Network externalities across financial institutions

We propose and estimate a financial distress model that explicitly accounts for the interactions or spill-over effects between financial institutions, through the use of a spatial continuity matrix that is build from financial network data of inter bank transactions. Such setup of the financial distress model allows for the empirical validation of the importance of network externalities in determining financial distress, in addition to institution specific and macroeconomic covariates. The relevance of such specification is that it incorporates simultaneously micro-prudential factors (Basel 2) as well as macro-prudential and systemic factors (Basel 3) as determinants of financial distress. Results indicate network externalities are an important determinant of financial health of a financial institutions. The parameter that measures the effect of network externalities is both economically and statistical significant and its inclusion as a risk factor reduces the importance of the firm specific variables such as the size or degree of leverage of the financial institution. In addition we analyze the policy implications of the network factor model for capital requirements and deposit insurance pricing.

Selected configuration interaction with truncation energy error and application to the Ne atom

Selected configuration interaction (SCI) for atomic and molecular electronic structure calculations is reformulated in a general framework encompassing all CI methods. The linked cluster expansion is used as an intermediate device to approximate CI coefficients BK of disconnected configurations (those that can be expressed as products of combinations of singly and doubly excited ones) in terms of CI coefficients of lower-excited configurations where each K is a linear combination of configuration-state-functions (CSFs) over all degenerate elements of K. Disconnected configurations up to sextuply excited ones are selected by Brown's energy formula, ΔEK=(E-HKK)BK2/(1-BK2), with BK determined from coefficients of singly and doubly excited configurations. The truncation energy error from disconnected configurations, Δdis, is approximated by the sum of ΔEKS of all discarded Ks. The remaining (connected) configurations are selected by thresholds based on natural orbital concepts. Given a model CI space M, a usual upper bound ES is computed by CI in a selected space S, and EM=E S+ΔEdis+δE, where δE is a residual error which can be calculated by well-defined sensitivity analyses. An SCI calculation on Ne ground state featuring 1077 orbitals is presented. Convergence to within near spectroscopic accuracy (0.5 cm-1) is achieved in a model space M of 1.4× 109 CSFs (1.1 × 1012 determinants) containing up to quadruply excited CSFs. Accurate energy contributions of quintuples and sextuples in a model space of 6.5 × 1012 CSFs are obtained. The impact of SCI on various orbital methods is discussed. Since ΔEdis can readily be calculated for very large basis sets without the need of a CI calculation, it can be used to estimate the orbital basis incompleteness error. A method for precise and efficient evaluation of ES is taken up in a companion paper

Implementation and application of basis set superposition error-correction schemes to the theoretical modeling of weak intermolecular interactions

This thesis deals with the so-called Basis Set Superposition Error (BSSE) from both a methodological and a practical point of view. The purpose of the present thesis is twofold: (a) to contribute step ahead in the correct characterization of weakly bound complexes and, (b) to shed light the understanding of the actual implications of the basis set extension effects in the ab intio calculations and contribute to the BSSE debate. The existing BSSE-correction procedures are deeply analyzed, compared, validated and, if necessary, improved. A new interpretation of the counterpoise (CP) method is used in order to define counterpoise-corrected descriptions of the molecular complexes. This novel point of view allows for a study of the BSSE-effects not only in the interaction energy but also on the potential energy surface and, in general, in any property derived from the molecular energy and its derivatives A program has been developed for the calculation of CP-corrected geometry optimizations and vibrational frequencies, also using several counterpoise schemes for the case of molecular clusters. The method has also been implemented in Gaussian98 revA10 package. The Chemical Hamiltonian Approach (CHA) methodology has been also implemented at the RHF and UHF levels of theory for an arbitrary number interacting systems using an algorithm based on block-diagonal matrices. Along with the methodological development, the effects of the BSSE on the properties of molecular complexes have been discussed in detail. The CP and CHA methodologies are used for the determination of BSSE-corrected molecular complexes properties related to the Potential Energy Surfaces and molecular wavefunction, respectively. First, the behaviour of both BSSE-correction schemes are systematically compared at different levels of theory and basis sets for a number of hydrogen-bonded complexes. The Complete Basis Set (CBS) limit of both uncorrected and CP-corrected molecular properties like stabilization energies and intermolecular distances has also been determined, showing the capital importance of the BSSE correction. Several controversial topics of the BSSE correction are addressed as well. The application of the counterpoise method is applied to internal rotational barriers. The importance of the nuclear relaxation term is also pointed out. The viability of the CP method for dealing with charged complexes and the BSSE effects on the double-well PES blue-shifted hydrogen bonds is also studied in detail. In the case of the molecular clusters the effect of high-order BSSE effects introduced with the hierarchical counterpoise scheme is also determined. The effect of the BSSE on the electron density-related properties is also addressed. The first-order electron density obtained with the CHA/F and CHA/DFT methodologies was used to assess, both graphically and numerically, the redistribution of the charge density upon BSSE-correction. Several tools like the Atoms in Molecules topologycal analysis, density difference maps, Quantum Molecular Similarity, and Chemical Energy Component Analysis were used to deeply analyze, for the first time, the BSSE effects on the electron density of several hydrogen bonded complexes of increasing size. The indirect effect of the BSSE on intermolecular perturbation theory results is also pointed out It is shown that for a BSSE-free SAPT study of hydrogen fluoride clusters, the use of a counterpoise-corrected PES is essential in order to determine the proper molecular geometry to perform the SAPT analysis.

