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Central Clearing: Why Do Collateral Requirements Need Regulations?
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oops my bedroom house has now of think
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you go on that 1 and that all the organiser for putting together the size of an Emmy for material on the of the year and mean I think the same that from a meeting with respect to the 1 applied to meet some all I was walked on similar topics as you something from the great trees can then reason the systemic risk it and he builds on
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and off in the drama of course uh so this talk is about the price contagion effects that arise when banks hopin lets you know holding on the von sheets and I we already seen that told by remind them all and in the area of of the known and this talk is being going to be quite 3 police told but I'm looking at the different that criteria that banks our following so I will outline where the differences why as we proceed with the book
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and that its staff and this the discuss why do we care about systemic risk I think we're ready and see why it's important tool uh measure system increase because meaning Simeon bottom institution failed again pro they can part of generators them you externalities alright this facts that can be stabilizing the financial system because you might have either exporting banks might of exposure bloggers store them out and the on the balance sheet and essentially I would classify DSS bottomup and topdown approach is busy at the bottom of the Rogers when you model really the counterpart racial being banks and then you're ready to see understanding but the luminaltype type effects which means what happens when a bank's enabled tool rebates by abusive to rebates so uh obligations blood other bank which can be in the form of like that have exposure sorry the banking that and the B only if the bank is able to that then uh there might be like the theorists which induced losses for the counterpart to the banks in this of the departing 3rd may be unable to repay their obligations to bloggers and so on so this type of farming affects at to be captured well by a network representation of the system and would is approach so nice because they go very microscope here you really model that uh come to pass durations but to be it's quite hard to get the money productive results because of the complexity of an echo kill a lot of interactions that you've to model the approach is the top down approach which is also the approach that I was 4 this talk and conceiving and here you care about global indicators of systemic trees Ken doll they contribute uh told um me where our data daily affect the stability of the financial institution DB only when you look at this top them approach should uncle in such a level of the data modeling the counterparty relations between banks but the other you tried have like a discrete representation of the system and you try to Fulton effects which indicators and our system increased cases come from giving get and these are I think Fidel this and what the the reason was systemic risk arises how does it arise hallways it mandate without time and so on and I'm appearing approach of this uh differing feature this approach is that beauty beauty can have an article talk but they were pretty prediction the really clean results if you make the right assumptions you try to capture the right uh features of the system game and the topdown approach it means the spread of the stress the BLU it's captured by systemic risk measures indium referring like to the economy to the their share that this book for Roth uh important measures of systemic risk uh which are used by the late what is the contribution of entity to the risk of this is that for reasons that is the core of measure by a hammer were in my youth I still understand how in in this fiscal entity can now contribute and effective under 3 of the overall system there is a try and older that that the lot that's another really measure which is the expected shortfalls of school system expected shuffled because you look a neural system and you don't understand what he's the expected amount of undercapitalization solid bank if a systemic events arise and this is to be added on X sound and then there is another measure recently rewards by Brown's boundless an angle which is the asterisk which also measures the expected shot before but there I brought you the market this stress in this that portray about this it looks more at the exboss what happens after the fact and some of yes in the white you want to look at um Barchi contagion as opposed to network models me 1 of the reason is that when we look at networks studies to we take the asset prices is fixed so we don't look look at will options when banks they heats that i the occurrence of the fault of events can theory and say that the me you might cooperate um meas emerge if only a today he said the occurrence of the fault events at the beginning the price of rice is kept fixed and me there been reason the few studies including found that this also incorporated the effect of fire safety net of mothers but generally speaking you don't care too much about prices you have to be assume that the institutions Don preocular suppress changing by managing the biology to the loop you don't care about how the banks are the institution of managing the bargein because he's not going to be important but I mean as it has been also pointed out in the 1st book the modern day in the afternoon me if we look at for sale really be Podarcis these might the rest prices because firms may happen to have similar holdings on the rubber sheets I might have of modest membership than the the uh accuracy as also mortgage and is Marchionne about shape therefore we will get affected if 1 is the assets delegates effect and there is a quote by ammunition in which thing is interesting this is that if it's so severely the effect that was the relevant 1 then at the full on brother such a subprime mortgage would that that they're much more effective what we have observed because stimuli the barge of banks and a very low exposure markets uh in their balance sheet of the spectacle the purple pill the lowlevel gasses so if we look at of us about the banquet the subprime mortgage was a very minor very tiny percentage if we compare compare it with the other rosters and with the capital so that that means that the the only it we we busier over system mediate the risk if we are yet to be the the effects and what is the contribution of the emission is like a topdown model for which guy school quantify price linkages
