Report of the Regulated Materials Facility Revenue Bond Funds of Iowa State University of Science and Technology as of and for the year ended June 30, 2008

Report of the Regulated Materials Facility Revenue Bond Funds of Iowa State University of Science and Technology as of and for the year ended June 30, 2008

Imitation of succesful behavior in Cournot markets

In an experimental standard Cournot Oligopoly we test the importance ofmodels of behavior characterized by imitation of succesful behavior. Wefind that the players appear to the rather reluctant to imitate.

Firm investment in imperfect capital markets: A structural estimation

We set up a dynamic model of firm investment in which liquidity constraintsenter explicity into the firm's maximization problem. The optimal policyrules are incorporated into a maximum likelihood procedure which estimatesthe structural parameters of the model. Investment is positively related tothe firm's internal financial position when the firm is relatively poor. This relationship disappears for wealthy firms, which can reach theirdesired level of investment. Borrowing is an increasing function of financial position for poor firms. This relationship is reversed as a firm's financial position improves, and large firms hold little debt.Liquidity constrained firms may be unused credits lines and the capacity toinvest further if they desire. However the fear that liquidity constraintswill become binding in the future induces them to invest only when internalresources increase.We estimate the structural parameters of the model and use them to quantifythe importance of liquidity constraints on firms' investment. We find thatliquidity constraints matter significantly for the investment decisions of firms. If firms can finance investment by issuing fresh equity, rather than with internal funds or debt, average capital stock is almost 35% higher overa period of 20 years. Transitory shocks to internal funds have a sustained effect on the capital stock. This effect lasts for several periods and ismore persistent for small firms than for large firms. A 10% negative shock to firm fundamentals reduces the capital stock of firms which face liquidityconstraints by almost 8% over a period as opposed to only 3.5% for firms which do not face these constraints.

Credit derivatives in emerging markets

Credit Derivatives are securities that offer protection against credit or default risk ofbonds or loans. The credit derivatives emerging market has grown rapidly and creditderivatives are widely used. This paper describes the emerging credit derivativesmarket structure. The current market activity is analyzed through elementary pricingdynamics and the study of the term structure of default risk. Focusing on theperformance of credit derivatives in stress situation, including legal and market risks,we discuss the potential consequences of a debt restructuring in a large emergingmarket borrower. The contribution of credit derivatives to the risk sharing in emergingmarkets is also examined.

Bank liquidity, interbank markets and monetary policy

A major lesson of the recent financial crisis is that the interbank lending marketis crucial for banks facing large uncertainty regarding their liquidity needs. Thispaper studies the efficiency of the interbank lending market in allocating funds. Weconsider two different types of liquidity shocks leading to different implications foroptimal policy by the central bank. We show that, when confronted with a distributional liquidity-shock crisis that causes a large disparity in the liquidity held amongbanks, the central bank should lower the interbank rate. This view implies that thetraditional tenet prescribing the separation between prudential regulation and monetary policy should be abandoned. In addition, we show that, during an aggregateliquidity crisis, central banks should manage the aggregate volume of liquidity. Twodifferent instruments, interest rates and liquidity injection, are therefore required tocope with the two different types of liquidity shocks. Finally, we show that failureto cut interest rates during a crisis erodes financial stability by increasing the riskof bank runs.

Insurance with frequent trading: A dynamic analysis of efficient insurance markets

This paper extends existing insurance results on the type of insurance contracts needed for insurance market efficiency toa dynamic setting. It introduces continuosly open markets that allow for more efficient asset allocation. It alsoeliminates the role of preferences and endowments in the classification of risks, which is done primarily in terms of the actuarial properties of the underlying riskprocess. The paper further extends insurability to include correlated and catstrophic events. Under these very general conditions the paper defines a condition that determines whether a small number of standard insurance contracts (together with aggregate assets) suffice to complete markets or one needs to introduce such assets as mutual insurance.

