Everything you always wanted to know about systemic importance (but were afraid to ask)
- We develop a methodology to identify and rank “systemically important financial institutions” (SIFIs). Our approach is consistent with that followed by the Financial Stability Board (FSB) but, unlike the latter, it is free of judgment and it is based entirely on publicly available data, thus filling the gap between the official views of the regulator and those that market participants can form with their own information set. We apply the methodology to annual data on three samples of banks (global, EU and euro area) for the years 2007-2012. We examine the evolution of the SIFIs over time and document the shifs in the relative weights of the major geographic areas. We also discuss the implication of the 2013 update of the identification methodology proposed by the FSB.
Credit default swaps and corporate cash holdings : [Version 27 Mai 2014]
Marti G. Subrahmanyam
Dragon Yongjun Tang
Sarah Qian Wang
- We examine the effects of credit default swaps (CDS), a major type of over-the-counter derivative, on the corporate liquidity management of the reference firms. CDS help firms to access the credit market since the lenders can hedge their credit risk more easily using these contracts. However, CDS-protected creditors can be tougher in debt renegotiations and less willing to support distressed borrowers, causing some firms to become more cautious. Consequently, we find that firms hold significantly more cash after the inception of CDS trading on their debt. The increase in cash holdings by CDS firms is more pronounced for financially constrained firms and firms facing higher refinancing risk. Moreover, bank relationships and outstanding credit facilities intensify the CDS effect on cash holding. Finally, firms with greater financial expertise hold more cash when their debt is referenced by CDS. These findings suggest that CDS, which are primarily a risk management tool for lenders, induce firms to adopt more conservative liquidity policies.
To disclose or not to disclose: transparency and liquidity in the structured product market : [Version 5 Mai 2014]
Marti G. Subrahmanyam
- We use a unique data set from the Trade Reporting and Compliance Engine (TRACE) to study liquidity effects in the US structured product market. Our main contribution is the analysis of the relation between the accuracy in measuring liquidity and the potential degree of disclosure. Having access to all relevant trading information, we provide evidence that transaction cost measures that use dealer specific information such as trader identity and trade direction can be efficiently proxied by measures that use less detailed information. This finding is important for all market participants in the context of OTC markets, as it fosters our understanding of the information contained in transaction data. Thus, our results provide guidance for improving transparency while maintaining trader confidentiality. In addition, we analyze liquidity in the structured product market in general and show that securities that are mainly institutionally traded, guaranteed by a federal authority, or have low credit risk, tend to be more liquid.
Spectral densities of the τ lepton in a global U(2)L × U(2)R linear sigma model with electroweak interaction
- This work is dedicated to the study of the vector and axial vector spectral functions of the τ lepton within the framework of a U(2)L × U(2)R Linear Sigma Model with electroweak interaction. As an effective field theory the Linear Sigma Model describes hadronic degrees of freedom based on the symmetries of the Standard Model. Therefore, the following section aims at giving a very general and concise introduction to the Standard Model and the meaning of symmetries for contemporary elementary particle physics. In the next section the SU(3)C symmetry group will be discussed in short, followed by an introduction to chiral symmetry SU(2)L × SU(2)R. In the last section of this chapter the Glashow-Weinberg-Salam theory of the local group SU(2)L × U(1)Y is presented. Important concepts of the theoretical framework of the Standard Model, such as the Noether Theorem, the Gauge Principle, Spontaneous Symmetry Breaking, and the Higgs Mechanism will be introduced in the context of these three symmetry groups. In Chapter 2 it will be first shown how the symmetries of the Standard Model are realised within the global U(2)L × U(2)R Linear Sigma Model and how electroweak interactions can be introduced to the model on the basis of local SU(2)L × U(1)Y symmetry transformations of the hadronic degrees of freedom. The vertices that are relevant for the vector and axial vector decay channels in weak τ decay are extracted from the Lagrangian with electroweak interaction in Chapter 3. This is followed by a short introduction to the Källen-Lehmann Representation of spectral functions and how these can be parametrised within the framework of this model (Chapter 4). The results of the vector and axial vector spectral functions are presented in Chapter 5 and 6.
Evaluating point and density forecasts of DSGE models : [Version 23 Januar 2012]
Maik Hendrik Wolters
- This paper investigates the accuracy of point and density forecasts of four DSGE models for inflation, output growth and the federal funds rate. Model parameters are estimated and forecasts are derived successively from historical U.S. data vintages synchronized with the Fed’s Greenbook projections. Point forecasts of some models are of similar accuracy as the forecasts of nonstructural large dataset methods. Despite their common underlying New Keynesian modeling philosophy, forecasts of different DSGE models turn out to be quite distinct. Weighted forecasts are more precise than forecasts from individual models. The accuracy of a simple average of DSGE model forecasts is comparable to Greenbook projections for medium term horizons. Comparing density forecasts of DSGE models with the actual distribution of observations shows that the models overestimate uncertainty around point forecasts.
