Essays on the Use of Convertible Bonds and the Security Issuance Decision.

This dissertation examines two topics, the use of convertible bonds by Canadian companies and the security issuance choice in the Canadian market. The first part of the dissertation is devoted to the use of convertible debt by Canadian companies. Practitioners most often view convertibles as delayed equity and claim to issue them because of the lower coupon rate and to “sweeten” the debt issue, which would be otherwise more difficult to place. On the other hand, academics have proposed theories that in general suggest that companies that face high debt- and/or equity-related agency costs could benefit from issuing convertible debt as opposed to other “straight” means of financing. Chapter 2 provides the literature overview of the motives for the issuance of convertible debt. Chapter 3 investigates motives for the use of convertible debt in the Canadian market. Chapter 6 analyzes a convertible arbitrage in the Canadian market, a strategy mainly used by hedge funds to exploit underpricing of convertible bonds. The second part of the dissertation analyzes the security issuance decision in the Canadian market. The security issuance decision is essentially a capital structure decision. Different explanations have been put forward in the past as to how and when managers decide to increase or decrease the leverage of the firm, such are the pecking-order model, the market timing model and the agreement between insiders and outsiders. Chapter 4 examines the determinants of security issuance choice in the Canadian market, while Chapter 5 investigates the relationship between short interest and some of the capital structure theories.

The Convertible Arbitrage Strategy Analyzed

This paper analyzes convertible bond arbitrage on the Canadian market for the period 1998 to 2004.Convertible bond arbitrage is the combination of a long position in convertible bonds and a short position in the underlying stocks. Convertible arbitrage has been one of the most successful strategies of hedge funds.This paper shows that the convertible arbitrage strategy has considerable effects on capital markets.First, there is a downward pressure on cumulative average abnormal returns of the underlying stocks between the announcement and the issuance dates of convertible bonds.Second, short sales of the underlying equity around the issuance dates strongly increase for equity-like convertibles. Third, convertible bonds are underpriced at the issuance dates.All effects are stronger for equity-like than for debt-like convertible bonds.Finally, we find that over a one-year period following the issue, equity-like convertibles earn a return that is more than 23 percentage points higher than the return of debt-like convertibles.In the last years of our sample, convertible arbitrage returns have strongly decreased.This seems to be related to a shift from equity-like to debt-like convertibles by the issuing companies.convertible arbitrage;short sales;underpricing;convertible bonds;abnormal returns

Why do Companies issue Convertible Bond Loans? An Empirical Analysis for the Canadian Market

We examine the wealth effects associated with the announcements of convertible debt offerings in the Canadian market for the period between 1991 and 2004.The average wealth effect for the three day event window is a significantly negative -2.7%.This result is in line with previous studies on other Anglo-Saxon markets, but it is different from other markets where generally no effect or even a positive effect is found.In addition, support is found for the negative effect of both debt- and equity-related agency costs.Event study;convertible bonds;wealth effects;agency costs

Analysis and Comparison of Peak-to-Peak Current Ripple in Two-Level and Multilevel PWM Inverters

Three-phase multilevel inverters are used in many medium- and high-power applications such as motor drives and grid-connected systems. Despite numerous PWM techniques for multilevel inverters have been developed, the impact of these modulation schemes on the peak-to-peak output current ripple amplitude has not been addressed yet. In this paper the analysis and the comparison of current ripple for two- and three-level voltage source inverters are given. Reference is made to optimal and popular modulation, so-called centered PWM, easily obtained by both carrier-based modulation (phase disposition, with proper common-mode voltage injection) and space vector modulation (nearest three vectors). It is shown that the peak-to-peak current ripple amplitude in three-level inverters can be determined on the basis of the ripple in two-level inverters, obtaining the same re-sults as by directly analyzing the output voltage waveforms of the three-level inverters. This procedure can be readily extended to higher level numbers. The proposed analytical developments are verified by both numerical simulations and experimental tests

An empirical comparison of convertible bond valuation models

This paper empirically compares three convertible bond valuation models. We use an innovative approach where all model parameters are estimated by the Marquardt algorithm using a subsample of convertible bond prices. The model parameters are then used for out-of-sample forecasts of convertible bond prices. The mean absolute deviation is 1.86% for the Ayache-Forsyth-Vetzal model, 1.94% for the Tsiveriotis-Fernandes model, and 3.73% for the Brennan-Schwartz model. For this and other measures of fit, the Ayache-Forsyth-Vetzal and Tsiveriotis-Fernandes models outperform the Brennan-Schwartz model

Why do Companies issue Convertible Bond Loans? An Empirical Analysis for the Canadian Market

We examine the wealth effects associated with the announcements of convertible debt offerings in the Canadian market for the period between 1991 and 2004.The average wealth effect for the three day event window is a significantly negative -2.7%.This result is in line with previous studies on other Anglo-Saxon markets, but it is different from other markets where generally no effect or even a positive effect is found.In addition, support is found for the negative effect of both debt- and equity-related agency costs.