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which arise when the firms which have a common are supersymmetry us a senior us on the march it's at to mundane some leverage requirements and they have to conform with target levels so that um me this favor fits within the the charge that has been developed uh starting from Schlaefer envisioning wonder so with of explain our fire sales can veto spirals of cascades 90 s at prices so then there's been there in the data by Bruner my and person looks at interaction been marketing medianfinding lead the Whittier we're not looking at funding liquidity but out the essentially the they also then in this paper is more related because they look at how distressed in them in we did the uh and um difficult the funding in other tools trade in the market might affect it with the of the brothers attacked in the market and the 4th the ability all the firm to get funded and birches is offset so there is a spot affecting how funding with the effect is the market leader and viceversa and what very much new member that this most agreeable the thought is that there might be Greenwald uh and gold or school understand all look at how the distribution of bank leverage and exposures toward risk can lead to creation of systemic risk so they don't understand what happens in banks after Monday some leverage environments handle with these effects There'll systemic risk that is in the market and there is also really big by Rama that arise be present in the morning you will set fire sales and this amplification effects and the key difference at the spectrum of the brain book is that them is gone is on the stand with up and banks are subject to me will cover the requirements if they exceed that racial there than they have leverage otherwise and and after that so it is labor we have taking care approach where banks have tracking their rich and they would explain why we do that so the imperial evidence that the uh motivated also the study is that that if look at empirical studies the idea that banks mounted manage leverage quite actively for and that is this by dropped and Heider that as shown in the outer banks and blood just for this target leverage that they're a target leverages they want Lamontagne NDT began the adjust would be the very fast speeds and there's also been a differentiation been group purely capitalized bank with capitalized bang it from the data by better encoders to recapitalise banks they adjust to that target leverage even faster than wellcapitalized banks can't and a very important beer Bayern chain as shown that commercial banks indeed got their leverage which means that over time they mundane the cover the literature were still be some all cost of nearly constant and is that if we look at brokerdealers they even if procedure for leverage which means that event to bomb and acquire more leverage during period the warmth and therefore they tend to contact about sheets urine be of stress tens of their procedure of you and others you know Wilson after this finding of microfine did microfounded that leverage guy using about it please constraints are there there's been a lot the walk down done nor the tool like understand this leverage the web and the facts and this is important in New fear that would capture well they're going to discuss in the in the presentation if we look at the top graph this is showing what is the leverage the last row this a function of the other marriage grow and as we get the disease roughly 0 so that means that there is no all by and um acid grows and there'd grows which means that banks then told Montaigne that that which had this indicates that banks and within the areas because there is your role to leverage as a function of the velocity wrote on average so there at this point at a fair told the leverage growth of banks as a portal glasses growth of banks and this is a simple of US banks again from 19 having nineties 1996 subtilisin tree the up lots of 6 after in 1990 the apple doesn't 6 so there are a lot of like the evidence and if we look at that commercial banks and that's the procedure will be or that there should be for that that mentioned before which means that as the acid grows the leverage also world so the banks and expand and acquire more count that during via the wolves when there are so gross they also know although they're average of rules 10 what areas yes I mean now what are the major yeah that's when the but I should becomes available it's a good point and uh OK so now based on this evidence we don't was start the model so the objective here is the following we take as given that bankstock leverage as we have seen and read that label understand if that might be prices the BD effects and when there might be price is that the effects if the banks to adopt this um level of disk radio which means that the fact that rich so what can often is a torus OK if the exact marriage or we should warrant when should we worry that's something that can happen then and in order to study this we consider a model which codes which is a very simple model but the sign to doing a tool to understand when this effect in a rights we have a market which consist of only 2 sectors that is the banking and the so called non banking sectors of the banking sector is essentially formed by commercial banks by bags of trucking LaRouche so the same findings good that would
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that sorry what up in the same finding would apply also to investment banks we will see how and why but the studies
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essentially designed to capture the commercial banks and then there is a banking sector ways not subject to the sum leverage requirements alarmingly separable insist of usual find moneymarket venture fund assurances or institutions which are not subject to stringent ever leverage requirements so the really is a solution of more or less and we defined therefore didn't have to worry too much about this month Baruch OK so the distinguishing feature is that banks of tracking their leverage and I will use the state of each bank described is described by its Spartiates the marshes consist of assets Edward and that that's a stylized representation the banks managed if capital by either buying or selling assets or increasing their using that so that's durations that the bank and all they can either by us it's also lost the police that they knew that and purchase assets already used that that by the beginning assets and they don't raise equity in response to shocks so another stability there is a negative