The importance of cash holdings for acquiring companies in mergers and acquisitions

Dissertação de mestrado em FinançasCash holdings can be an important vehicle for firms to undertake value increasing investment opportunities, but also a source of agency costs. Using a sample of Mergers and Acquisitions of bidders from several countries: Germany, France, UK and US, between 1990 and 2015, I find a positive relation between excess cash and M&A activity. The results also suggest that smaller firms, with higher investment opportunities and riskier cash-flows tend to hold more cash. Additionally, I do not find any short-term significant stock market reaction to cash-rich bidder acquisitions, despite abnormal declines in post-merger operating performance. Finally, cash-rich firms use their cash rather than stock to finance these investment decisions.O nível de caixa de uma empresa pode ser um veículo importante para conseguir financiar oportunidades de investimento de valor acrescentado, mas também pode representar uma fonte de custos de agência. Utilizando uma amostra de Fusões e Aquisições em vários países: Alemanha, França, Reino Unido e EUA, entre 1990 e 2015, encontro uma relação positiva entre o excesso de caixa e a atividade de investimento. Os resultados também sugerem que as empresas de menor dimensão, com maiores oportunidades de investimento e fluxos de caixa com maior nível de risco, tendem a reter mais dinheiro. Além disso, não encontro qualquer reação do mercado de ações, a curto prazo, a aquisições de licitantes ricos em caixa, apesar de encontrar posteriores declínios no desempenho operacional do adquirente. Finalmente, as empresas ricas em dinheiro utilizam o mesmo em vez de ações para financiar essas decisões de investimento

Large earthquakes in the Azores

The history of the Azores archipelago, from its discovery and settlement in the rst half of the 15th century through the present, is marked by the social and economic impacts produced by earthquakes, mainly the high-intensity ones. Information that has been compiled leads to the conclusion that in this period, 33 earthquakes with intensity equal to or greater than VII have affected the Azores, which caused approximately 6,300 deaths and widespread destruction on some islands of the archipelago, principally S. Miguel, Terceira, Graciosa, Faial, S. Jorge and Pico Islands. The accommodation of strain resulting from the dynamics of the Azores triple junction (ATJ) plate boundary and volcanism, which also occurs in the region, are the main factors responsible for the intense seismic activity in this archipelago. This work reviews the scienti c issues of the known earthquakes that have severely interfered with the lives of the Azorean people throughout their history, which we call large earthquakes

A multi-interface software designed to share geometries within different simulation tools

A computer system that consists of a set of several programs that share both the same geometric definition and a consistent set of definitions for construction elements, is under development. The system consists of a common program allowing different types of exportation to other simulation programs or to other modules. The main modules under development until now are: an interface to the Energy Plus program, which builds an "idf" file from a 3D geometric definition that was previously modeled in graphical mode; and a module, that will provide the necessary calculations to verify if a given shape fulfills the thermal regulation of buildings which is based upon the Energy Performance of Buildings Directive (EPBD) approved by European Parliament and Council. An interface with Radiance program is also being developed. Using this system, which has been designed firstly for architectural conception, the user can perform different simulations with different aims, but sharing the same architectural shape and construction types, in order to check if the building fulfills thermal Portuguese codes and to perform energy simulations with Energy Plus or Radiance. The use of this system has demonstrated that it can represent a great saving of time in simulations and helping to reduce the occurrence of design errors as well. Since it allows performing simulations in a very quick way it can contribute also to help architects on achieving better solutions while designing, in terms of the optimization of all the parameter evaluated. The use of energy plus to evaluate the comfort of the buildings while being design as shown that this methodology can help to find more sustainable solutions in terms of their architectural shape and construction elements

