Bank capital for market risk: a study in incentive compatible regulation
Traditionally, government regulation in the United States follows a straightforward command approach. The government states the desired activities of the regulated firm, the allowable actions, and the prohibited actions. The firm is punished if it violates these strictures. Regulatory economists have identified many problems with this approach. First, there is the problem of asymmetry in information: Regulations cannot be enforced if they require information from the firm that the regulator cannot elicit reliably and at reasonable cost.
The Pre-Commitment Approach in a Model of Regulatory Banking Capital
The pre-commitment approach offers a novel way to improve bank capital regulation. It requires that banks choose their capital levels and that regulators fine them if losses exceed this level. In essence, the approach is a proposal to use menus of contracts, a device commonly employed in other economic settings. Using a private-information model, the author derives optimal fine schedules and compares them to the proposal's schedules. He shows the latter schedules to be inefficient and potentially to require high levels of fines.
A model for predicting heat transfer through gypsum‐board/wood‐stud walls exposed to fire
To facilitate the development of cost-effective and flexible design options there is a need to develop models to predict the fire resistance of wood-frame building assemblies. Such assemblies often derive much of their fire resistance from a protective membrane composed of gypsum board. A simple two-dimensional computer model is presented to predict heat transfer through gypsum-board/wood-stud walls exposed to fire. Input data for the thermophysical properties of gypsum board were measured exploying standard bench-scale tests. Input data for wood were selected from the literature. Small-and full-scale fire resistance tests were conducted on gypsum-board/wood-stud wall assemblies to provide data for the validation of the model. The model is shown to predict heat transfer through these walls rather well.