Guest editorial: energy storage in smart grids

Energy storage systems and smart grids cooperation is now crucial and will encourage collaborative engagement by different players in the energy market, offering sophisticated management and control approaches. Therefore, new advances and innovative solutions for such cooperation are of preeminent importance. Moreover, electric mobility should also be considered in this scenario. Electric vehicles (EVs) can be seen as distributed energy storage systems that generally need to be charged but, in some cases, can be adopted to support the grid thanks to vehicle-to-grid (V2G) and vehicle-for-grid (V4G) modes, offering advantages of controlled operation with active or reactive power. So, energy storage systems can be distinguished into aggregated and distributed structures, and they can be based on different technologies, such as batteries, fuel-cells, and super-capacitors. Furthermore, the integration of new renewable energy solutions with energy storage systems in smart grids should also be promoted. Power and energy management are crucial for the upcoming challenges and novel opportunities in smart grids. In line with this trend, this Special Issue aims to present further research on and developments in energy storage systems in smart grids, including power electronics converters, novel modulation schemes, energy and power management strategies, advanced battery packs and Battery Management Systems (BMSs). Novel renewable energy solutions are also of interest, as well as their cooperative and strategic integration with storage and EV chargers. Advanced EV services, such as V2G and V4G in the perspective of contributions to improve power quality, can also be considered. Three main topics can be found in this Special Issue: power electronic converters, converter and machine modelling and lithium-ion battery packs. In the following section, the papers accepted per each topic will be rapidly summarized along with their main achievements

The Convertible Arbitrage Strategy Analyzed

This paper analyzes convertible bond arbitrage on the Canadian market for the period 1998 to 2004.Convertible bond arbitrage is the combination of a long position in convertible bonds and a short position in the underlying stocks. Convertible arbitrage has been one of the most successful strategies of hedge funds.This paper shows that the convertible arbitrage strategy has considerable effects on capital markets.First, there is a downward pressure on cumulative average abnormal returns of the underlying stocks between the announcement and the issuance dates of convertible bonds.Second, short sales of the underlying equity around the issuance dates strongly increase for equity-like convertibles. Third, convertible bonds are underpriced at the issuance dates.All effects are stronger for equity-like than for debt-like convertible bonds.Finally, we find that over a one-year period following the issue, equity-like convertibles earn a return that is more than 23 percentage points higher than the return of debt-like convertibles.In the last years of our sample, convertible arbitrage returns have strongly decreased.This seems to be related to a shift from equity-like to debt-like convertibles by the issuing companies.

Efficiency comparison of a dc-dc interleaved converter based on SiC-MOSFET and Si-IGBT devices for EV chargers

The charging process is one of the main factors for the widespread dissemination of electric mobility, therefore, the use of optimized power electronics converters is of utmost importance. In addition to innovative topologies, the use of emerging technologies of semiconductors is also crucial. In this context, using a three-phase interleaved dc-dc topology, a comparison between the use of SiC-MOSFET and Si-IGBT is presented in this paper, mainly in terms of operating efficiency. Two cases have been presented: 1) with the same inductor, where only power device losses have been considered; 2) with the same inductor current ripple, where different inductors have been considered and the analysis included also the inductor design and losses. The simulations were carried out in LTspice simulation tool on realistic dynamic models of power switch modules obtained from the manufacturer’s experimental tests. The results validate the use of SiC-MOSFET for the three-phase interleaved dc-dc topology showing lower losses for both the power devices and inductor and, most important, prove the advantages of its use in terms of efficiency for a wide range of operating powers.This work has been supported by FCT - Fundacao para a Ciencia e Tecnologia with-in the Project Scope: UID/CEC/00319/2019, and by the FCT Project newERA4GRIDs PTDC/EEI-EEE/30283/2017

Why are convertible bond announcements associated with increasingly negative issuer stock returns? An arbitrage-based explanation

While convertible offerings announced between 1984 and 1999 induce average abnormal stock returns of −1.69%, convertible announcement effects over the period 2000–2008 are more than twice as negative (−4.59%). We hypothesize that this evolution is attributable to a shift in the convertible bond investor base from long-only investors towards convertible arbitrage funds. These funds buy convertibles and short the underlying stocks, causing downward price pressure. Consistent with this hypothesis, we find that the differences in announcement returns between the Traditional Investor period (1984–1999) and the Arbitrage period (2000–September 2008) disappear when controlling for arbitrage-induced short selling associated with a range of hedging strategies. Post-issuance stock returns are also in line with the arbitrage explanation. Average announcement effects of convertibles issued during the Global Financial Crisis are even more negative (−9.12%), due to a combination of short-selling price pressure and issuer, issue, and macroeconomic characteristics associated with these offerings