Diversification and value-at-risk

A pervasive and puzzling feature of banks’ Value-at-Risk (VaR) is its abnormally high level, which leads to excessive regulatory capital. A possible explanation for the tendency of commercial banks to overstate their VaR is that they incompletely account for the diversification effect among broad risk categories (e.g., equity, interest rate, commodity, credit spread, and foreign exchange). By underestimating the diversification effect, bank’s proprietary VaR models produce overly prudent market risk assessments. In this paper, we examine empirically the validity of this hypothesis using actual VaR data from major US commercial banks. In contrast to the VaR diversification hypothesis, we find that US banks show no sign of systematic underestimation of the diversification effect. In particular, diversification effects used by banks is very close to (and quite often larger than) our empirical diversification estimates. A direct implication of this finding is that individual VaRs for each broad risk category, just like aggregate VaRs, are biased risk assessments.

Reconstructing the history of maize streak virus strain a dispersal to reveal diversification hot spots and its origin in southern Africa

Maize streak virus strain A (MSV-A), the causal agent of maize streak disease, is today one of the most serious biotic threats to African food security. Determining where MSV-A originated and how it spread transcontinentally could yield valuable insights into its historical emergence as a crop pathogen. Similarly, determining where the major extant MSV-A lineages arose could identify geographical hot spots of MSV evolution. Here, we use model-based phylogeographic analyses of 353 fully sequenced MSV-A isolates to reconstruct a plausible history of MSV-A movements over the past 150 years. We show that since the probable emergence of MSV-A in southern Africa around 1863, the virus spread transcontinentally at an average rate of 32.5 km/year (95% highest probability density interval, 15.6 to 51.6 km/year). Using distinctive patterns of nucleotide variation caused by 20 unique intra-MSV-A recombination events, we tentatively classified the MSV-A isolates into 24 easily discernible lineages. Despite many of these lineages displaying distinct geographical distributions, it is apparent that almost all have emerged within the past 4 decades from either southern or east-central Africa. Collectively, our results suggest that regular analysis of MSV-A genomes within these diversification hot spots could be used to monitor the emergence of future MSV-A lineages that could affect maize cultivation in Africa. © 2011, American Society for Microbiology.

Raman microscopy of formamide-intercalated kaolinites treated by controlled-rate thermal analysis technology

Raman spectroscopy of formamide-intercalated kaolinites treated using controlled-rate thermal analysis technology (CRTA), allowing the separation of adsorbed formamide from intercalated formamide in formamide-intercalated kaolinites, is reported. The Raman spectra of the CRTA-treated formamide-intercalated kaolinites are significantly different from those of the intercalated kaolinites, which display a combination of both intercalated and adsorbed formamide. An intense band is observed at 3629 cm-1, attributed to the inner surface hydroxyls hydrogen bonded to the formamide. Broad bands are observed at 3600 and 3639 cm-1, assigned to the inner surface hydroxyls, which are hydrogen bonded to the adsorbed water molecules. The hydroxyl-stretching band of the inner hydroxyl is observed at 3621 cm-1 in the Raman spectra of the CRTA-treated formamide-intercalated kaolinites. The results of thermal analysis show that the amount of intercalated formamide between the kaolinite layers is independent of the presence of water. Significant differences are observed in the CO stretching region between the adsorbed and intercalated formamide.

Hydrazine-hydrate intercalated halloysite under controlled-rate thermal analysis conditions

The thermal behaviour of halloysite fully expanded with hydrazine-hydrate has been investigated in nitrogen atmosphere under dynamic heating and at a constant, pre-set decomposition rate of 0.15 mg min-1. Under controlled-rate thermal analysis (CRTA) conditions it was possible to resolve the closely overlapping decomposition stages and to distinguish between adsorbed and bonded reagent. Three types of bonded reagent could be identified. The loosely bonded reagent amounting to 0.20 mol hydrazine-hydrate per mol inner surface hydroxyl is connected to the internal and external surfaces of the expanded mineral and is present as a space filler between the sheets of the delaminated mineral. The strongly bonded (intercalated) hydrazine-hydrate is connected to the kaolinite inner surface OH groups by the formation of hydrogen bonds. Based on the thermoanalytical results two different types of bonded reagent could be distinguished in the complex. Type 1 reagent (approx. 0.06 mol hydrazine-hydrate/mol inner surface OH) is liberated between 77 and 103°C. Type 2 reagent is lost between 103 and 227°C, corresponding to a quantity of 0.36 mol hydrazine/mol inner surface OH. When heating the complex to 77°C under CRTA conditions a new reflection appears in the XRD pattern with a d-value of 9.6 Å, in addition to the 10.2 Ĺ reflection. This new reflection disappears in contact with moist air and the complex re-expands to the original d-value of 10.2 Å in a few h. The appearance of the 9.6 Å reflection is interpreted as the expansion of kaolinite with hydrazine alone, while the 10.2 Å one is due to expansion with hydrazine-hydrate. FTIR (DRIFT) spectroscopic results showed that the treated mineral after intercalation/deintercalation and heat treatment to 300°C is slightly more ordered than the original (untreated) clay.

Comparison of emission rate values for odour and odorous chemicals derived from two sampling devices

Field and laboratory measurements identified a complex relationship between odour emission rates provided by the US EPA dynamic emission chamber and the University of New South Wales wind tunnel. Using a range of model compounds in an aqueous odour source, we demonstrate that emission rates derived from the wind tunnel and flux chamber are a function of the solubility of the materials being emitted, the concentrations of the materials within the liquid; and the aerodynamic conditions within the device – either velocity in the wind tunnel, or flushing rate for the flux chamber. The ratio of wind tunnel to flux chamber odour emission rates (OU m-2 s) ranged from about 60:1 to 112:1. The emission rates of the model odorants varied from about 40:1 to over 600:1. These results may provide, for the first time, a basis for the development of a model allowing an odour emission rate derived from either device to be used for odour dispersion modelling.

Relative entropy rate based multiple hidden Markov Model Approximation

This paper proposes a novel relative entropy rate (RER) based approach for multiple HMM (MHMM) approximation of a class of discrete-time uncertain processes. Under different uncertainty assumptions, the model design problem is posed either as a min-max optimisation problem or stochastic minimisation problem on the RER between joint laws describing the state and output processes (rather than the more usual RER between output processes). A suitable filter is proposed for which performance results are established which bound conditional mean estimation performance and show that estimation performance improves as the RER is reduced. These filter consistency and convergence bounds are the first results characterising multiple HMM approximation performance and suggest that joint RER concepts provide a useful model selection criteria. The proposed model design process and MHMM filter are demonstrated on an important image processing dim-target detection problem.