BankCaR (Bank Capital-at-Risk): a credit risk model for U.S. commercial bank charge-offs

BankCaR is a credit risk model that forecasts the distribution of a commercial bank's charge-offs. The distribution depends only on systematic factors; BankCaR takes each bank and projects its expected charge-off across a distribution of good years and bad years. Since most bank failures occur in bad years, this analysis has promise for both banks and bank supervisors. In BankCaR, charge-offs depend on the bank's loan balances and the charge-off rates of twelve categories of lending. A joint distribution of the twelve charge-off rates is calibrated to a long history of regulatory reporting data. Applied to the US banking system, BankCaR finds that credit risk is rising and is concentrated most significantly in construction lending. Applied to individual banks, BankCaR efficiently identifies those that have an adverse combination of credit risk and capital. BankCaR uses publicly available regulatory reporting data, the most common credit portfolio model, and standard quantitative techniques. These generic qualities can provide a standard of comparison between banks. They also can provide an individual commercial bank with a benchmark for more elaborate vended credit models.Bank capital ; Risk management ; Bank failures

Government Intervention in the Inflation Process: The Econometrics of "Self-Inflicted Wounds"

This paper presents a single reduced-form inflation equation that can explain both the variance and acceleration of inflation during the 1970s.Inflation is explained by four sets of factors. Aggregate demand enters through the lagged output ratio and the growth rate of nominal GNP. The adjustment of inflation to changes in aggregate demand is limited by the role of inertia in the inflation process, expressed as the dependence of the rate of change of prices on its own past values. Two types of supply-side elements enter. Government intervention directly altered the price level during the Nixon control era, and in addition the government has aggravated the inflation problem by what have been called "self-inflicted wounds," including increases in the effective social security tax rate and effective minimum wage. Also there have been external supply shocks that are outside of the immediate control of the government, including changes in the relative prices of food and energy, changes in the growth rate of productivity, and changes in the foreign exchange value of the dollar. Considerable attention is given to alternative methods of estimating the impact of direct episodes of government intervention In the price-setting process, particularly during the Nixon controls. We find that such episodes have been futile. Because of their futility, these intervention episodes can be regarded as "self-inflicted wounds," like the payroll tax and minimum wage changes that normally are described by this term.

The Variance and Acceleration of Inflation in the 1970s: Alternative Explanatory Models and Methods

The paper attributes the behavior of U.S. inflation to four sets of factors: aggregate demand shifts; government intervention in the form of the Nixon price controls and changes in the social security tax rate and the effective minimum wage; external supply shocks that include the impact of the changing relative prices of food and energy, the depreciation of the dollar, and the aggregate productivity slowdown: and inertia that makes the inflation rate depend partly on its own lagged values. Considerable attention is given to alternative methods of measuring the impact of government intervention, including the Nixon controls, Kennedy- Johnson guideposts, and the Carter pay standards. The results imply that direct intervention has been futile, since the guidelines and pay standards had no effect at all on inflation, while the Nixon-era controls had only a temporary impact that stabilized both the inflation rate and the level of real output. Some previous studies have had a problem in explaining why inflation was so rapid in 1974 and have been forced to conclude that the termination of the Nixon controls raised prices more than the imposition of controls had lowered them. We find that much of the explanation of rapid inflation in 1974 is the same as that in 1979-80: the shortfall of productivity growth below its ever-slowing trend rate of growth raised business costs and forced-extra price increases, and the depreciation of the dollar in 1971-73 and 1978 boosted the prices of exports and import substitutes, Rapid demand growth, the 1979-80 oil shock, the depreciation of the dollar, the productivity slow- down, and payroll tax increases all help to explain why the inflation rate accelerated between 1976 and 1980 by much more than was generally expected two or three years ago.

BankCaR (Bank Capital-at-Risk): A credit risk model for US commercial bank charge-offs

BankCaR is a credit risk model that forecasts the distribution of a commercial bank's charge-offs. The distribution depends only on systematic factors; BankCaR takes each bank and projects its expected charge-off across a distribution of good years and bad years. Since most bank failures occur in bad years, this analysis has promise for both banks and bank supervisors. In BankCaR, charge-offs depend on the bank's loan balances and the charge-off rates of twelve categories of lending. A joint distribution of the twelve charge-off rates is calibrated to a long history of regulatory reporting data. Applied to the US banking system, BankCaR finds that credit risk is rising and is concentrated most significantly in construction lending. Applied to individual banks, BankCaR efficiently identifies those that have an adverse combination of credit risk and capital. BankCaR uses publicly available regulatory reporting data, the most common credit portfolio model, and standard quantitative techniques. These generic qualities can provide a standard of comparison between banks. They also can provide an individual commercial bank with a benchmark for more elaborate vended credit models

