Opportunity cost and prudentiality : a representative-agent model of futures clearinghouse behavior

Includes bibliographic references (p. 31-38)

Opportunity cost and prudentiality : an analysis of futures clearinghouse behavior

Margin deposits, which serve as collateral to protect the clearinghouse, are typically the most important tool for risk management. The authors develop a model that explains how creating a futures clearinghouse may allow traders simultaneously to reduce both the risk of default and the total amount of margin that members post. Optimal margin levels are determined by the need to balance the deadweight costs of default against the opportunity cost of holding additional margin. Both costs are a consequence of market participants'imperfect access to capital markets. The simultaneous reduction in default risk and in the opportunity cost of margin deposits is possible because the creation of the clearinghouse facilitates multilateral netting. The authors characterize the conditions under which multilateral netting will dominate bilateral netting. They also show that it is credible for the clearinghouse to expel members who default, further reducing the risk of default. Finally, they show that it may (but need not) be optimal for the clearinghouse to monitor the financial condition of its members. If monitoring occurs, it will reduce the amount of margin required, but need not affect the probability of default. The empirical tests run by the authors indicate that the opportunity cost of margin plays an important role in determining margin. The relationship between volatility and margins indicates that participants face an upward-sloping opportunity cost for margin, which appears to more than offset the effects that monitoring and expulsion would be expected to have on margin setting.Environmental Economics&Policies,Banks&Banking Reform,International Terrorism&Counterterrorism,Economic Theory&Research,Insurance&Risk Mitigation

Time-resolved Ultraviolet Spectroscopy of the M-dwarf GJ 876 Exoplanetary System

Extrasolar planets orbiting M-stars may represent our best chance to discover habitable worlds in the coming decade. The ultraviolet spectrum incident upon both Earth-like and Jovian planets is critically important for proper modeling of their atmospheric heating and chemistry. In order to provide more realistic inputs for atmospheric models of planets orbiting low-mass stars, we present new near- and far-ultraviolet (NUV and FUV) spectroscopy of the M-dwarf exoplanet host GJ 876 (M4V). Using the COS and STIS spectrographs aboard the Hubble Space Telescope, we have measured the 1150-3140A spectrum of GJ 876. We have reconstructed the stellar HI LyA emission line profile, and find that the integrated LyA flux is roughly equal to the rest of the integrated flux (1150-1210A + 1220-3140A) in the entire ultraviolet bandpass (F(LyA)/F(FUV+NUV) ~0.7). This ratio is ~ 2500x greater than the solar value. We describe the ultraviolet line spectrum and report surprisingly strong fluorescent emission from hot H2 (T(H2) > 2000 K). We show the light-curve of a chromospheric + transition region flare observed in several far-UV emission lines, with flare/quiescent flux ratios >= 10. The strong FUV radiation field of an M-star (and specifically LyA) is important for determining the abundance of O2 -- and the formation of biomarkers -- in the lower atmospheres of Earth-like planets in the habitable zones of low-mass stars.Comment: 6 pages, 4 figures. ApJL accepte

High Stellar FUV/NUV Ratio and Oxygen Contents in the Atmospheres of Potentially Habitable Planets

Recent observations of several planet-hosting M dwarfs show that most have FUV/NUV flux ratios 1000 times greater than that of the Sun. Here we show that the atmospheric oxygen contents (O2 and O3) of potentially habitable planets in this type of UV environment could be 2~3 orders of magnitude greater than those of their counterparts around Sun-like stars as a result of decreased photolysis of O3, H2O2, and HO2. Thus detectable levels of atmospheric oxygen, in combination with the existence of H2O and CO2, may not be the most promising biosignatures on planets around stars with high FUV/NUV ratios such as the observed M dwarfs

The Far-Ultraviolet "Continuum" in Protoplanetary Disk Systems I: Electron-Impact H2 and Accretion Shocks

We present deep spectroscopic observations of the classical T Tauri stars DF Tau and V4046 Sgr in order to better characterize two important sources of far-ultraviolet continuum emission in protoplanetary disks. These new Hubble Space Telescope-Cosmic Origins Spectrograph observations reveal a combination of line and continuum emission from collisionally excited H2 and emission from accretion shocks. H2 is the dominant emission in the 1400-1650 A band spectrum of V4046 Sgr, while an accretion continuum contributes strongly across the far-ultraviolet spectrum of DF Tau. We compare the spectrum of V4046 Sgr to models of electron-impact induced H2 emission to constrain the physical properties of the emitting region, after making corrections for attenuation within the disk. We find reasonable agreement with the broad spectral characteristics of the H2 model, implying N(H2) ~ 10^{18} cm^{-2}, T(H2) = 3000^{+1000}_{-500} K, and a characteristic electron energy in the range of ~ 50 - 100 eV. We propose that self-absorption and hydrocarbons provide the dominant attenuation for H2 line photons originating within the disk. For both DF Tau and V4046 Sgr, we find that a linear fit to the far-UV data can reproduce near-UV/optical accretion spectra. We discuss outstanding issues concerning how these processes operate in protostellar/protoplanetary disks, including the effective temperature and absolute strength of the radiation field in low-mass protoplanetary environments. We find that the 912-2000A continuum in low-mass systems has an effective temperature of ~10^{4} K with fluxes 10^{5-7} times the interstellar level at 1 AU.Comment: 14 pages, 8 figures, 3 tables. ApJ, accepte