shock in the bank needs to get funded the nation you add with not this doesn't offer so they don't have any equity issuance in response to a shock to the acid value and this assumption is also busy and seemed to hold the food OK gain that favored by IBM and called collection that that the altered again for a set of banks from 1994 total doesn't 1 2nd quarter the changing Edward as a as a part of the Schengen asset and the change in that as a function of the change in acid so if we look at investment banks and those of commercial banks award graphs show that they change in asset is the bigger the that even by changing that you don't see change in our set which is given by the changing it with then the mean they argue in this also explain why this up as the idea with this stiII here with respect to that so in this very fact we don't take any other nations and the mother that today the site as in there are my we have bought 2 dimensions the Riesz assets and there are banks so there are key assets and there are and that's sold that is there and the for if we have chaos that we will have the prices we will have the price at time t of supply and the president the elastic to when the price time President you loss of key and we assume that the aggregate supply of atrocities fixed and there is a certain number of quantities available for just as they have to be held by the entire market and the banks sold quantities of these are set so we assume that q t 1 I is that 1 did you lasted 1 held by the bank I qt eyes the 1 you acetyl held by the bank I and so on so we have a vector of quantities for each man because the bank might hold different assets and if we want to look at what is the market value of the bank asset what did we will divide the price by the quantity so the right the asset the amount velocity OK bank ideas that easy but the price of the asset k times the 1 D Elastic gate the bank I guess thank so that's the model and then we have uh the depths of the dead or the bag is by the I I'm not there too much interested or at uh thinking about whether that comes from meaning a a motif coming from the Repo market it's something from it the bang of obligations to just that and this is denoted by the the eyes of that so that the the bag at time t and as I mentioned before that is a key Bureau assumption that sees that banks of talking that leverage their leverage Islam dies of bank I is elaboration on and they want to demanding these leverage over time which means that they want the ratio of debt or equity to be constant and you what land I so that is the key I I reduced passive men was that then and just for the purpose of simplicity and assuming the interest rate is we see what was 0 mean the also the case where the state is nonzero but yeah is not going to play in Iraq by because man not indigenize Inge interestingly enough of interestrate walks that so then what can the bank to the bank and only do that do very simple racial they generate revenues each because these revenues is what is the money by they'll stop are so that dot the eyes the revenue bank ieee at time t and the disease mappable breeding and is a just like mn profits are also that the bank is generating using the mind evolved in nothing in this interval of time the the process that the so this is going to be a discrete time model and cash flows can results either from operating revenues which is Banks performing their alterations may be investing in assets and getting we dance and song or they can generate cash flow by increasing their that phrase of the gas begin should have they get this them so they have high I get cash flow and now they can use this control to invest or they can reduce of if the user that then it means that they the greedy after the old things and then they repay that that the creditors which are not part of a more going and I take uh on the uh and estimate each bank a specific cashflow obligations strategy so each bank is deciding what use the fractional losses that the sum giving to each offset so off at the 1 i is the fraction of cash flow they make the fish show that the Sun located plus plot of the chemical the i is the fraction of September located is obligated the by bank I and I'm not assuming that the banks of the mice their strategy I think this study is exogenously given OK and they don't understand what adopt under different strategies tool to were tool firesale and systemic risk for this is fixed young people saying is that uh that there is no shifts it is allowed in the model so that quantity of to be possible after yeah i 40 chance that this would be of course the so they can trust sell assets can't and theory they have to invest all the cash flows to some so we have that the sum of assets of each bank of the fraction that are legally Choset for bank IEC was the 1 the US they were so cool him me 1 can think of the last World adjusted differences of Treasury bond the a c so the fundamentally question is the following we have things have to balance things of the balanced means that whatever you invest in the BUT the losses that the s who come from what you generated as a revenue and from increase of decrease that that the 2 i for if we look at the left hand side what is this is the price at time t plus this that the old yes it k times the quantity all loss k that the bank is buying OK so that the bank wants to buy quantity of times the roles that that the they have to read they have to break the price be the losses that the gate because they're buying it and the rest of the the an acid K an amount all quantities which is the difference between what they have and what they want laughter and these have to be as will be well the proces that they generating from their operations which is desktop and from the dead the dead acquiring delta at the times the fraction that they are located OK so what they in nested case would be what to develop cash flows that their generated in this speedup that is the fraction that then decided quality loss of the then so that's the which for each bank and for each of us class so now you know it's a very simple uh calculation you combine this equation which gives you a right phenomena such flow and the ghost saying that the bank have have commanding the leverage so the alright would be what a lot so you can then this means that you can substitute and get connected and really get rid of the debt because that this will be what to the land that as the asset and so if you do that you get the demand function of the bank which is given by this form so the addition then and they'll tell the quantities of us K 4 main values to be with expression and in order to understand the bit what this expression means they want to consider some simple cases similar example so that we understand precisely what type of the from from the bank sector past date for a moment assume that delta easy what was 0 for each page different from K which means that changing prices are they cobbled really enough plus thing new this is the case just for a moment to get some intuition