Gene changes may minimize masculinizing and defeminizing influences of exposure to male cotwins in female callitrichine primates

Background: Sexual differentiation in female mammals can be altered by the proximity of male littermates in utero, a phenomenon known as the intrauterine position effect (IUP). Among simian primates, callitrichines (marmosets and tamarins) are likely candidates for IUP, since they exhibit obligate dizygotic twinning and fetuses share extensive vascularization in utero. In this paper, we determined whether female reproductive parameters are altered by gestating with a male twin and evaluated changes in genes associated with anti-Müllerian and steroid hormones in twinning callitrichine primates. Methods: We assessed the impact of gestation with male cotwins on reproductive performance and survivorship in female marmosets (Callithrix) and lion tamarins (Leontopithecus), contrasting measures for females gestated with one or more littermates (M+) or no male littermates (0M). We compared targeted coding regions for genes involved in steroidal and anti-Müllerian hormone mediation of sexual differentiation for representatives of twinning callitrichines (Callithrix, Saguinus, and Leontopithecus) with closely related New World primates that produce single births (Saimiri and Callimico). Results: IUP effects in females were absent in female callitrichine primates: age at first ovulation, average litter size, and the proportion of stillborn infants, and lifetime survivorship did not differ between M+ and 0M females. We documented multiple nonsynonymous substitutions in genes associated with steroid synthesis, transport, and cellular action (SRD5A2, CYP19A1, SHBG, and AR) and with anti-Müllerian hormone (AMH and AMHR2) in callitrichines. In the only callitrichine to produce single infants (Callimico), two genes contained nonsynonymous substitutions relative to twinning callitrichines (CYP19A1 and AMRHR2); these substitutions were identical with nontwinning Saimiri and humans, suggesting a reversion to an ancestral sequence.Conclusions: In spite of a shared placental vasculature with opposite-sex twins throughout embryonic and fetal development, female callitrichine primates gestated with a male cotwin exhibit no decrement in reproductive performance relative to females gestated with female cotwins. Hence, IUP effects on female reproduction in callitrichines are modest. We have identified mutations in candidate genes relevant for steroid hormone signaling and metabolism, and especially in AMH-related genes, that are likely to alter protein structure and function in the callitrichines. These mutations may confer protection for females from the masculinizing and defeminizing influences of gestating with a male cotwin

Scope for Credit Risk Diversification

This paper considers a simple model of credit risk and derives the limit distribution of losses under different assumptions regarding the structure of systematic risk and the nature of exposure or firm heterogeneity. We derive fat-tailed correlated loss distributions arising from Gaussian risk factors and explore the potential for risk diversification. Where possible the results are generalised to non-Gaussian distributions. The theoretical results indicate that if the firm parameters are heterogeneous but come from a common distribution, for sufficiently large portfolios there is no scope for further risk reduction through active portfolio management. However, if the firm parameters come from different distributions, then further risk reduction is possible by changing the portfolio weights. In either case, neglecting parameter heterogeneity can lead to underestimation of expected losses. But, once expected losses are controlled for, neglecting parameter heterogeneity can lead to overestimation of risk, whether measured by unexpected loss or value-at-risk

Dynamic Reprogramming of the Kinome in Response to Targeted MEK Inhibition in Triple-Negative Breast Cancer

Kinase inhibitors have limited success in cancer treatment because tumors circumvent their action. Using a quantitative proteomics approach, we assessed kinome activity in response to MEK inhibition in triple negative breast cancer (TNBC) cells and genetically engineered mice (GEMMs). MEK inhibition caused acute ERK activity loss, resulting in rapid c-Myc degradation that induced expression and activation of several receptor tyrosine kinases (RTKs). RNAi knockdown of ERK or c-Myc mimicked RTK induction by MEK inhibitors, whereas prevention of proteasomal c-Myc degradation blocked kinome reprogramming. MEK inhibitor-induced RTK stimulation overcame MEK2 but not MEK1 inhibition, reactivating ERK and producing drug resistance. The C3Tag GEMM for TNBC similarly induced RTKs in response to MEK inhibition. The inhibitor-induced RTK profile suggested a kinase inhibitor combination therapy that produced GEMM tumor apoptosis and regression where single agents were ineffective. This approach defines mechanisms of drug resistance, allowing rational design of combination therapies for cancer