Nucleolar organization, ribosomal DNA array stability, and acrocentric chromosome integrity are linked to telomere function.

The short arms of the ten acrocentric human chromosomes share several repetitive DNAs, including ribosomal RNA genes (rDNA). The rDNA arrays correspond to nucleolar organizing regions that coalesce each cell cycle to form the nucleolus. Telomere disruption by expressing a mutant version of telomere binding protein TRF2 (dnTRF2) causes non-random acrocentric fusions, as well as large-scale nucleolar defects. The mechanisms responsible for acrocentric chromosome sensitivity to dysfunctional telomeres are unclear. In this study, we show that TRF2 normally associates with the nucleolus and rDNA. However, when telomeres are crippled by dnTRF2 or RNAi knockdown of TRF2, gross nucleolar and chromosomal changes occur. We used the controllable dnTRF2 system to precisely dissect the timing and progression of nucleolar and chromosomal instability induced by telomere dysfunction, demonstrating that nucleolar changes precede the DNA damage and morphological changes that occur at acrocentric short arms. The rDNA repeat arrays on the short arms decondense, and are coated by RNA polymerase I transcription binding factor UBF, physically linking acrocentrics to one another as they become fusogenic. These results highlight the importance of telomere function in nucleolar stability and structural integrity of acrocentric chromosomes, particularly the rDNA arrays. Telomeric stress is widely accepted to cause DNA damage at chromosome ends, but our findings suggest that it also disrupts chromosome structure beyond the telomere region, specifically within the rDNA arrays located on acrocentric chromosomes. These results have relevance for Robertsonian translocation formation in humans and mechanisms by which acrocentric-acrocentric fusions are promoted by DNA damage and repair.

Optimal Capital Requirements in Financial Networks with Fire Sales

I explore and analyze a problem of finding the socially optimal capital requirements for financial institutions considering two distinct channels of contagion: direct exposures among the institutions, as represented by a network and fire sales externalities, which reflect the negative price impact of massive liquidation of assets.These two channels amplify shocks from individual financial institutions to the financial system as a whole and thus increase the risk of joint defaults amongst the interconnected financial institutions; this is often referred to as systemic risk. In the model, there is a trade-off between reducing systemic risk and raising the capital requirements of the financial institutions. The policymaker considers this trade-off and determines the optimal capital requirements for individual financial institutions. I provide a method for finding and analyzing the optimal capital requirements that can be applied to arbitrary network structures and arbitrary distributions of investment returns.

In particular, I first consider a network model consisting only of direct exposures and show that the optimal capital requirements can be found by solving a stochastic linear programming problem. I then extend the analysis to financial networks with default costs and show the optimal capital requirements can be found by solving a stochastic mixed integer programming problem. The computational complexity of this problem poses a challenge, and I develop an iterative algorithm that can be efficiently executed. I show that the iterative algorithm leads to solutions that are nearly optimal by comparing it with lower bounds based on a dual approach. I also show that the iterative algorithm converges to the optimal solution.

Finally, I incorporate fire sales externalities into the model. In particular, I am able to extend the analysis of systemic risk and the optimal capital requirements with a single illiquid asset to a model with multiple illiquid assets. The model with multiple illiquid assets incorporates liquidation rules used by the banks. I provide an optimization formulation whose solution provides the equilibrium payments for a given liquidation rule.

I further show that the socially optimal capital problem using the ``socially optimal liquidation" and prioritized liquidation rules can be formulated as a convex and convex mixed integer problem, respectively. Finally, I illustrate the results of the methodology on numerical examples and

discuss some implications for capital regulation policy and stress testing.