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mean Jenna them up this and other days in effect we get expression of all but this this would be the case then you will get that the delta q dj I would give the eyes which means that the ready fraction of the amount uh that at a fractional quantity you K 4 main guy over the current quantity elastic k from a guy to be was to land iron which is the leverage ratio that they're tracking bands offered again i which is the focus knowledge of the bank I acid K that is the change in price times the price of the asset at time t plus that the so that this again idea the reminds amid what means elasticity right if you take a changing quantity or quantities by changing price overpriced he was still a cost and this is also will the demand elasticity and in fact we can interpret level the leverage ratio the biggest starting times the fraction that they're investing s at present there is a less the resistivity of the banking sector which arises because leverage what this interesting is that this this is the this that and find units is quite specific because suppose for a moment that the price of the asset goes up so from find deeper than the loss that that the does that the spots if the price went up so if the resident top put up and we will see that best accused's Arlanda office positive that the Cuba to also still be positive so that means that if the price went up the banks are buying more quantities 0 yes that's what you wish and is telling us and why is this true because if the price goes up and then if we look at the ratio of their bill Redwood is what does it mean it means that the that the word really went down but because the rights and not so that the where believe that was not the ghost yet really went up there with the source of manners that so if the price goes up then it really was that uh goes up but then any the equity goes down in order to bring it back to the constant leverage what do we have to do you have to increase the numerator of the may the reason that so which means that the banks have to increase the level of that in order to maintain that bullet that would the cost of but the thing is that that the world they what they can do with the amount they can only buy assets place just for more that the of the message so which means that we have to demand more quantity of gas at the so that's why this demand function is somehow uh upward sloping so when the price goes up that amount also was up you along by when the you buy when things are expensive you said when things are cheaper if you want to adopt leverage if you need to that LaRouche that's a lot that's OK so then that if that we we we if we would live in a world where there are only investment banks we would therefore that this the banks of tracking very so when things go well you repeal of booms price goes up they buy Vermont and Maine Vermont the by the Moran the for they grow a lot by so that means you can lead to instability quite so but as I said in the mother there is not just a banking sector will serve the numbering acceptor which don't have before these leverage requirements in I'm there is only 1 home banking sector in the mode which is called the a and and they also trade in the same asset as the banking sector like mutual funds rich fonts can also have mortgage and abolish its so they share sets with the banks and the they're in asset value also which is a and the discusses value bag of homing sector product the which is again you would buy the right so acid that's the 1 that making cycles and that they ever demand function which is exogenous specified and is given by this if which so this is a question that I'm saying that number of quantities of at k demanded benumbing etc. he was discuss along the k which acts as a price elasticity divided by the price of the asset at that given the they times the quantity and that's the difference between the the end of the piece so that the the acid specific demand shock so they're going shock set up is the acid lasts for instance the mortgage uh market needs the z shocked that's going to be incorporated and also the say there is a shock to the measurable market it's delta Ct for the but not for the bond gossip and so on then and why they considering the specific demand function for 2 main reasons 1 is that if you forget about leverage ratio practices toward already even little mini sector then if impose market clearing condition then you get that the change in prices could be what to the demand shock which means that if they are surprised those I mean if there is a positive shock on the mortgage then the price of mortgage was up otherwise it goes not because there is no nobody else other than that then the remaining sector anybody here use you also an idea of what he's the systemic artifacts on the prices is the many which can be generated by the behavior of the banks because in the absence of banks you know what is the price you I would like a benchmark but the price and In addition means if you'd think that there is no shock to the acid so that the the DAC what is your then you get integration which tells you what these the amount of acid galanin banking sector in reaction to a change in price and now as you can see From here is that the relation between changing wanted changing prices negative which means that if the price goes up the bond is demanded of the acid goes down and the behavior that cube expect to be only from known clustering agents like you would like to buy when the price goes down you want to sell when the price goes up and this is exactly what up it's here and these gamma again if we think about the ratio of the mountain areas change in demand divided by the change in price this is the definition of price elasticity so these gamma k as the price elasticity for the nonbanking sector then so then that OK now what we do with this with this knowledge may just some notation we have Main we're moving the goat following them yeah sure there might be like if you come you'll see it coho which means the inner product nodding if rather by the product of you the componentwise and also use the componentwise ratio which is you do it by the thing that we divide each component of you in the and uh this use of the in the sky is the vector and also by Iike his delay