Evaluation of the Met Office global forecast model using Geostationary Earth Radiation Budget (GERB) data

Simulations of the top-of-atmosphere radiative-energy budget from the Met Office global numerical weather-prediction model are evaluated using new data from the Geostationary Earth Radiation Budget (GERB) instrument on board the Meteosat-8 satellite. Systematic discrepancies between the model simulations and GERB measurements greater than 20 Wm-2 in outgoing long-wave radiation (OLR) and greater than 60 Wm-2 in reflected short-wave radiation (RSR) are identified over the period April-September 2006 using 12 UTC data. Convective cloud over equatorial Africa is spatially less organized and less reflective than in the GERB data. This bias depends strongly on convective-cloud cover, which is highly sensitive to changes in the model convective parametrization. Underestimates in model OLR over the Gulf of Guinea coincide with unrealistic southerly cloud outflow from convective centres to the north. Large overestimates in model RSR over the subtropical ocean, greater than 50 Wm-2 at 12 UTC, are explained by unrealistic radiative properties of low-level cloud relating to overestimation of cloud liquid water compared with independent satellite measurements. The results of this analysis contribute to the development and improvement of parametrizations in the global forecast model.

A high-order arbitrarily unstructured finite-volume model of the global atmosphere: tests solving the shallow-water equations

Simulations of the global atmosphere for weather and climate forecasting require fast and accurate solutions and so operational models use high-order finite differences on regular structured grids. This precludes the use of local refinement; techniques allowing local refinement are either expensive (eg. high-order finite element techniques) or have reduced accuracy at changes in resolution (eg. unstructured finite-volume with linear differencing). We present solutions of the shallow-water equations for westerly flow over a mid-latitude mountain from a finite-volume model written using OpenFOAM. A second/third-order accurate differencing scheme is applied on arbitrarily unstructured meshes made up of various shapes and refinement patterns. The results are as accurate as equivalent resolution spectral methods. Using lower order differencing reduces accuracy at a refinement pattern which allows errors from refinement of the mountain to accumulate and reduces the global accuracy over a 15 day simulation. We have therefore introduced a scheme which fits a 2D cubic polynomial approximately on a stencil around each cell. Using this scheme means that refinement of the mountain improves the accuracy after a 15 day simulation. This is a more severe test of local mesh refinement for global simulations than has been presented but a realistic test if these techniques are to be used operationally. These efficient, high-order schemes may make it possible for local mesh refinement to be used by weather and climate forecast models.