Evaluating point and density forecasts of DSGE models : [Version 4 September 2012]
Maik Hendrik Wolters
- This paper investigates the accuracy of forecasts from four DSGE models for inflation, output growth and the federal funds rate using a real-time dataset synchronized with the Fed’s Greenbook projections. Conditioning the model forecasts on the Greenbook nowcasts leads to forecasts that are as accurate as the Greenbook projections for output growth and the federal funds rate. Only for inflation the model forecasts are dominated by the Greenbook projections. A comparison with forecasts from Bayesian VARs shows that the economic structure of the DSGE models which is useful for the interpretation of forecasts does not lower the accuracy of forecasts. Combining forecasts of several DSGE models increases precision in comparison to individual model forecasts. Comparing density forecasts with the actual distribution of observations shows that DSGE models overestimate uncertainty around point forecasts.
Organizational choices of banks and the effective supervision of transnational financial institutions : [Version 21 März 2013]
- This paper outlines relatively easy to implement reforms for the supervision of transnational banking-groups in the E.U. that should not be primarily based on legal form but on the actual risk structures of the pertinent financial institutions. The proposal also aims at paying close attention to the economics of public administration and international relations in allocating competences among national and supranational supervisory bodies.
Before detailing the own proposition, this paper looks into the relationship between sovereign debt and banking crises that drive regulatory reactions to the financial turmoil in the Euro area. These initiatives inter alia affirm effective prudential supervision as a pivotal element of crisis prevention.
In order to arrive at a more informed idea, which determinants apart from a per-ceived appetite for regulatory arbitrage drive banks’ organizational choices, this paper scrutinizes the merits of either a branch or subsidiary structure for the cross-border business of financial institutions. In doing so, it also considers the policy-makers perspective. The analysis shows that no one size fits all organizational structure is available and concludes that banks’ choices should generally not be second-guessed, particularly because they are subject to (some) market discipline.
The analysis proceeds with describing and evaluating how competences in prudential supervision are currently allocated among national and supranational supervisory authorities. In order to assess the findings the appraisal adopts insights form the economics of public administration and international relations. It argues that the supervisory architecture has to be more aligned with bureaucrats’ incentives and that inefficient requirements to cooperate and share information should be reduced. The evolving Single Supervisory Mechanism for euro area banks with its rather complicated allocation of responsibilities between the ECB and the national supervisors in participating and non-participating Member States will not solve all the problems identified as it is partly in disaccord with bureaucrats’ incentives.
The last part of this paper finally sketches an alternative solution that dwells on far-reaching mutual recognition of national supervisory regimes and allocates competences in line with supervisors’ incentives and the risk inherent in cross-border banking groups.
Immunization of Mice with Lentiviral Vectors Targeted to MHC Class II+ Cells Is Due to Preferential Transduction of Dendritic Cells In Vivo
Sylvie Da Rocha
Christian J. Buchholz
Mary K. Collins
- Gene transfer vectors such as lentiviral vectors offer versatile possibilities to express transgenic antigens for vaccination purposes. However, viral vaccines leading to broad transduction and transgene expression in vivo, are undesirable. Therefore, strategies capable of directing gene transfer only to professional antigen-presenting cells would increase the specific activity and safety of genetic vaccines. A lentiviral vector pseudotype specific for murine major histocompatibilty complex class II (LV-MHCII) was recently developed and the present study aims to characterize the in vivo biodistribution profile and immunization potential of this vector in mice. Whereas the systemic administration of a vector pseudotyped with a ubiquitously-interacting envelope led to prominent detection of vector copies in the liver of animals, the injection of an equivalent amount of LV-MHCII resulted in a more specific biodistribution of vector and transgene. Copies of LV-MHCII were found only in secondary lymphoid organs, essentially in CD11c+ dendritic cells expressing the transgene whereas B cells were not efficiently targeted in vivo, contrary to expectations based on in vitro testing. Upon a single injection of LV-MHCII, naive mice mounted specific effector CD4 and CD8 T cell responses against the intracelllular transgene product with the generation of Th1 cytokines, development of in vivo cytotoxic activity and establishment of T cell immune memory. The targeting of dendritic cells by recombinant viral vaccines must therefore be assessed in vivo but this strategy is feasible, effective for immunization and cross-presentation and constitutes a potentially safe alternative to limit off-target gene expression in gene-based vaccination strategies with integrative vectors.
