate and the current account do not. The resulting optimal portfolio outperforms the carry trade and other naive benchmarks in an extensive 16 year out-of-sample test. Its returns are not explained by risk and are valuable to diversified investors holding stocks and bonds. Exposure to currencies increases the Sharpe ratio of diversified portfolios by 0.5 on average, while reducing crash risk. We argue that currency returns are an anomaly which is gradually being corrected as hedge fund capital increases

Ratings, rating agencies and the global financial system: Summary and policy implications

In this introductory chapter, we begin with a brief overview of the issues that have Motivated our research into the role of credit ratings and credit rating agencies in the global financial system. We then summarize the main themes in each of the papers and highlight the major findings. In the final section, we suggest several policy implications and conclusions that can be drawn from this research.Rating credit sovereign corporate risk lending

Distribution of Interacting Ionic Particles in Disordered Media

Equilibrium distribution of interacting ionic particles in a charged disordered background is studied using the nonlinear Poisson-Boltzmann equation. For an arbitrarily given realization of the disorder, an exact solution of the equation is obtained in one dimension using a mapping of the nonlinear Poisson-Boltzmann equation to a self-consistent Schrodinger equation. The resulting density profile shows that the ions are delocalized, despite what the equivalent Schrodinger formulation in one dimension would suggest. It is shown that the ions are not distributed so as to locally neutralize the background, presumably due to their mutual interactions

A Flight for Hope

The purpose of this piece was to specifically commemorate the children that were victims of the Holocaust. The butterfly is the international symbol for hope, renewal of life, innocence, and beauty, and so I wanted to create something that captured the spirit and souls of all the children that never had a chance to spread their own beautiful wings and fly away from their terrible fate. The horrible crimes and the overall darkest period in history the children had to suffer through is represented by the big dark butterfly in the corner, dressed with gruesome images of what they were put through. The wave of colorful butterflies represents that although their physical bodies did not survive, their souls live on forever through the forms of butterflies: beautiful, free, and full of life, and that they were eventually able to escape their nightmares and leave them behind

Evidence on Financial Globalization and Crises: Interest Rate Parity

The Interest Rate Parity (IRP) relationship is one of the most relied upon indicators of financial globalization. IRP plays such a key role in global macroeconomic models that it is taken as a benchmark for perfect capital mobility between markets. In this paper, we review the theoretical basis and historical origins of the interest rate parity relationship. Empirical evidence supporting IRP became so wide-spread that by the start of the 21st century, economists and financial professionals essentially took IRP for granted. However, with the start of the global financial crisis in summer 2007 deviations from IRP increased significantly. Empirical evidence suggests that deviations can be linked to greater credit and counterparty risk among bank dealers, and a reduction in risk capital, as well as wider bid-ask spreads in currency markets. In the aftermath of the global financial crisis, deviations from covered interest parity have increased considerably relative to a decade ago. Calibrating whether these deviations are efficient market violations, or simply a reflection of greater costs and risks, is a new challenge for financial economists

FX Counterparty Risk and Trading Activity in Currency Forward and Futures Markets

The Global Financial Crisis initiated a period of market turbulence and increased counterparty risk for financial institutions. Even though the Dodd-Frank Act is likely to exempt interbank foreign exchange trading from a central counterparty mandate, market participants have the option to trade currency futures on existing futures markets which standardize counterparty risks. Evidence for the period 2005-11 indicates that the market share of currency futures trading has grown relative to the pre-crisis period. This shift may be the result of a perceived increase in counterparty risk among banks, as well as changes in relative trading costs or changes in other institutional factors