Level dependent annuities: Defaults of multiple degrees

Motivated by the risk of stopped debt coupon payments from a leveraged company in financial distress, we value a level dependent annuity contract where the annuity rate depends on the value of an underlying asset-process. The range of possible values of the asset is divided into a finite number of regions. The annuity rate is constant within each region, but may differ between the regions. We consider both in finite and finite annuities, with or without bankruptcy risk, i.e., bankruptcy occurs if the asset value process hits an absorbing boundary. Such annuities are common in models of debt with credit risk in financial economics. Suspension of debt service under the US Chapter 11 provisions is one well-known real-world example. We present closed-form formulas for the market value of such multi-level annuities contracts when the market value of the underlying asset is assumed to follow a geometric Brownian motion.Multi-level annuity; credit risk; financial distress

A Model of Deferred Callability in Defaultable Debt

Banks and other financial institutions raise hybrid capital as part of their risk capital. Hybrid capital has no maturity, but, similarily to most corporate debt, includes an embedded issuer's call option. To obtain acceptance as risk capital, the first possible exercise date of the embedded call is contractually deferred by several years, generating a protection period. The existence of this call feature affects the issuer's optimal bankruptcy decision, in addition to the value of debt. We value the call feature as a European option on perpetual defaultable debt. We do this by first modifying the underlying asset process to incorporate a time dependent bankruptcy level before the expiration of the embedded option. We identify a call option on debt as a fixed number of put options using a modified exercise price on a modified asset, which is lognormally distributed, as opposed to the market value of debt. To include the possibility of default before the expiration of the option we apply barrier options results. The formulas are quite general and may be used for valuing both embedded and third-party options. All formulas are developed in the seminal and standard Black-Scholes-Merton model and, thus, standard analytical tools such as 'the greeks', are immediately available.Callable perpetual debt; barrier options

Using Bank Mergers and Acquisitions to Understand Lending Relationships

We study how firm-bank lending relationships affect firms' access to and terms of credit. We use bank mergers and acquisitions (M&As) as exogenous events that affect lending relationships. Bank M&As lead to organisational changes at the involved banks, which may reduce the amount of soft information encompassed in the firm-bank relationship. Using a unique Norwegian dataset, which combines information on companies' bank accounts, annual accounts, bankruptcies, and bank M&As for the years 1997-2009, we find that domestic bank mergers increase interest rate margins by 0.24 percentage points for opaque small and medium sized rms, relative to less opaque firms. Since, due to information asymmetries, opaque firms are typically more dependent on bank lending relationships, our results indicate that these relationships are advantageous for such borrowers, and the destruction of a relationship during the merger process has adverse effects for the firm. Conversely, the results are not consistent with a lock-in effect due to an information monopoly by the relationship lender that on average increases a firm's borrowing costs over its life cycle. The results are robust to the inclusion of variables that control for eects of market competition.Bank Mergers and Acquisitions; Lending Relationships

Myocardial protection by insulin at reperfusion requires early administration and is mediated via Akt and p70s6 kinase cell-survival signaling

The "metabolic cocktail" comprising glucose-insulin-potassium administrated at reperfusion reduces infarct size in the in vivo rat heart. We propose that insulin is the major component mediating this protection and acts via Akt prosurvival signaling. This hypothesis was studied in isolated perfused rat hearts (measuring infarct size to area of risk [%]) subjected to 35 minutes regional myocardial ischemia and 2 hours reperfusion. Insulin administered at the onset of reperfusion attenuated infarct size by 45% versus control hearts (P<0.001). Insulin-mediated cardioprotection was found to be independent of the presence of glucose at reperfusion. Moreover, the cell survival benefit of insulin is temporally dependent, in that insulin administration from the onset of reperfusion and maintained for either 15 minutes or for the duration of reperfusion reduced infarct size. In contrast, protection was abrogated if insulin administration was delayed until 15 minutes into reperfusion. Pharmacological inhibition of both upstream and downstream signals in the Akt prosurvival pathway abolished the cardioprotective effects of insulin. Here coadministration of insulin with the tyrosine kinase inhibitor lavendustin A, the phosphatidylinositol3-kinase (PI3-kinase) inhibitor wortmannin, and mTOR/p70s6 kinase inhibitor rapamycin abolished cardioprotection. Steady-state levels of activated/phosphorylated Akt correlated with insulin administration. Finally, downstream prosurvival targets of Akt including p70s6 kinase and BAD were modulated by insulin. In conclusion, insulin administration at reperfusion reduces myocardial infarction, is dependent on early administration during reperfusion, and is mediated via Akt and p70s6 kinase dependent signaling pathway. Moreover, BAD is maintained in its inert phosphorylated state in response to insulin therapy

Naive and adapted utilization of the GPU for general purpose computing

In this thesis we will see that adaptive utilization of the graphical processing unit (GPU) has much better performance than naive utilization, but it takes longer time to implement and requires more knowledge about GPU-programming. To choose which strategy to use for utilizing the GPU depends on how we weigh implementation time against performance. If we want to get results fast and the size of the problem is not too large (or too small where CPU is more suitable), the naive utilization of the GPU is probably the best choice. If we want high performance, use large dataset or want a more sophisticated solution in terms of graphics and functionality, the adapted utilization is probably the best choice. This conclusion is based on implementation of numerical solutions for two partial differential equations (PDEs), The Heat Equation and The Shallow Water Equations. These solutions were implemented to utilize the power of the GPU to do the actual approximation of the equations. The power of the GPU can be utilized in different ways. In this thesis we want to implement the numerical solutions to utilize the GPU in both a naive way and an adaptive way. In the naive way, we use standard libraries where we can apply code written for the central processing unit (CPU) to the GPU without any knowledge about how it is executed. In the adaptive way, we have to specify every little detail about setting up the connection and communication with the GPU, how memory is used on the GPU and how to write code on the GPU. For each implementation, we measure running time with different problem sizes to see how each solution performed.Masteroppgave i informatikkINF39