Estimating surface CO2 fluxes from space-borne dry air mole fraction observations using an Ensemble Kalman filter

We have developed an ensemble Kalman Filter (EnKF) to estimate 8-day regional surface fluxes of CO2 from space-borne CO2 dry-air mole fraction observations (XCO2) and evaluate the approach using a series of synthetic experiments, in preparation for data from the NASA Orbiting Carbon Observatory (OCO). The 32-day duty cycle of OCO alternates every 16 days between nadir and glint measurements of backscattered solar radiation at short-wave infrared wavelengths. The EnKF uses an ensemble of states to represent the error covariances to estimate 8-day CO2 surface fluxes over 144 geographical regions. We use a 12×8-day lag window, recognising that XCO2 measurements include surface flux information from prior time windows. The observation operator that relates surface CO2 fluxes to atmospheric distributions of XCO2 includes: a) the GEOS-Chem transport model that relates surface fluxes to global 3-D distributions of CO2 concentrations, which are sampled at the time and location of OCO measurements that are cloud-free and have aerosol optical depths <0.3; and b) scene-dependent averaging kernels that relate the CO2 profiles to XCO2, accounting for differences between nadir and glint measurements, and the associated scene-dependent observation errors. We show that OCO XCO2 measurements significantly reduce the uncertainties of surface CO2 flux estimates. Glint measurements are generally better at constraining ocean CO2 flux estimates. Nadir XCO2 measurements over the terrestrial tropics are sparse throughout the year because of either clouds or smoke. Glint measurements provide the most effective constraint for estimating tropical terrestrial CO2 fluxes by accurately sampling fresh continental outflow over neighbouring oceans. We also present results from sensitivity experiments that investigate how flux estimates change with 1) bias and unbiased errors, 2) alternative duty cycles, 3) measurement density and correlations, 4) the spatial resolution of estimated flux estimates, and 5) reducing the length of the lag window and the size of the ensemble. At the revision stage of this manuscript, the OCO instrument failed to reach its orbit after it was launched on 24 February 2009. The EnKF formulation presented here is also applicable to GOSAT measurements of CO2 and CH4.

Exploitation of Geostationary Earth Radiation Budget data using simulations from a numerical weather prediction model: Methodology and data validation

We describe a new methodology for comparing satellite radiation budget data with a numerical weather prediction (NWP) model. This is applied to data from the Geostationary Earth Radiation Budget (GERB) instrument on Meteosat-8. The methodology brings together, in near-real time, GERB broadband shortwave and longwave fluxes with simulations based on analyses produced by the Met Office global NWP model. Results for the period May 2003 to February 2005 illustrate the progressive improvements in the data products as various initial problems were resolved. In most areas the comparisons reveal systematic errors in the model's representation of surface properties and clouds, which are discussed elsewhere. However, for clear-sky regions over the oceans the model simulations are believed to be sufficiently accurate to allow the quality of the GERB fluxes themselves to be assessed and any changes in time of the performance of the instrument to be identified. Using model and radiosonde profiles of temperature and humidity as input to a single-column version of the model's radiation code, we conduct sensitivity experiments which provide estimates of the expected model errors over the ocean of about ±5–10 W m−2 in clear-sky outgoing longwave radiation (OLR) and ±0.01 in clear-sky albedo. For the more recent data the differences between the observed and modeled OLR and albedo are well within these error estimates. The close agreement between the observed and modeled values, particularly for the most recent period, illustrates the value of the methodology. It also contributes to the validation of the GERB products and increases confidence in the quality of the data, prior to their release.

On the climate response of the low-latitude Pacific Ocean to changes in the global freshwater cycle

