The Falsification of Four Popular Hypotheses About the Asian Crisis

Various claims have been made about the causes of the Asian crisis and its spread. Here, we use data on the behaviour of capital flows during the crisis to test the strong forms of four such hypotheses, that portfolio investors and hedge funds played a dominant role in initiating and/or spreading the crisis; that moral hazard kept efficient markets from predicting the crisis; and, finally, the common lender hypothesis of Kaminsky and Reinhart. In the process we also test implications of the Calvo-Mendoza model of rational investor ignorance. All are falsified as monocausal explanations. For example, portfolio investments that could not have been subject to substantial moral hazard continued to flow into Asia until very shortly before the crisis. Likewise, banks were a much larger source of capital outflows during the crisis than were portfolio investors. While falsified in their strongest forms, several of these hypotheses in less strong forms should play a role in a more nuanced analysis. It is necessary to move past simple single-factor approaches in order to produce a more complete, synthetic explanation of this episode.     

Simultaneous visualisation of biofouling, organic and inorganic particle fouling on separation membranes.

Fouling is a major problem in membrane processes of water treatment. It can be caused by the deposition of inorganic and organic particulate material, and of microbial cells which may subsequently form biofilms. In practice, usually more than one foulant participates in the formation of membrane deposits. Knowledge of the composition of fouling layers is important for the development of appropriate countermeasures. For this purpose, an experimental system was established for the generation and microscopic visualisation of mixed deposits, using fluorescently labelled model foulants: (i) drinking-water bacteria stained with nucleic acid-specific dyes (biofouling), (ii) synthetic clay mineral laponite stained with rhodamine 6G (inorganic particle fouling), and (iii) fluorescently labelled polystyrene microspheres (organic particle fouling). Polycarbonate and polyethersulfone membranes were challenged with these foulants by dead-end filtration. On the basis of different fluorescent labels, the single foulants in these mixed deposits could be visualised separately by confocal laser scanning microscopy which, in combination with image analysis, allowed the generation of three-dimensional views of the complete deposits. This method offers the possibility for the estimation of quantitative surface coverage by foulants and for the determination of the efficacy of cleaning measures with respect to the removal of different foulants.     

HEDGING INTEREST RATE RISK UNDER TERM STRUCTURE EFFECTS: AN APPLICATION TO FINANCIAL INSTITUTIONS

In this paper we investigate the use of the structured full rank model for hedging the balance sheet of a financial institution. Simulation results suggest that the optimal hedge is insensitive to changes in parameter estimates. In addition, we hedge a portfolio of Treasury bills using both the full information covariance matrix and the structured covariance matrix. We then contrast these results with those obtained from a duration-based model. Empirical results suggest that the structured full rank model is generally more effective in hedging applications than either the full information model or duration-based model.     

From Experience: Avoiding Marketing's Best-Of-The-Best Specification Trap

Too often companies fall into a trap when developing a list of performance specifications for a new product. Milton Rosenau calls this the best-of-the-best specification trap. The problem arises whenever a company bases a specification on the combination of the best single features observed in available competitive products. When this happens, the new product's design is driven by competition and is not derived from a unique market insight. This may not provide the basis for a sustainable advantage. Sometimes, rumors of competitive improvements may even lead to sudden changes in the specification, creating delays in the development process. A far better goal is to develop a specification that responds to an unrecognized and unfilled user need, one that adds high value to users. His points are illustrated with several examples.     

Automation model of sewerage rehabilitation planning.

The major steps of sewerage rehabilitation include inspection of sewerage, assessment of structural conditions, computation of structural condition grades, and determination of rehabilitation methods and materials. Conventionally, sewerage rehabilitation planning relies on experts with professional background that is tedious and time-consuming. This paper proposes an automation model of planning optimal sewerage rehabilitation strategies for the sewer system by integrating image process, clustering technology, optimization, and visualization display. Firstly, image processing techniques, such as wavelet transformation and co-occurrence features extraction, were employed to extract various characteristics of structural failures from CCTV inspection images. Secondly, a classification neural network was established to automatically interpret the structural conditions by comparing the extracted features with the typical failures in a databank. Then, to achieve optimal rehabilitation efficiency, a genetic algorithm was used to determine appropriate rehabilitation methods and substitution materials for the pipe sections with a risk of mal-function and even collapse. Finally, the result from the automation model can be visualized in a geographic information system in which essential information of the sewer system and sewerage rehabilitation plans are graphically displayed. For demonstration, the automation model of optimal sewerage rehabilitation planning was applied to a sewer system in east Taichung, Chinese Taiwan.     

Conservation of water resources problems of small rivers in Russia

Translated from Gidrotekhnicheskoe Stroitel'stvo, No. 8, pp. 1–5, August, 1994.     

Exact Ruin Probabilities and the Evaluation of Program Trading On Financial Markets

For a compound Poisson process with negative drift and jump distribution consisting of a mixture of exponentials on [0) and on (-, 0), an exact expression is derived for the probability of hitting the level c, c > 0. the problem is motivated by modeling the returns from trading on financial markets.     

WARRANT PRICING USING OBSERVABLE VARIABLES

The classical warrant pricing formula requires knowledge of the firm value and of the firm‐value process variance. When warrants are outstanding, the firm value itself is a function of the warrant price. Firm value and firm‐value variance are then unobservable variables. I develop an algorithm for pricing warrants using stock prices, an observable variable, and stock return variance. The method also enables estimation of firm‐value variance. A proof of existence of the solution is provided.     

Use of 3D modelling and several ultrasound sensors to assess overflow rate.

A new instrumentation mode has been put in place in order to determine the overflow rate of five complex CSOs of the system in Sélestat (French), which are subject to self monitoring. 3D and 1D models have made it possible to predict the shapes of the water lines and suggest a location for the ultrasound sensors. In order to validate the instrumentation principle, three overhead sensors were placed on a weir. The overflow laws suggested are of the type Q(overflow) = a1h1b1 + a2h2b2 + a3h3b3. Early results of the overflow rate that have been obtained by applying the law are close to 10 % of the flow measured in the physical test bench. On the actual site, the ultrasound sensors were assembled on a rail covering the entire weir in order to be able to change their position in future after models calibration.     

Parathion degradation and toxicity reduction in solar photocatalysis and photolysis.

The solar photocatalytic degradation of methyl parathion was investigated using a circulating TiO2/solar light reactor. Under solar photocatalysis condition, parathion was more effectively degraded than solar photolysis and TiO2-only conditions. With solar photocatalysis, 20 mg/L of parathion was completely degraded within 60 min with a TOC decrease of 63% after 150 min. The main ionic byproducts during photocatalysis recovered from parathion degradation were mainly as NO3-, NO2- and NH4+, 80% of the sulphur as SO4(2-), and 5% of phosphorus as PO4(3-). The organic intermediates 4-nitrophenol and methyl paraoxon were also identified, and these were further degraded in solar photocatalytic condition. Two different bioassays (Vibrio fischeri and Daphnia magna) were used to test the acute toxicity of solutions treated by solar photocatalysis and photolysis. The Microtox test using V. fischeri showed that the toxicity expressed as EC50 (%) value increased from 5.5% to >82% in solar photocatalysis, indicating that the treated solution is non-toxic, but only increased from 4.9 to 20.5% after 150 min in solar photolysis. The acute toxicity test using D. magna showed that EC50 (%) increased from 0.05 to 1.08% under solar photocatalysis, but only increased to 0.12% after 150 min with solar photolysis, indicating the solution is still toxic. The pattern of toxicity reduction parallels the decrease in TOC and the parathion concentrations.