On the Pricing of Performance Sensitive Debt

Performance sensitive debt (PSD) contracts link a loan's interest rate to a measure of the borrower's credit relevant performance, e.g., if the borrower becomes less credit worthy, the interest rate increases according to a predetermined schedule. We derive and empirically test a pricing model for PSD contracts and find that interest increasing contracts are priced reflecting a substantial risk of shocks to borrower credit quality. Borrowers using such contracts are of an overall higher credit quality compared to borrowers using interest decreasing contracts. These contracts are priced as if no risk of shocks to borrower credit quality is present.Performance sensitive debt; cash flow ratios; credit ratings

Dokumentasjon og kvalitetssikring av SNFs og NHHs database med regnskaps- og foretaksinformasjon for norske selskaper (Oppdatert 03/2010)

Denne rapporten er en oppdatering og utvidelse av Arbeidsnotat nr. 38/09, ”Dokumentasjon og kvalitetssikring av SNFs og NHHs database med regnskaps- og foretaksinformasjon for norske selskaper” dels med data for året 2008 og dels ved indikatorer for alle typer børsnoterte verdipapirer samt mer historisk informasjon om selskapers revisorer, i tillegg til noe ren korrektur. Formålet med denne rapporten og de tilhørende datafilene med regnskapsdata er å dokumentere og kvalitetssikre den databasen som brukes av Samfunns- og næringslivsforskning AS (SNF) og Norges Handelshøyskole (NHH) i forskning basert på bedrifters regnskaper. Databasen inneholder regnskaper for alle norske virksomheter og konserner for årene 1992-2008, om enn med noen manglende selskaper i de første årene

Den norske bedriftsbankboka : en beskrivende analyse av bankmarkedet for norske bedriftskunder

Den norske Bedriftsbankboka er en utførlig statistisk dokumentasjon av markedsforholdene for kommersielle bedrifter som søker lån eller plasserer innskudd i norskrapporterende banker. Den baseres på detaljert kundeinformasjon fra Skatteetaten for perioden 1997-2009, samt supplerende regnskaps- og foretaksdata. Vi finner en svært høy vekst både i utlån og innskudd for årene fram til finanskrisen. Markedet preges generelt av høy konsentrasjon, men med klare variasjoner mellom ulike geografiske inndelinger. Dette indikerer sterkt varierende konkurranse. Estimerte rentesatser på bedriftsnivå viser også store variasjoner i forhold til det som rapporteres i eksisterende statistikker. Analysene er gjort med inndeling etter landsdeler, fylker pendleregioner, bransjer, alder og selskapsstørrelse. Dataene er primært framstilt grafisk, med supplerende tabeller. Bedriftsbankboka er finansiert av Finansmarkedsfondet

Regnskapsboka : dokumentasjon og kvalitetssikring av SNFs og NHHs database med regnskaps : og foretaksinformasjon for norske bedrifter

Arbeidsnotatet beskriver databasen med norske regnskapstall og selskapsinformasjon som brukes i forskning og utredninger ved Samfunns- og næringslivsforskning AS (SNF) og Norges Handelshøyskole (NHH). Formålet med notatet og de tilhørende datafilene er å dokumentere og kvalitetssikre denne databasen som inneholder regnskaper for alle norske virksomheter og konserner for årene 1992-2011, om enn med noen manglende selskaper i de første årene. Arbeidsnotatet bygger på Arbeidsnotat nr. 09/12, ”Dokumentasjon og kvalitetssikring av SNFs og NHHs database med regnskaps- og foretaksinformasjon for norske selskaper”. Supplementet inkluderer data for året 2011, historisk informasjon om revisorer, regnskapsførere, styrestruktur, og bruk av IFRS-regnskapsstandard, i tillegg til noe ren korrektur. Det har dessuten blitt utført en omfattende kvalitetssikring av databasen og revisjon av notatet, inkludert omtale av IFRS i Norge siden 2005

The effects of financial constraints on business fundamentals and asset returns : evidence from a small open economy

In this thesis we investigate whether financially constrained firms are fundamentally riskier than unconstrained firms, whether this risk is priced in the form of a financial constraint factor, and whether the financial constraint factor represents an independent source of return movements. The investigation will be in the context of the Norwegian economy and securities markets. Using various measures of financial constraints, we form portfolios of constrained and unconstrained firms in a similar fashion to Fama and French (1992). Following Campello and Chen (2010) we estimate differences in the real business risk of constrained and unconstrained firms by regressing their median real operating earnings- and investment growth on macroeconomic and credit market variables. We test whether the risk is priced by subtracting the monthly stock market returns of constrained firms from unconstrained firms, creating a financial constraint factor. Finally, following Lamont et al. (2001), we investigate whether the financial constraint factor represents an independent source of movement in returns by regressing it on benchmark asset pricing models, including Sharpe (1964) and Lintner (1965)’s CAPM, the Fama and French (1992) three-factor model and the Fama and French (2015) five-factor model. We find evidence that financially constrained firms are fundamentally riskier than unconstrained firms, and that this risk is priced in the form of a financial constraint factor. The results point to financial constraints being time-varying and binding more in downturns than expansions. We find that a negative oil price shock is associated with increasing financial constraints in the Norwegian economy. Furthermore, we find that financially constrained firms in Norway behave in a similar fashion to constrained firms in the US, suggesting that financial constraints are not significantly different across various economic settings. Finally, the combined real-financial results point to the existence of a macroeconomy-equity valuation channel along the lines of Gertler and Bernanke (1989).nhhma