Irreversible investment in stochastically cyclical markets

This paper presents a new framework for studying irreversible (dis)investment whena market follows a random number of random-length cycles (such as a high-tech productmarket). It is assumed that a firm facing such market evolution is always unsure aboutwhether the current cycle is the last one, although it can update its beliefs about theprobability of facing a permanent decline by observing that no further growth phasearrives. We show that the existence of regime shifts in fluctuating markets suffices for anoption value of waiting to (dis)invest to arise, and we provide a marginal interpretationof the optimal (dis)investment policies, absent in the real options literature. Thepaper also shows that, despite the stochastic process of the underlying variable has acontinuous sample path, the discreteness in the regime changes implies that the samplepath of the firm s value experiences jumps whenever the regime switches all of a sudden,irrespective of whether the firm is active or not.

Connexin26 is regulated in rat urothelium by the scaffold protein IB1/JIP-1.

Proper function of the wall of bladder requires gap junctional communication for coordinating the responses of smooth muscle (SMC) and urothelial cells exposed to urine pressure. In the rat bladder, Cx43 is expressed by SMC and urothelial cells, whereas Cx26 expression is restricted to the epithelium. We used a model of bladder outlet obstruction, in which a ligature is placed around the urethra to increase voiding pressure. Increased fluid pressure was associated with increased Cx43 and Cx26 mRNA expression and with the activation of a signaling cascade including the transcription factor c-Jun, which is a component of the AP-1 complex. The signaling pathway of the c-Jun NH2 terminal kinase (JNK) requires the presence of the scaffold protein Islet-Brain1/c-Jun amino-terminal kinase Interacting Protein-1 (IB1/JIP-1). Under stress conditions resulting from urine retention, we have found a reduced content of IB1/JIP-1 in urothelial cells, which in turn induced a drastic increase of JNK and AP-1 binding activities. The stress-induced activation of JNK was prevented by overexpressing IB1/JIP-1, using a viral gene transfer approach, a condition which also resulted in a decrease in Cx26 mRNA. The data show that: 1) mechanical stress of urothelial cells activates in vivo JNK, as a consequence of a regulated expression of IB1/JIP-1 and 2) that urothelial Cx26 may be directly regulated by the AP-1 complex.

Sovereign debt markets in turbulent times: Creditor discrimination and crowding-out effects

In 2007, countries in the Euro periphery were enjoying stable growth, low deficits, and lowspreads. Then the financial crisis erupted and pushed them into deep recessions, raising theirdeficits and debt levels. By 2010, they were facing severe debt problems. Spreads increased and,surprisingly, so did the share of the debt held by domestic creditors. Credit was reallocatedfrom the private to the public sectors, reducing investment and deepening the recessions evenfurther. To account for these facts, we propose a simple model of sovereign risk in which debtcan be traded in secondary markets. The model has two key ingredients: creditor discriminationand crowding-out effects. Creditor discrimination arises because, in turbulent times, sovereigndebt offers a higher expected return to domestic creditors than to foreign ones. This providesincentives for domestic purchases of debt. Crowding-out effects arise because private borrowingis limited by financial frictions. This implies that domestic debt purchases displace productiveinvestment. The model shows that these purchases reduce growth and welfare, and may lead toself-fulfilling crises. It also shows how crowding-out effects can be transmitted to other countriesin the Eurozone, and how they may be addressed by policies at the European level.

Differential ubiquitylation of the mineralocorticoid receptor is regulated by phosphorylation.