Implementing a new method for the design of bioclimatic building

A tool for support the design of bioclimatic buildings is under development. This tool is also specialy adapted to the particular needs of buildings in the portuguese territory, since it includes the possibility of doing evaluations according to the requirements that are imposed by the new regulations of thermal performance for buildings (RCCTE). This tool will allow designers of bioclimatic architecture to easily extract reports of different energy simulation programs, such as energy Plus, Radiance and RCCTE thermal code. The system is provided with a 3D Editor that shares multiple interfaces with the different simulation programs above mencioned. A particular method for the conception of bioclimatic architecture is assumed, however different types of evaluations can be performed with this interface program. A particular method for the conception of bioclimatic buildings is here sugested. It begans with the evaluation of the complience with the portuguese thermal codes. Once the shape and construction for the building under design are conformant with regulations, other evaluations are sugested. The system provides the possibility of automaticaly generate a geometric definition for future energy plus simulation that maches the previous RCCTE definition, however with some simplification assumptions. This can bring closer the evaluations of the thermal code requirements with the energy Plus evaluations, and so to take advantage of a large number of energy plus features in a detailed analysis. The program under development provides automatic generation of some particular features of Energy Plus that were found very usefull for design tasks of bioclimatic buildings, such as the generation of; adjacent zones, trombe walls zones, earth tubes, detailed window variables, etc

Interferometric mapping of test mass surfaces for precise position determination in inertial sensors

Novel inertial reference sensors for space applications using optical readout of a Spherical proof mass (SPM), which enable full drag-free operations, are being studied for future space programs such as Laser Interferometer Space Antenna (LISA) and Big Bang Observer. Using this concept results in the reduction of residual acceleration noise by the proof mass, but with the SPM under rotation the surface topography induces errors in the center of mass position determination due to factors like surface finish, that changes the optical path length on a nanometer scale, and the reflection angle. To determine successfully the center of mass position with picometer accuracy, a surface map of the proof mass is necessary in order to correct the measurement data, thus improving the precision of the position determination. An experimental setup using double heterodyne interferometer in opposing configuration developed by Airbus, Friedrichshafen, is used to map one single surface circumference of a continuously rotating proof mass. In this thesis, enhancements were done to allow a complete surface map of the SPM with picometer accuracy at relevant angular frequencies. Enhancements made were: The inertial-mass degrees of freedom were increased by adding a second rotational stage. Overall software performance has been improved by implementing fast angle read-out by the encoders. Code in LabVIEW and MATLAB has been developed, capable of making a full 2D surface map of the SPM for calibration of errors in the determination of the position of the center of mass. Data acquisition has been sped up to enable low-noise full 2D surface maps

Market neutral volatility: a different approach to the S&P 500 options market efficiency

Under the efficient market hypothesis, an options price’s implied volatility should be the best possible forecast of the future realized volatility of the underlying asset. In spite of this theoretical proposition, a vast number of studies in the financial literature found that implied volatility is a biased estimator of the future realized volatility. These findings suggest that we are either in the presence of an inefficient market or that econometric models fail on that purpose. In this thesis, by introducing the concept of Market Neutral Volatility and the derivation of a theoretical model, we show what in fact the implied volatility forecasts and we prove that the S&P 500 options market is efficient. This property of the S&P 500 options market assures that the implied volatility cannot be a biased forecast of its future realized volatility. Thus, we conclude that the bias of the implied volatility estimator is due to the inadequacy of the commonly used econometric approaches.Sob a hipótese de eficiência dos mercados, a volatilidade implícita de uma opção deve ser a melhor previsão possível da futura volatilidade realizada do activo subjacente. Apesar deste argumento teórico, um vasto número de estudos realizados na literatura financeira, concluem que a volatilidade implícita é um estimador enviesado da volatilidade realizada futura. Estes resultados sugerem que, ou estamos na presença de um mercado ineficiente, ou que a metodologia econométrica utilizada é inadequada. Através da introdução do conceito de Market Neutral Volatility e da derivação de um modelo teórico, é demonstrado, o que na realidade a volatilidade implícita estima, e provamos que o mercado de opções sobre o S&P 500 é eficiente. A eficiência do mercado de opções sobre o S&P 500, garante que a volatilidade implícita desse mercado não pode ser um estimador enviesado da volatilidade realizada futura. Estes resultados permitem concluir que o problema da obtenção de estimativas enviesadas, deverá resultar do uso de metodologias econométricas inadequadas

