Stress testing credit risk: the Great Depression scenario

By employing Moody’s corporate default and rating transition data spanning the last 90 years we explore how much capital banks should hold against their corporate loan portfolios to withstand historical stress scenarios. Specifically, we will focus on the worst case scenario over the observation period, the Great Depression. We find that migration risk and the length of the investment horizon are critical factors when determining bank capital needs in a crisis. We show that capital may need to rise more than three times when the horizon is increased from 1 year, as required by current and future regulation, to 3 years. Increases are still important but of a lower magnitude when migration risk is introduced in the analysis. Further, we find that the new bank capital requirements under the so-called Basel 3 agreement would enable banks to absorb Great Depression-style losses. But, such losses would dent regulatory capital considerably and far beyond the capital buffers that have been proposed to ensure that banks survive crisis periods without government support.

The statistical downscaling model-decision centric (SDSM-DC): conceptual basis and applications

Regional climate downscaling has arrived at an important juncture. Some in the research community favour continued refinement and evaluation of downscaling techniques within a broader framework of uncertainty characterisation and reduction. Others are calling for smarter use of downscaling tools, accepting that conventional, scenario-led strategies for adaptation planning have limited utility in practice. This paper sets out the rationale and new functionality of the Decision Centric (DC) version of the Statistical DownScaling Model (SDSM-DC). This tool enables synthesis of plausible daily weather series, exotic variables (such as tidal surge), and climate change scenarios guided, not determined, by climate model output. Two worked examples are presented. The first shows how SDSM-DC can be used to reconstruct and in-fill missing records based on calibrated predictor-predictand relationships. Daily temperature and precipitation series from sites in Africa, Asia and North America are deliberately degraded to show that SDSM-DC can reconstitute lost data. The second demonstrates the application of the new scenario generator for stress testing a specific adaptation decision. SDSM-DC is used to generate daily precipitation scenarios to simulate winter flooding in the Boyne catchment, Ireland. This sensitivity analysis reveals the conditions under which existing precautionary allowances for climate change might be insufficient. We conclude by discussing the wider implications of the proposed approach and research opportunities presented by the new tool.

Systems biology meets stress ecology: linking molecular and organismal stress responses in Daphnia magna

Background: Ibuprofen and other nonsteroidal anti-inflammatory drugs have been designed to interrupt eicosanoid metabolism in mammals, but little is known of how they affect nontarget organisms. Here we report a systems biology study that simultaneously describes the transcriptomic and phenotypic stress responses of the model crustacean Daphnia magna after exposure to ibuprofen. Results: Our findings reveal intriguing similarities in the mode of action of ibuprofen between vertebrates and invertebrates, and they suggest that ibuprofen has a targeted impact on reproduction at the molecular, organismal, and population level in daphnids. Microarray expression and temporal real-time quantitative PCR profiles of key genes suggest early ibuprofen interruption of crustacean eicosanoid metabolism, which appears to disrupt signal transduction affecting juvenile hormone metabolism and oogenesis. Conclusion: Combining molecular and organismal stress responses provides a guide to possible chronic consequences of environmental stress for population health. This could improve current environmental risk assessment by providing an early indication of the need for higher tier testing. Our study demonstrates the advantages of a systems approach to stress ecology, in which Daphnia will probably play a major role.

Testing white line strength in the dairy cow

The tensile strength of 576 pieces of white line horn collected over 6 mo from 14 dairy cows restricted to parity 1 or 2 was tested. None of the cows had ever been lame. Seven cows were randomly assigned to receive 20 mg/d biotin supplementation, and 7 were not supplemented. Hoof horn samples were taken from zones 2 and 3 (the more proximal and distal sites of the abaxial white line) of the medial and lateral claws of both hind feet on d 1 and on 5 further occasions over 6 mo. The samples were analyzed at 100% water saturation. Hoof slivers were notched to ensure that tensile strength was measured specifically across the white line region. The tensile stress at failure was measured in MPa and was adjusted for the cross-sectional area of the notch site. Data were analyzed in a multilevel model, which accounted for the repeated measures within cows. All other variables were entered as fixed effects. In the final model, there was considerable variation in strength over time. Tensile strength was significantly higher in medial compared with lateral claws, and zone 2 was significantly stronger than zone 3. Where the white line was visibly damaged the tensile strength was low. Biotin supplementation did not affect the tensile strength of the white line. Results of this study indicate that damage to the white line impairs its tensile strength and that in horn with no visible abnormality the white line is weaker in the lateral hind claw than the medial and in zone 3 compared with zone 2. The biomechanical strength was lowest at zone 3 of the lateral hind claw, which is the most common site of white line disease lameness in cattle.

Design, testing, and simulation of fibre composite leaf springs for heavy axle loads

This paper summarizes the design, manufacturing, testing, and finite element analysis (FEA) of glass-fibre-reinforced polyester leaf springs for rail freight vehicles. FEA predictions of load-deflection curves under static loading are presented, together with comparisons with test results. Bending stress distribution at typical load conditions is plotted for the springs. The springs have been mounted on a real wagon and drop tests at tare and full load have been carried out on a purpose-built shaker rig. The transient response of the springs from tests and FEA is presented and discussed.

Stress relaxation behaviour of frozen sucrose solutions

The stress relaxation behaviour of two frozen sucrose solutions (7% and 19%) during indentation in the temperature range of -20C to -40C were investigated. The stress relaxation is similar to that of pure polycrystalline ice, which is controlled by steady-state creep. The steady state creep rate exponent, m, of 7% and 19% sucrose solutions lies between 2.3 and 3.6. The steady state creep rate constant, B, of 19% sucrose solution is greater than that of 7% sucrose solution. It is suggested that the steady-state creep rate exponent m depends on contributions from the proportions of favourably oriented grains, unfavourably oriented grains and grain boundaries to creep and that these components depend on the value of internal stress which is related to the hardness of samples at the different testing temperatures. The steady-state creep rate constant B depends on the mobility of dislocations in sucrose solutions which, in turn, depends on the temperature and the concentration of sucrose.