Aldosterone stimulation of the mineralocorticoid receptor (MR) is involved in numerous physiological responses, including Na+ homeostasis, blood pressure control, and heart failure. Aldosterone binding to MR promotes different post-translational modifications that regulate MR nuclear translocation, gene expression, and finally receptor degradation. Here, we show that aldosterone stimulates rapid phosphorylation of MR via ERK1/2 in a dose-dependent manner (from 0.1 to 10 nM) in renal epithelial cells. This phosphorylation induces an increase of MR apparent molecular weight, with a maximal upward shift of 30 kDa. Strikingly, these modifications are critical for the regulation of the MR ubiquitylation state. Indeed, we find that MR is monoubiquitylated in its basal state, and this status is sustained by the tumor suppressor gene 101 (Tsg101). Phosphorylation leads to disruption of MR/Tsg101 association and monoubiquitin removal. These events prompt polyubiquitin-dependent destabilization of MR and degradation. Preventing MR phosphorylation by ERK1/2 inhibition or mutation of target serines affects the sequential mechanisms of MR ubiquitylation and inhibits the aldosterone-mediated degradation. Our data provide a novel model of negative feedback of aldosterone signaling, involving sequential phosphorylation, monoubiquitin removal and subsequent polyubiquitylation/degradation of MR.

Regulated exocytosis of an H+/myo-inositol symporter at synapses and growth cones.

Phosphoinositides, synthesized from myo-inositol, play a critical role in the development of growth cones and in synaptic activity. As neurons cannot synthesize inositol, they take it up from the extracellular milieu. Here, we demonstrate that, in brain and PC12 cells, the recently identified H(+)/myo-inositol symporter HMIT is present in intracellular vesicles that are distinct from synaptic and dense-core vesicles. We further show that HMIT can be triggered to appear on the cell surface following cell depolarization, activation of protein kinase C or increased intracellular calcium concentrations. HMIT cell surface expression takes place preferentially in regions of nerve growth and at varicosities and leads to increased myo-inositol uptake. The symporter is then endocytosed in a dynamin-dependent manner and becomes available for a subsequent cycle of stimulated exocytosis. HMIT is thus expressed in a vesicular compartment involved in activity-dependent regulation of myo-inositol uptake in neurons. This may be essential for sustained signaling and vesicular traffic activities in growth cones and at synapses.

Strategic behaviours in healthcare : evidence from primary care and pharmaceutical markets

We analyse the strategic behaviours of agents in a market through the appropriate¬ness of their skills to the market. If agents' skills are well adapted to market and they can reach their target, they will not need to adopt strategic behaviours. The agents will behave as selfish individuals. However, if their skills are not well adapted and they cannot attain their target alone, they will adopt strategic behaviours to reach their objectives. These behaviours will have a different impact on the utilities of other agents, depending on the skills and the objectives of the agent. If these agents need other agents to reach their objectives, they will behave as altruistic individuals who internalise the utilities of other agents in reaching their objectives and will adopt cooperative behaviours. However, if these agents fear that other agents could prevent them from reaching their target because they can foresee that the skills of other agents are better adapted than their own skills, the agents will then behave as predator individuals and will adopt destructive behaviours to attain their objective. It is in the interests of these agents to manipulate information to increase disorder and dissimulate their lack of skills. They will reproduce the strategies of animals that modify their appearance to escape predators or simulate being bait to attract their prey. These agents will seek to induce chaos into the behaviours of other agents to amplify the impact of their strategies. The appropriateness of skills to the market allows an understanding of the emer-gence of networks and associated strategies. The members of a networks are inputs who are excluded when their costs are higher than their benefits. A network simul-taneously allows cooperation and selfish, predatory behaviours among its members. A network may adopt informational strategies when seeking to become the leader in a market or when it cannot survive. The creation of networks and the manipulation of information are two overlapping evolutionary strategies, with the first strategy favouring the second. In our model, an agent does not behave like a firm that aims only to maximise the profits of the firm but rather as a member of a network who adopts strategic behaviours as a function of the interests of this network. If his skills are well adapted to the market and he can innovate, he will not invest in erroneous input; in contrast, if his skills are not adapted, the agent will invest in the erroneous input of information into the market in order to survive. Therefore, when any informational asymmetries between the agents and their principals characterise the market, the price cannot be the main element that allows equilibrium to be reached in the market; instead, the appropriateness of skills to the market enables equilibrium. We will now apply these hypotheses to explain the strategic behaviours of physicians and pharmaceutical companies.