and I'll be the which produces a vector view on the land stamp so this would be used in order to learn the results the results would crucially depend on an object which we call systemic systemic nest metrics and I will explain you why it's called systemic tests medics because is essentially the diver all the price me if you want understand embracing the bend on this quantity which is some OWL a sort of a graph so it tells if you look at the lth Kate component of these magic he tells you BCAD or governs what these the popular shock to an acid plus l on the acid plus the for is the loser shock us last l then banks might have a negative shock reasons than banks might have to the leverage so sell assets and then other banks which have the same assets on the balance sheet might have also to were from the same image the Union sort so if we want to look at the aggregate the outcome of this effect is going to be given by the semantics how exactly in the following way so not is that he'd events on the after which is decided of the bank on the leverage their their tracking and the on the process easier than on the nondomain amounts of these are the crucial elements that I the results and as I just said you can also visualize these as the weighted that GIScience emitting on the network so for instance if you're a direct edge from node l to node k which is a weight STK yells later than on the graph then if there is a relation to the at L and this the size of this shop is y l this is propagating along the edge and it will generate a shot the Knesset K which aside the was to S SDK l times y el so you ammunition shop + a + l then it propagates plus class k and the amplification of this shock of the size of the shock after promulgation easy what to be is going to be what to the medics to the end the STL times while so then you have a shortly after k of the sides and this might force other leverage are just met at sort for is that if you want to see now what is the effect of this show quite uh y to a nested class J. then you will still would multiply st DJ by and so on and so it's like you can travel along these graph and understand the different implication of the shock and this is
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essentially what you get when you now solve for the Libyan price agreed the merely means that you're applying you assume that market is clearing so if the market is clearing and will combine their cash flow equation that received the leverage equation and the numbering them on function then you get the the change in price you see was told the inverse of this matrix i minus st so that's why I said that this these very important the same medics binds this quantity which I think of as a vector of initial library our shock so this is a vector which depends on the demand shock and under the eyes very shock the banks so yes students use of the system is OK now the banks get their revenues and then there are some us at this assumption shock to the loss of classes now let's see what these yet again top them on the rights Hubble measured these he's busy and you will be writing the so that this quantity now if we assume that medics inverse exists which means that STS eigenvalue which has more than 1 so you don't get to and stability originally submitted it then you can write
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down the change in price over price in terms of an expansion so you have high + as the plus the square and so on so uranium feet serious bands this vector of aggregate shocks initial idea to the shock so now what you can see from this renormalization is the for link that there are several effects that is 1st an what i which is the identity matrix which means that if there is a without me if that is the initial shock these really but the rice right so you have those I made and attempted to lights that the white so this initial impact but then there is the additional impacts which have caused by different from so the leveraging for instance this this initial shock then banks have to adjust the because they have the 1 thing that leverage requirement and St models the 1st round of leveraging solve banks if there is an a shock in order to Monday in that wireless but then after they have sold other banks which as a hostage and the marshes which have been affected by these fire firesale they will simply be there because they've been effective so all of a sudden they have seen that the market value the position is decreased because of the action off of them the 1st on the leverage so there will be a 2nd round of the leverage but then maybe during the 2nd round of varying some massive classes have been touched which are held by other banks and the 4 of these are the main source of that evidence or so you're continuing this busy ever and did you originally and the buying would you reach an equilibrium is exactly what is giving you the price find there we then see that what we can see is that if we don't have any bank there another iteration that makes then as the as the squared sum disappear changing prices billiard even only by the shop which is what you expect there is nothing else but the fire soon externalities which originated by the banks this year the captured by the distance as the process the square processed Cuban sort don't and this also the school
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as me asking questions of the form of OK can we assess the impact of the leverage official directing makes me when the we have high instability in the system meaning we have ideas stability system them if they're medics exist these closing is close to being nonmetabolic right if we have this
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was and St as eigenvalues very close to 1 that means that we expect shocks clever beam path right there might be very very high stability indices so then we will clearly studying this property of these
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Medicus the so now we can study the rover still American state by looking at the spectral radius of these metrics so can we say anything about a specular writers of the medics with these largest eigenvalue at there's all that mm it's impossible due until it explicitly but you can derive some of so in bigger you have an upper bound on the roller bar that is a lower bound and upper bounds for the best possible understand when we have mostly original lines the period and when we hadn't that safe and we can also get some intuition about what the upper bound and lower bound means this stopping the