Three essays on the valuation of American-style options

Classificação: G13Esta tese aborda a avaliac¸ ˜ao de opc¸ ˜oes de estilo Americano, com e sem barreira, em tr ˆes artigos distintos: A. Pricing and Static Hedging of American-style Options under the Jump to Default Extended CEV Model Este artigo avalia (e faz o hedging) de opc¸ ˜oes de estilo Americano atrav´es do static hedge approach (SHP) proposto por Chung and Shih (2009) e estende a literatura em duas direc¸ ˜oes. Primeiramente, o SHP ´e adaptado ao modelo jump to default extended CEV (JDCEV) de Carr and Linetsky (2006), e s˜ao avaliadas opc¸ ˜oes de estilo Americano sem barreira sobre activos com possibilidade de fal ˆ encia. A robustez e a efici ˆencia das soluc¸ ˜oes de avaliac¸ ˜ao propostas, s˜ao comparadas com o optimal stopping approach de Nunes (2009), no ˆambito dos modelos JDCEV e constant elasticity of variance (CEV) de Cox (1975), considerando diferentes valores para o parˆametro de elasticidade. Em segundo lugar, tanto o SHP como o optimal stopping approach s˜ao estendidos para a avaliac¸ ˜ao de opc¸ ˜oes de estilo Americano com um cap. B. General Put-Call Symmetry for American-style Barrier Options Este artigo deriva relac¸ ˜oes de simetria put-call para opc¸ ˜oes de estilo Americano com uma e duas barreiras. Usando a t ´ecnica de mudanc¸a de numer´ ario proposta por Geman et al. (1995) e Schroder (1999) estas simetrias s˜ao derivadas sem impor restric¸ ˜oes pr ´evias sobre o processo estoc´ astico seguido pelo activo subjacente. Os resultados s˜ao testados atrav´es de uma extensa an´ alise num´ erica sob o modelo constant elasticity of variance. C. In-Out Parity Relations and Early Exercise Boundaries for American-style Barrier Options Este artigo deriva novas relac¸ ˜oes de paridade in-out para puts de estilo Americano com uma barreira inferior e calls de estilo Americano com uma barreira superior. Mais importante, ´e proposta uma nova representac¸ ˜ao da fronteira de exerc´ıcio antecipado para opc¸ ˜oes de estilo Americano com dupla barreira knock-out, em termos da fronteira de exerc´ıcio ´optimo de uma opc¸ ˜ao de estilo Americano com uma s´o barreira. Assim sendo, o m´etodo static hedge portfolio ´e estendido para a avaliac¸ ˜ao de opc¸ ˜oes de estilo Americano com dupla barreira knock-out. Os resultados s˜ao testados atrav´es de uma extensa an´ alise num´ erica sob os modelos geometric Brownian motion e constant elasticity of variance.This thesis addresses the valuation of American-style standard and barrier options in three separate and self-contained papers: A. Pricing and Static Hedging of American-style Options under the Jump to Default Extended CEV Model This paper prices (and hedges) American-style options through the static hedge approach (SHP) proposed by Chung and Shih (2009) and extends the literature in two directions. First, the SHP approach is adapted to the jump to default extended CEV (JDCEV) model of Carr and Linetsky (2006), and plain-vanilla American-style options on defaultable equity are priced. The robustness and efficiency of the proposed pricing solutions are compared with the optimal stopping approach offered by Nunes (2009), under both the JDCEV framework and the nested constant elasticity of variance (CEV) model of Cox (1975), using different elasticity parameter values. Second, both the SHP and the optimal stopping approaches are extended to the valuation of American-style capped options. B. General Put-Call Symmetry for American-style Barrier Options This paper derives put-call symmetries for American-style single and double barrier options. Using the change of numeraire technique proposed by Geman et al. (1995) and Schroder (1999) we are able to derive these symmetries without imposing previous assumptions on the process followed by the underlying asset. Our results are tested through an extensive numerical analysis run under the constant elasticity of variance model. C. In-Out Parity Relations and Early Exercise Boundaries for American-style Barrier Options This paper derives new in-out parity relations for American-style puts with a down barrier and American-style calls with an up barrier. More importantly, we also propose a novel representation for the early exercise boundary of American-style double knock-out options in terms of the simpler optimal stopping boundary for a nested single barrier American-style option. Therefore, we are able to extend the static hedge portfolio approach to the valuation of American-style double barrier knockout options. Our results are tested through an extensive numerical analysis run under the geometric Brownian motion (GBM) and the constant elasticity of variance models