Under global warming, the predicted intensification of the global freshwater cycle will modify the net freshwater flux at the ocean surface. Since the freshwater flux maintains ocean salinity structures, changes to the density-driven ocean circulation are likely. A modified ocean circulation could further alter the climate, potentially allowing rapid changes, as seen in the past. The relevant feedback mechanisms and timescales are poorly understood in detail, however, especially at low latitudes where the effects of salinity are relatively subtle. In an attempt to resolve some of these outstanding issues, we present an investigation of the climate response of the low-latitude Pacific region to changes in freshwater forcing. Initiated from the present-day thermohaline structure, a control run of a coupled ocean-atmosphere general circulation model is compared with a perturbation run in which the net freshwater flux is prescribed to be zero over the ocean. Such an extreme experiment helps to elucidate the general adjustment mechanisms and their timescales. The atmospheric greenhouse gas concentrations are held constant, and we restrict our attention to the adjustment of the upper 1,000 m of the Pacific Ocean between 40°N and 40°S, over 100 years. In the perturbation run, changes to the surface buoyancy, near-surface vertical mixing and mixed-layer depth are established within 1 year. Subsequently, relative to the control run, the surface of the low-latitude Pacific Ocean in the perturbation run warms by an average of 0.6°C, and the interior cools by up to 1.1°C, after a few decades. This vertical re-arrangement of the ocean heat content is shown to be achieved by a gradual shutdown of the heat flux due to isopycnal (i.e. along surfaces of constant density) mixing, the vertical component of which is downwards at low latitudes. This heat transfer depends crucially upon the existence of density-compensating temperature and salinity gradients on isopycnal surfaces. The timescale of the thermal changes in the perturbation run is therefore set by the timescale for the decay of isopycnal salinity gradients in response to the eliminated freshwater forcing, which we demonstrate to be around 10-20 years. Such isopycnal heat flux changes may play a role in the response of the low-latitude climate to a future accelerated freshwater cycle. Specifically, the mechanism appears to represent a weak negative sea surface temperature feedback, which we speculate might partially shield from view the anthropogenically-forced global warming signal at low latitudes. Furthermore, since the surface freshwater flux is shown to play a role in determining the ocean's thermal structure, it follows that evaporation and/or precipitation biases in general circulation models are likely to cause sea surface temperature biases.

Voronoi, Delaunay, and Block-Structured Mesh Refinement for Solution of the Shallow-Water Equations on the Sphere

Alternative meshes of the sphere and adaptive mesh refinement could be immensely beneficial for weather and climate forecasts, but it is not clear how mesh refinement should be achieved. A finite-volume model that solves the shallow-water equations on any mesh of the surface of the sphere is presented. The accuracy and cost effectiveness of four quasi-uniform meshes of the sphere are compared: a cubed sphere, reduced latitude–longitude, hexagonal–icosahedral, and triangular–icosahedral. On some standard shallow-water tests, the hexagonal–icosahedral mesh performs best and the reduced latitude–longitude mesh performs well only when the flow is aligned with the mesh. The inclusion of a refined mesh over a disc-shaped region is achieved using either gradual Delaunay, gradual Voronoi, or abrupt 2:1 block-structured refinement. These refined regions can actually degrade global accuracy, presumably because of changes in wave dispersion where the mesh is highly nonuniform. However, using gradual refinement to resolve a mountain in an otherwise coarse mesh can improve accuracy for the same cost. The model prognostic variables are height and momentum collocated at cell centers, and (to remove grid-scale oscillations of the A grid) the mass flux between cells is advanced from the old momentum using the momentum equation. Quadratic and upwind biased cubic differencing methods are used as explicit corrections to a fast implicit solution that uses linear differencing.

Predicting mesh density for adaptive modelling of the global atmosphere

The shallow water equations are solved using a mesh of polygons on the sphere, which adapts infrequently to the predicted future solution. Infrequent mesh adaptation reduces the cost of adaptation and load-balancing and will thus allow for more accurate mapping on adaptation. We simulate the growth of a barotropically unstable jet adapting the mesh every 12 h. Using an adaptation criterion based largely on the gradient of the vorticity leads to a mesh with around 20 per cent of the cells of a uniform mesh that gives equivalent results. This is a similar proportion to previous studies of the same test case with mesh adaptation every 1–20 min. The prediction of the mesh density involves solving the shallow water equations on a coarse mesh in advance of the locally refined mesh in order to estimate where features requiring higher resolution will grow, decay or move to. The adaptation criterion consists of two parts: that resolved on the coarse mesh, and that which is not resolved and so is passively advected on the coarse mesh. This combination leads to a balance between resolving features controlled by the large-scale dynamics and maintaining fine-scale features.