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upper bound to the upper bound on the spectral radius is given by the should be into what it is that for it no matter there is essentially the sides of the banking sector by the elasticity way the size of the banking sector because of but the out I the any member is the see all the banking them on function times the acetyl the Banks so this gives us the size of the bank's weighted by just the nominator instead use the elasticity of the nonbanking sector that for this is the elasticity way besides all the nonbanking sector this also means that when the number the sector is large relative the banking sector then that which means that some if you look if you over you see the maps in the only Fenollosa classes the nonbank sector is latch that the nominee sector which means that a mere there is high given the numerator then we expect that the specter Rogers more which means that we don't have ideas instability and why because me if we have a large nonbanking sector of the banking sector than all the price pressure which might be generated by the leveraging can be absorbed by a nominee sector because it's large the things that you have very small mini sector this may not be able to absorb this fire suppression insect there and the lower bound the studies also given by the sum they gain depends on the holding so the banks of the banking sector in them a set of the only difference the lower bound and upper bound is that lower bounds now on involves buildings of the bank's indicate assets before it was involved in building the banks in all assets notes on indicators before we had the in the in the in the giver gospel signs EDI was the sum of the assets of the banks in order plus 6 now instead it only depends on the so you only have guarantees the assets of an eye on the set of being i.e. on class k and is also states that if there exists there me if the nominee said is more relative the banking sector then enormous of classes then it means that you will have high right because the lower bound in this case the sample behind the lower bound Cyprus as we went this numerator is higher than the norm here about the numerator would be higher than the denominator is there is an asset classes for which the banking sector is larger than the remaining set yeah so then we know it's entity what this diving is a bit this perspective about so then we can ask so we can look at different strategies last specified studies to be exogenous so I can say OK let's assume that banks are adopting a fixed relative exposure strategy which is the study that is us that is also used in Greenwood and also in the river by a block and back so then they uh you can bound in this case the spectral radius more explicit and you have this Mount so this bound is telling you that if there is an asset class for which yielding so that leverage additional banks at large and the numbering sector then the this upper bound is going to be high thank the scene after that is just 1 of class for which the number in the sector is small relative to the banking sector that is this upper bound rose up and this means that is that the radius becomes close to 1 and or even larger than 1 and that means that the system becomes stable unstable and this is me you you want and role and not done that but 1 can draw a nice analogy between this upper bound and the so called the greedy concentration measure that has been used in the river of blood and isomeric so there are some connection between the 2 so then the other studies that they want analyzes the greedy size now suppose that the banks all adopt the same strategy they focus on the still they unlocated cash flows to the acid which are more vaguely they did is proxy by gamma right if an acid test is very the with gamma is large so that means that banks are getting there holdings Nickisch foldings to the offer classes which are morally with so the 1st cell the with assets and then modeling with us and or as a portal before where they were just obligating the control to the largest us a plus so in this case interestingly the spectral radius becomes the was to the upper bound so you're really reach the upper bound you can show this but there is little box and this exact is that given by this wanted so now the interesting thing here is that if we look at the spectral radius now it only depends on the aggregate sides of the banking sector all more loss classes for that to the the aggregate as the size of a mini sector or on 1 more loss of classes so this moment a there is and a say what is the sides of the banking sector weighted by dynasties and their military spending you what is the sides of the membrane the sector weighted by the elasticity of the assets so kind events on the idea and if events indegree you don't see and you can already imagine that this is going to lead to a more stable system because as long as there is just 1 of class for which the rise of CDs hike and for each nominee sector is larger the banking sector of the just must be 1 of the class for which this up and this is going to make the happen but that the speaker is small and the reason is the forming is that if there are very strong by leveraging needs scenes bank started beginning very with us at 1st so if museum the them that are assets which can generate more somebody because they're more in a week the realities are not subject to fire sale because banks are there and they did in the US at 1st
42:13
and 1 can show that if you if you look at agreed based strategy this is going to lead to a more stable system then if you use there are fixed exposure such so that means that in terms of somebody's better made to follow some studies where you have have a look at your cash old excluding us this of course these may not always be possible because there might be a states but to the extent that you can do that then you have at the end control of the sub b of the system sort URIs be more stable by doing this as a postal falls in on the other side of the US OK so then that just
42:52
