Thursday, July 16, 2015

MoneyScience News

MoneyScience News

Published / Preprint: 16Jul/Guidelines for identifying and dealing with weak banks released by the Basel Committee

Posted: 16 Jul 2015 02:07 AM PDT

Press release about the Basel Committee releasing guidelines for identifying and dealing with weak banks (July 2015)

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Published / Preprint: Reputational Learning and Network Dynamics. (arXiv:1507.04065v1 [q-fin.EC])

Posted: 15 Jul 2015 05:37 PM PDT

In many real world networks agents are initially unsure of each other's qualities and learn about each other over time via repeated interactions. This paper is the first to provide a methodology for studying the formation of such networks, taking into account that agents differ from each other, that they begin with incomplete information, and that they must learn through observations which...

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Published / Preprint: Taming the Basel Leverage Cycle. (arXiv:1507.04136v1 [q-fin.EC])

Posted: 15 Jul 2015 05:37 PM PDT

Effective risk control must make a tradeoff between the microprudential risk of exogenous shocks to individual institutions and the macroprudential risks caused by their systemic interactions. We investigate a simple dynamical model for understanding this tradeoff, consisting of a bank with a leverage target and an unleveraged fundamental investor subject to exogenous noise with clustered...

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Published / Preprint: Axiomatization of the Choquet integral for heterogeneous product sets. (arXiv:1507.04167v1 [q-fin.EC])

Posted: 15 Jul 2015 05:37 PM PDT

We prove a representation theorem for the Choquet integral model. The preference relation is defined on a two-dimensional heterogeneous product set $X = X_1 \times X_2$ where elements of $X_1$ and $X_2$ are not necessarily comparable with each other. However, making such comparisons in a meaningful way is necessary for the construction of the Choquet integral (and any rank-dependent model)....

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Published / Preprint: Invariant features of spatial inequality in consumption: the case of India. (arXiv:1507.04236v1 [physics.soc-ph])

Posted: 15 Jul 2015 05:37 PM PDT

We study the distributional features and inequality of consumption expenditure across India, for different states, castes, religion and urban-rural divide. We find that even though the aggregate measures of inequality are fairly diversified across states, the consumption distributions show near identical statistics, once properly normalized. This feature is seen to be robust with respect to...

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Published / Preprint: New: Discounting the Distant Future

Posted: 15 Jul 2015 12:16 PM PDT

If the historical average annual real interest rate is m > 0, and if the world is stationary, should consumption in the distant future be discounted at the rate of m per year? Suppose the annual real interest rate r(t) reverts to m according to the Ornstein Uhlenbeck (OU) continuous time process dr(t) = alpha[m - r(t)]dt kdw(t), where w is a standard Wiener process. Then we prove that the...

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