Balance sheet optimization tool : under the Basel III framework

The most recent regulatory framework implemented by the Basel Committee on Banking Supervision (BCBS) was introduced as an incentive to enhance market discipline and supervisory power of the regulatory authorities. However, these changes seem to challenge financial institutions in structural aspects that could negatively impact the profit efficiency. This paper tries to fill this risk management role need by presenting a customized tool that enables banks to effectively manage their balance sheet, while taking into account the constraints required by Basel III. Following that, this paper also investigates the impact of the Basel III requirements on several parameters and finishes with two types of impact studies. The first type addresses the banking regulatory requirements and the second performs stress tests. The study used real data of a Portuguese commercial bank named through the paper as ‘Bank I’. Our results suggest that the tool manages to significantly improve the profitability of ‘Bank I’ while making it compliant with the Basel III framework by finding its optimal balance sheet composition. It also shows that both capital and liquidity requirements have a negative impact on the retained profit. Concerning the results taken from the stress tests we conclude that higher restrictions influence negatively the retained profit and that under certain stress scenarios ‘Bank I’ would present worryingly high losses. The tool does not capture the cost of changing the composition of the balance sheet, even though that would provide relevant information

Spinoffs and other entrants: evidence from Portugal

This thesis studies the prevalence and survival of spinoff entrants in Portugal from 1987 to 2008. Information on worker flows is used to identify them at a population level, providing evidence on other operations such as mergers and acquisitions. We show that the number of spinoffs has been increasing at a higher rate than other entrants of comparable size. Studying the determinants of their exit suggests that the most important predictor is whether the spinoff was motivated by the failure of the parent firm. The effect of industry specific knowledge and previous experience of the founders from working together in the parent firm is seemingly negligible, with only weak evidence supporting the latter.NSBE - UN

On out of sample errors in portfolio optimization : a study of the portuguese market

Motivated by a long-standing notion of the challenge that is investing successfully in the Portuguese stock exchange, this thesis studies the implementation in Portugal of a new model that tackles one of portfolio optimization’s greatest obstacles: estimation errors. The Galton model, originally developed and tested in the United States market, uses a discovered pattern in out of sample errors, the difference between forecasted and realized values in out of sample tests, to correct historical inputs. These errors are mostly disregarded by other optimization efforts. With the corrected inputs, the model delivers a performance upgrade all around - more sensible weighting of the assets, improved return performance, returns concentrated around its mean avoiding extreme occurrences, less turnover and, above all, accurate forecasting of the portfolios’ volatility, in the same line as the models’ conclusions in the American market.Motivado por uma perceção recorrente do desafio que é investir de forma bem-sucedida na bolsa financeira portuguesa, esta tese estuda a implementação em Portugal de um novo modelo que visa resolver um dos maiores obstáculos para a otimização de portfólios: erros de estimação. O modelo Galton, originalmente desenvolvido e testado no mercado dos Estados Unidos da América, utiliza um padrão descoberto nos erros fora da amostra, a diferença entre os valores previstos e os reais, para corrigir os dados históricos inseridos. Estes erros são, maioritariamente, ignorados por outros esforços de otimização. Com os dados corrigidos, o modelo produz uma melhoria no desempenho em todos os aspetos – pesos dos ativos mais contidos, melhoramento a nível de retornos, retornos mais concentrados em volta da sua média evitando ocorrências extremas, menos volume de transações de ativos e, acima de tudo, previsão precisa da volatilidade dos portfólios, em linha com as conclusões do modelo no mercado americano