won't do it was stated be put these the impact of the shocks yeah and me we can compute the um how the banks contribute to the propagation of shock for instance if we want to look at the bubble once that impact on the that goes by a bank then what we do we look at the systemic medics and that we look at the product of the leverage issue that is being tracked by each bank times the holdings of the banks in inelastic and B sample there are lots of classes this is going to go to the last their impacts owner fires is given by the bank I in the data banks that are hiding elaborate which means that they're very high glamor and banks which have Betty alligator for all these we live with assets which means that demarcates low this is going to be the highest value for the impact so there is hiding box caused by the a bank if they have if fish stocking to hide leverage and it's also locating the cash holdings believe us it's because if it's not obvious that it shouldn't really be losses this number endemic is going to be small then the and then 1 can look OK but 1 separate and gives an incomplete view of the system because there is a propagation of shock so this a bit also what grammar mentioning you really we data NASA class and then all of a sudden you say what's what's going on because you have seen the market value your asses when down although you didn't have any shopping that last is that although the region shop was not really good yes a classes that you held and the reason is precisely the fact that there is like a propagation of shocks so that means that if we want to see what is the impact of that of a shock on acid k Due to a shock cop announced that l so there is a shock up and class shock up into the market share of the market and how season box the old things that that the market but deals that the yeah now for instance commodities by and this is going to be given exactly by this medic Simon assisting so you get spines medics and then you can check precisely what up and so for instance this is a very it play exemplary of the asset simple banks and these are the asset holdings so Bank 1 enough set 120 so Bank 1 is holding 1 unit nests that 1 NASA planners by denying us it was 0 minus a tree and this is the started and for bank for us of food for bank to it this 0 exposure plus a plant exposure 1 plus 2 and this waterfall cluster tree which gives rise to this fraction of politicians challenge yeah and then we have many set and in this case something in arming sector which is much larger than the banking sector OK so we expect lowers the barrier but but if we don't do this systemic asthmatics in this case is going to be going to be given by this equation is from when the guy nice thing me what they want to point out with this uh magic is that if you look again to the 1 of these medics you can see that the entries of the entity 1 easy what was 0 right so that means that the 1st the that epoch of a set plan on us a tree is 0 but if you look at the inverse and you look at the end the 3 1 of the inverse which I'm not revolve thing here is 0 117 so that means that you expect that shock plus a plant we level and impact on the the animosity even if the onestep effect is 0 by the ones that affect the zeal because are supplying the city they don't have any relation in terms of the banks 1 right if there's a shot plus it at 1 make the bank doesn't have any old eating us tree but they can the leverage and they can busier impact holdings living in the region uh the degrees of rice or support but thus it was held by the bank to so then if the bank to see is that the acetyl is decreasing then they have also adjusted leverage in the 4 they will have to sell us a tree and they have exposure for cluster so this is it and then adding a wonderful just shoal some graphs so if we look at the 2 strategies we can see that that early exposure strategy this is a scenario and see reading the revenue shocks and instigate simulating there are shops of the bank and considering a specific derivation and this is a case where there is somebody so very submitted the nonbanking sector which is here is larger than the banking sector and in fact the spectral radius is also the material is built at the 5 per cent KnowledgePro IID than other simulation just
48:01
pick randomly 1 simulation where the earliest might be studies so I fix the reduction and the revenue shocks and other on shocks both for the banks and for the for for both for the the greedy based and fix the exposure strategy so I'm thinking the same sequence shocks but I'm applying the different solids so if I apply we miss strategies I can see that the spectral radius is always lower than 1 in this case it can go as high guess 50 per cent and in fact when this that it is increasing the numbering sector is decreasing out of the banking sector so this is the banking sector this the guarantees dumping sector but if you go but if instead you apply a fix that exploit strategy then you're in trouble because you can see that the speaker is jumps involve 1 and is exactly when the banking sector becomes inside the what little sector for this coincide and in this case you could but up and the rises there is a why shop which gained use these big spike in the price so the price drops them ideally you response to a shock so that's this shows that you can see this disability effects on prices when the banking sector is growing too much because they cannot be in the moments of presentable of the price
49:18
pressure so in terms of like policies are just what can 1 when 1 status that is high just stability if that means that the we can improve something if we give the banking sectors more can we do that it's it's difficult now you cannot say the banks not the world will match although many centuries larger diesel so the field 1 all the nonbanking demand is high here last week yeah this means we don't know if the domain them amount is thus or not if the darker leverages go but Ben's affecting their marriage or if the banks assigned no weights religiosity if we implement this it would be the best strategy so that means that the 1 way to type stabalize these promoters fire sales effect on prices could be to go corrosive query gene such as the greedy based the weak or interracial where you are required to mundanely with our sensory of sheets which again the we could be some dynasty in the case where they said that gay and that's essentially what they wanted was a so submitted that the main point is that you have uh at this relation this being the applause holding them on functional banking sector and the ones loving them and function of the number in the sector and you can add that after the feel of moment where things are going well actually this is when you have to worry because the banking sector is growing too large and when they have to only read a school adjusted leverage that might be 5 sets effects which cannot be absorbed by the banking sector that's it thank you thank
50:54
home for our own and
00:00
Subtraktion
Verbandstheorie
Gruppenoperation
Operations Research
Topologie
01:04
Resultante
Stereometrie
Distributionstheorie
Einfügungsdämpfung
Punkt
Weg <Topologie>
Gruppenkeim
Familie <Mathematik>
Summengleichung
Element <Mathematik>
Pi <Zahl>
Komplex <Algebra>
Ähnlichkeitsgeometrie
Übergang
Gruppendarstellung
Arbeit <Physik>
Numerisches Modell
Prognoseverfahren
Charakteristisches Polynom
Vorzeichen <Mathematik>