Serum Autotaxin Is a Parameter for the Severity of Liver Cirrhosis and Overall Survival in Patients with Liver Cirrhosis – A Prospective Cohort Study
- Background: Autotaxin (ATX) and its product lysophosphatidic acid (LPA) are considered to be involved in the development of liver fibrosis and elevated levels of serum ATX have been found in patients with hepatitis C virus associated liver fibrosis. However, the clinical role of systemic ATX in the stages of liver cirrhosis was unknown. Here we investigated the relation of ATX serum levels and severity of cirrhosis as well as prognosis of cirrhotic patients.
Methods: Patients with liver cirrhosis were prospectively enrolled and followed until death, liver transplantation or last contact. Blood samples drawn at the day of inclusion in the study were assessed for ATX content by an enzyme-linked immunosorbent assay. ATX levels were correlated with the stage as well as complications of cirrhosis. The prognostic value of ATX was investigated by uni- and multivariate Cox regression analyses. LPA concentration was determined by liquid chromatography-tandem mass spectrometry.
Results: 270 patients were enrolled. Subjects with liver cirrhosis showed elevated serum levels of ATX as compared to healthy subjects (0.814±0.42 mg/l vs. 0.258±0.40 mg/l, P<0.001). Serum ATX levels correlated with the Child-Pugh stage and the MELD (model of end stage liver disease) score and LPA levels (r = 0.493, P = 0.027). Patients with hepatic encephalopathy (P = 0.006), esophageal varices (P = 0.002) and portal hypertensive gastropathy (P = 0.008) had higher ATX levels than patients without these complications. Low ATX levels were a parameter independently associated with longer overall survival (hazard ratio 0.575, 95% confidence interval 0.365–0.905, P = 0.017).
Conclusion: Serum ATX is an indicator for the severity of liver disease and the prognosis of cirrhotic patients.
Sensitivity of simulated global-scale freshwater fluxes and storages to input data, hydrological model structure, human water use and calibration
Hannes Müller Schmied
Felix Theodor Portmann
- Global-scale assessments of freshwater fluxes and storages by hydrological models under historic climate conditions are subject to a variety of uncertainties. Using the global hydrological model WaterGAP 2.2, we investigated the sensitivity of simulated freshwater fluxes and water storage variations to five major sources of uncertainty: climate forcing, land cover input, model structure, consideration of human water use and calibration (or no calibration). In a modelling experiment, five variants of the standard version of WaterGAP 2.2 were generated that differed from the standard version only regarding the investigated source of uncertainty. Sensitivity was analyzed by comparing water fluxes and water storage variations computed by the variants to those of the standard version, considering both global averages and grid cell values for the time period 1971–2000. The basin-specific calibration approach for WaterGAP, which forces simulated mean annual river discharge to be equal to observed values at 1319 gauging stations (representing 54% of global land area except Antarctica and Greenland), has the highest effect on modelled water fluxes and leads to the best fit of modelled to observed monthly and seasonal river discharge. Alternative state-of-the-art climate forcings rank second regarding the impact on grid cell specific fluxes and water storage variations, and their impact is ubiquitous and stronger than that of alternative land cover inputs. The diverse model refinements during the last decade lead to an improved fit to observed discharge, and affect globally averaged fluxes and storage values (the latter mainly due to modelling of groundwater depletion) but only affect a relatively small number of grid cells. Considering human water use is important for the global water storage trend (in particular in the groundwater compartment) but impacts on water fluxes are rather local and only important where water use is high. The best fit to observed time series of monthly river discharge (Nash–Sutcliffe criterion) or discharge seasonality is obtained with the standard WaterGAP 2.2 model version which is calibrated and driven by a sequence of two time series of daily observation-based climate forcings, WFD/WFDEI. Discharge computed by a calibrated model version using monthly CRU 3.2 and GPCC v6 climate input reduced the fit to observed discharge for most stations. Taking into account the investigated uncertainties of climate and land cover data, we estimate that the global 1971–2000 discharge into oceans and inland sinks is between 40 000 and 42 000 km3 yr−1. The range is mainly due differences in precipitation data that affect discharge in uncalibrated river basins. Actual evapotranspiration, with approximately 70 000 km3 yr−1, is rather unaffected by climate and land cover in global sum but differs spatially. Human water use is calculated to reduce river discharge by approximately 1000 km3 yr−1. Thus, global renewable water resources are estimated to range between 41 000 and 43 000 km3 yr−1. The climate data sets WFD (available until 2001) and WFDEI (starting in 1979) were found to be inconsistent with respect to short wave radiation data, resulting in strongly different potential evapotranspiration. Global assessments of freshwater fluxes and storages would therefore benefit from the development of a global data set of consistent daily climate forcing from 1900 to current.