readme.txt  -- For analysis and charts in McCabe, Cipriani, Holscher, and Martin, 2013, "The Minimum Balance at Risk:  A Proposal to Mitigate the Systemic Risks Posed by Money Market Funds"

Analysis used to create Charts 1-7 is included in the file "MBR Charts and Analysis.xlsx"

That spreadsheet has three tabs (worksheets).  Each tab name indicates the charts that are created on that tab.  The tabs all have the same format.  The analysis on each tab is divided into three portions, all of which have the same format:

Investor loss functions when:
  1. All other redemptions are trivial:  Columns A-J
  2. All other redemptions are 25 percent of fund assets:  Columns L-T
  3. All other redemptions are 50 percent of fund assets:  Columns V-AD

Finally, the charts that we used in the paper appear to the right of column AD.


Worksheet Rows.

Rows 1-6 are parameters for the MBR rule.  These include several parameters that are not used in our paper, but which illustrate some additional potential adjustments to an MBR rule.  These additional parameters are described in more detail in the "Note on adjustment parameters" at the end of this file.

Rows 8-17 show some basic summary information for each investor.  The only inputs here are:
	Row 9:  The investor's initial balance
	Row 12:  The amount that the investor redeemed before fund closure.

Rows 19-23 show the size of potential losses that would be absorbed by capital, the first-loss subordinated portion of investors' MBRs, the second-loss remainder of investors' MBRs, and the third-loss remainder of shares in the MMF.

Rows 26-8026 show losses to each investor as the fund's losses range from 0 percent to 8 percent.  


An Example.  

Assume all other redemptions from the fund are trivial.  Analysis is in columns A-J.  (A virtually identical format is used in columns L-T, where other redemptions are assumed to be 25 percent of fund assets, and in columns V-AD, where other redemptions are assumed to be 50 percent of fund assets.)

1. Column C, rows 1-6 list parameters (inputs) that the user can vary:
	Row 1:  The size of the MBR (in percent)
	Row 2:  "phi", an adjustment parameter not used in the paper (see note below)
	Row 3:  "gamma", an adjustment parameter not used in the paper (see note below)
	Row 4:  "lambda", an adjustment parameter not used in the paper (see note below)
	Row 6:  The size of a capital buffer, if any (in percent).

2. Column F, row 6 shows the aggregate amount of other investors' redemptions from the fund, as a percentage of the fund's pre-redemption assets (an input).

3. Column I, row 2 is the liquidity cost (in basis points) of losing access to shares in a closed fund, if any (an input).

4. Columns C-F, row 9 lists investors' initial holdings in the fund (inputs).  In general, we assume that the fund starts with 100,000 shares and, as noted in the paper, we assume that each investor owns 0.1 percent of the fund (100 shares).  

5. Columns C-F, row 9 lists investors' redemptions from the fund just before its closure (inputs).

6. Column B, rows 26-8026 show aggregate losses ($100,000 times the loss in column A).

7. Columns C-E, rows 26-8026 show losses incurred by each of three investors as a function of the fund's loss in column A, excluding any consideration of the liquidity cost of losing access to shares in a closed fund:
	Column C:  Investor #1, who redeems nothing before the fund closes.
	Column D:  Investor #2, who redeems 25 percent of his available balance.
	Column E:  Investor #3, who redeems all of his available balance.

8. Columns H-J, rows 26-8026 show losses incurred by each of three investors as a function of the fund's loss in column A, including the liquidity cost of losing access to shares in a closed fund, which is shown in column I, row 2:
	Column H:  Investor #1, who redeems nothing before the fund closes.
	Column I:  Investor #2, who redeems 25 percent of his available balance.
	Column J:  Investor #3, who redeems all of his available balance.


The Charts.

Each chart plots some combination of the loss functions mapped in rows 26-8026.


Note on adjustment parameters.  

Columns C, M, and W, rows 2-4 list three adjustment parameters that are not used in the paper:

a. "phi" (row 2) is a parameter (0<=phi<=1) that allows each investor to redeem a portion of her shares without triggering subordination of her MBR.  Specifically, fraction 1-phi of shares can be redeemed without triggering subordination.  In our paper, we assume that phi = 1.

b. "gamma" (row 3) is a parameter (0<=gamma<=1) that limits the fraction of an investor's MBR that can be subordinated.  That is, only the gamma x MBR can be subordinated.  (In our working paper, we use "s" rather than gamma.)   In our paper, we assume that gamma = 1.

c. "lambda" (row 4) is a parameter (0<=lambda<=1) that sets a minimum amount of each investor's MBR that is subordinated, as a way of ensuring that no investor is the only one to have her MBR subordinated.  In our paper, lambda = 0.  Note also that 0<=lambda<=gamma<=1.