Total <Mathematik>
Minimum
PetersenGraph
Messprozess
Einflussgröße
Distributionstheorie
Lineares Funktional
Winkel
Prognostik
Übergang
Quantifizierung
Endlich erzeugte Gruppe
Biprodukt
Frequenz
Spirale
Ereignishorizont
Menge
Rechter Winkel
Ordnung <Mathematik>
Normalspannung
Geschwindigkeit
Nebenbedingung
Risikomessung
Subtraktion
Stabilitätstheorie <Logik>
Gewicht <Mathematik>
Stab
Gruppenoperation
Kombinatorische Gruppentheorie
Punktspektrum
Physikalische Theorie
Überlagerung <Mathematik>
Topologie
Physikalisches System
Loop
Differential
Spieltheorie
Mittelwert
Spirale
Torus
Biprodukt
Indexberechnung
Strom <Mathematik>
Ereignishorizont
Beobachtungsstudie
Thermodynamisches System
Zehn
Graph
Relativitätstheorie
Indexberechnung
pVDiagramm
Winkel
Schlussregel
Physikalisches System
Frequenz
Kette <Mathematik>
Summengleichung
Objekt <Kategorie>
Flächeninhalt
Mereologie
Minimum
Analytische Menge
Beobachtungsstudie
Innerer Punkt
Numerisches Modell
13:01
Einfügungsdämpfung
Prozess <Physik>
Gewichtete Summe
Momentenproblem
Summengleichung
Gleichungssystem
Ungerichteter Graph
Massestrom
Strategisches Spiel
Arithmetischer Ausdruck
Gruppendarstellung
Numerisches Modell
Unordnung
Motiv <Mathematik>
Radius
Verschiebungsoperator
Sterbeziffer
Umwandlungsenthalpie
Addition
Bruchrechnung
Lineares Funktional
Nichtlinearer Operator
Vorzeichen <Mathematik>
Endlich erzeugte Gruppe
Ähnlichkeitsgeometrie
Negative Zahl
Rechnen
Arithmetisches Mittel
Menge
Rechter Winkel
Strategisches Spiel
Punktspektrum
Algebraische Struktur
Ordnung <Mathematik>
Aggregatzustand
Geschwindigkeit
Stabilitätstheorie <Logik>
Subtraktion
Sterbeziffer
HausdorffDimension
Klasse <Mathematik>
Zahlenbereich
Bilinearform
Physikalische Theorie
Endogene Variable
Ordnungsreduktion
Elastische Deformation
Operations Research
Gleichungssystem
Beobachtungsstudie
Mathematik
Vektorraum
Physikalisches System
Endogene Variable
Fundamentalsatz der Algebra
Mereologie
Numerisches Modell
22:22
Resultante
Korrelationsfunktion
Diagonale <Geometrie>
Prozess <Physik>
Momentenproblem
Weg <Topologie>
Kardinalzahl
Element <Mathematik>
Determinante
Gerichteter Graph
Übergang
Zahlensystem
Arithmetischer Ausdruck
Negative Zahl
Adjazenzmatrix
Umwandlungsenthalpie
Einheit <Mathematik>
Exakter Test
Vektor
Gruppe <Mathematik>
Umwandlungsenthalpie
Elastische Deformation
Bruchrechnung
Lineares Funktional
Addition
Strömungsrichtung
Biprodukt
Skalarproduktraum
Ereignishorizont
Menge
Einheit <Mathematik>
Sortierte Logik
Rechter Winkel
Würfel
Konditionszahl
Ordnung <Mathematik>
Gammafunktion
Schranke <Mathematik>
Subtraktion
Gewicht <Mathematik>
Ortsoperator
Gruppenoperation
Klasse <Mathematik>
Matrizenrechnung
Zahlenbereich
Kraft
Graph
Weg <Topologie>
Knotenmenge
Multiplikation
Gewicht <Mathematik>
Gewichtung
Zusammenhängender Graph
Biprodukt
Elastische Deformation
Gleichungssystem
Graph
Mathematik
Linienelement
Relativitätstheorie
Multiplikationssatz
Gasströmung
Vektorraum
Physikalisches System
Fokalpunkt
Integral
Summengleichung
Objekt <Kategorie>
Gerichtete Größe
Flächeninhalt
31:34
Eigenwertproblem
Matrizenrechnung
Einfügungsdämpfung
Stabilitätstheorie <Logik>
Prozess <Physik>
Gewichtete Summe
Renormierung
Ortsoperator
Inverse
Klasse <Mathematik>
Gruppenoperation
Matrizenrechnung
tTest
Vektorraum
Iteration
Unrundheit
Gleichungssystem
Massestrom
Term
Gerichteter Graph
Wärmeausdehnung
Gruppe <Mathematik>
Nichtunterscheidbarkeit
Abstand
Gleichungssystem
Aussage <Mathematik>
Lineares Funktional
Prozess <Physik>
Gerichtete Menge
Verschlingung
Mathematik
Inverse
Gasströmung
Physikalisches System
Vektorraum
Thermodynamisches Gleichgewicht
Reihe
Eigenwert
Quadratzahl
Funktion <Mathematik>
Sortierte Logik
Rechter Winkel
Wärmeausdehnung
Ordnung <Mathematik>
Term
Numerisches Modell
34:47
Eigenwertproblem
Stabilitätstheorie <Logik>
Inverse
Matrizenrechnung
Abgeschlossene Menge
Vektorraum
Spektralradius
Richtung
Gebundener Zustand
Physikalisches System
Gewicht <Mathematik>
Radius
Gerade
Gleichungssystem
Gebundener Zustand
Linienelement
Kategorie <Mathematik>
Gasströmung
Vorzeichen <Mathematik>
Physikalisches System
Frequenz
Arithmetisches Mittel
Funktion <Mathematik>
Rechter Winkel
Punktspektrum
Aggregatzustand
35:56
Einfügungsdämpfung
Gewichtete Summe
Momentenproblem
Kardinalzahl
Massestrom
Strategisches Spiel
Gebundener Zustand
Exakter Test
Vorzeichen <Mathematik>
Radius
Einflussgröße
Analogieschluss
Nominalskaliertes Merkmal
Elastische Deformation
Lineares Funktional
Addition
Bruchrechnung
Gebäude <Mathematik>
Flüssiger Zustand
pBlock
Ereignishorizont
Gruppenoperation
Konzentrizität
Druckverlauf
Menge
Einheit <Mathematik>
Rechter Winkel
Sortierte Logik
Strategisches Spiel
Punktspektrum
Ordnung <Mathematik>
Faltung <Mathematik>
Gammafunktion
Aggregatzustand
Subtraktion
Quader
Klasse <Mathematik>
Relation <Mathematik>
Zahlenbereich
Spektralradius
Term
Physikalisches System
Perspektive
Stichprobenumfang
Gewichtung
Elastische Deformation
Indexberechnung
Bruchrechnung
Beobachtungsstudie
Einfach zusammenhängender Raum
Radius
Erweiterung
Relativitätstheorie
Physikalisches System
Existenzsatz
Normalvektor
Term
Numerisches Modell
42:49
Stereometrie
Folge <Mathematik>
Einfügungsdämpfung
Quader
Ausbreitungsfunktion
Klasse <Mathematik>
Gruppenoperation
Matrizenrechnung
Zahlenbereich
Gleichungssystem
Derivation <Algebra>
Ungerichteter Graph
Kombinatorische Gruppentheorie
Spektralradius
Term
Strategisches Spiel
Topologie
Eins
Wechselsprung
Einheit <Mathematik>
Endogene Variable
Stichprobenumfang
Strom <Mathematik>
Beobachtungsstudie
Bruchrechnung
Erweiterung
Relativitätstheorie
Inverse
Physikalisches System
Biprodukt
Ordnungsreduktion
Rechter Winkel
Strategisches Spiel
49:17
Stabilitätstheorie <Logik>
Gewicht <Mathematik>
Punkt
Momentenproblem
Gruppenoperation
Matrizenrechnung
Zahlenbereich
Term
Eins
Strategisches Spiel
Stabilitätstheorie <Logik>
Gewicht <Mathematik>
Radius
Lineares Funktional
Elastische Deformation
Zeitbereich
Relativitätstheorie
Flüssiger Zustand
Gasströmung
Frequenz
MechanismusDesignTheorie
Druckverlauf
Menge
Körper <Physik>
Punktspektrum
Metadaten
Formale Metadaten
Titel  Central Clearing: Why Do Collateral Requirements Need Regulations? 
Serientitel  LUHKolloquium Versicherungs und Finanzmathematik 2015 
Teil  02 
Anzahl der Teile  04 
Autor 
Capponi, Agostino

Lizenz 
Keine OpenAccessLizenz: Es gilt deutsches Urheberrecht. Der Film darf zum eigenen Gebrauch kostenfrei genutzt, aber nicht im Internet bereitgestellt oder an Außenstehende weitergegeben werden. 
DOI  10.5446/34050 
Herausgeber  Leibniz Universität Hannover (LUH), ZQS/elsa 
Erscheinungsjahr  2015 
Sprache  Englisch 
Produzent 
ZQS/elsa

Produktionsjahr  2015 
Inhaltliche Metadaten
Fachgebiet  Mathematik, Sonstige 