Simulating the spatial variation of soil mineral N within fields using the model SUNDIAL

Variable rate applications of nitrogen (N) are of environmental and economic interest. Regular measurements of soil N supply are difficult to achieve practically. Therefore accurate model simulations of soil N supply might provide a practical solution for site-specific management of N. Mineral N, an estimate of N supply, was simulated by the model SUNDIAL (Simulation of Nitrogen Dynamics In Arable Land) at more than 100 locations within three arable fields in Bedfordshire, UK. The results were compared with actual measurements. The outcomes showed that the spatial patterns of the simulations of mineral N corresponded to the measurements but the range of values was underestimated.

The acoustic signature of fluid flow in complex porous media

Effective medium approximations for the frequency-dependent and complex-valued effective stiffness tensors of cracked/ porous rocks with multiple solid constituents are developed on the basis of the T-matrix approach (based on integral equation methods for quasi-static composites), the elastic - viscoelastic correspondence principle, and a unified treatment of the local and global flow mechanisms, which is consistent with the principle of fluid mass conservation. The main advantage of using the T-matrix approach, rather than the first-order approach of Eshelby or the second-order approach of Hudson, is that it produces physically plausible results even when the volume concentrations of inclusions or cavities are no longer small. The new formulae, which operates with an arbitrary homogeneous (anisotropic) reference medium and contains terms of all order in the volume concentrations of solid particles and communicating cavities, take explicitly account of inclusion shape and spatial distribution independently. We show analytically that an expansion of the T-matrix formulae to first order in the volume concentration of cavities (in agreement with the dilute estimate of Eshelby) has the correct dependence on the properties of the saturating fluid, in the sense that it is consistent with the Brown-Korringa relation, when the frequency is sufficiently low. We present numerical results for the (anisotropic) effective viscoelastic properties of a cracked permeable medium with finite storage porosity, indicating that the complete T-matrix formulae (including the higher-order terms) are generally consistent with the Brown-Korringa relation, at least if we assume the spatial distribution of cavities to be the same for all cavity pairs. We have found an efficient way to treat statistical correlations in the shapes and orientations of the communicating cavities, and also obtained a reasonable match between theoretical predictions (based on a dual porosity model for quartz-clay mixtures, involving relatively flat clay-related pores and more rounded quartz-related pores) and laboratory results for the ultrasonic velocity and attenuation spectra of a suite of typical reservoir rocks. (C) 2003 Elsevier B.V. All rights reserved.

Spatial analysis of the error in a model of soil nitrogen

Models of the dynamics of nitrogen in soil (soil-N) can be used to aid the fertilizer management of a crop. The predictions of soil-N models can be validated by comparison with observed data. Validation generally involves calculating non-spatial statistics of the observations and predictions, such as their means, their mean squared-difference, and their correlation. However, when the model predictions are spatially distributed across a landscape the model requires validation with spatial statistics. There are three reasons for this: (i) the model may be more or less successful at reproducing the variance of the observations at different spatial scales; (ii) the correlation of the predictions with the observations may be different at different spatial scales; (iii) the spatial pattern of model error may be informative. In this study we used a model, parameterized with spatially variable input information about the soil, to predict the mineral-N content of soil in an arable field, and compared the results with observed data. We validated the performance of the N model spatially with a linear mixed model of the observations and model predictions, estimated by residual maximum likelihood. This novel approach allowed us to describe the joint variation of the observations and predictions as: (i) independent random variation that occurred at a fine spatial scale; (ii) correlated random variation that occurred at a coarse spatial scale; (iii) systematic variation associated with a spatial trend. The linear mixed model revealed that, in general, the performance of the N model changed depending on the spatial scale of interest. At the scales associated with random variation, the N model underestimated the variance of the observations, and the predictions were correlated poorly with the observations. At the scale of the trend, the predictions and observations shared a common surface. The spatial pattern of the error of the N model suggested that the observations were affected by the local soil condition, but this was not accounted for by the N model. In summary, the N model would be well-suited to field-scale management of soil nitrogen, but suited poorly to management at finer spatial scales. This information was not apparent with a non-spatial validation. (c),2007 Elsevier B.V. All rights reserved.