Market implied costs of bankruptcy

This paper takes a novel approach to estimating bankruptcy costs by inference from market prices of equity and put options using a dynamic structural model of capital structure. This approach avoids the selection bias of looking at firms in or near default and therefore permits theories of ex ante capital structure determination to be tested. We identify significant cross sectional variation in bankruptcy costs across industries and relate these to specific firm characteristics. We find that asset volatility and growth options have significant positive impacts, while tangibility and size have negative impacts. Our bankruptcy cost variable estimate significantly negatively impacts leverage ratios. This negative impact is in addition to that of other firm characteristics such as asset intangibility and asset volatility. The results provide strong support for the tradeoff theory of capital structure

New Approaches To Photometric Redshift Prediction Via Gaussian Process Regression In The Sloan Digital Sky Survey

Expanding upon the work of Way and Srivastava 2006 we demonstrate how the use of training sets of comparable size continue to make Gaussian process regression (GPR) a competitive approach to that of neural networks and other least-squares fitting methods. This is possible via new large size matrix inversion techniques developed for Gaussian processes (GPs) that do not require that the kernel matrix be sparse. This development, combined with a neural-network kernel function appears to give superior results for this problem. Our best fit results for the Sloan Digital Sky Survey (SDSS) Main Galaxy Sample using u,g,r,i,z filters gives an rms error of 0.0201 while our results for the same filters in the luminous red galaxy sample yield 0.0220. We also demonstrate that there appears to be a minimum number of training-set galaxies needed to obtain the optimal fit when using our GPR rank-reduction methods. We find that morphological information included with many photometric surveys appears, for the most part, to make the photometric redshift evaluation slightly worse rather than better. This would indicate that most morphological information simply adds noise from the GP point of view in the data used herein. In addition, we show that cross-match catalog results involving combinations of the Two Micron All Sky Survey, SDSS, and Galaxy Evolution Explorer have to be evaluated in the context of the resulting cross-match magnitude and redshift distribution. Otherwise one may be misled into overly optimistic conclusions.Comment: 32 pages, ApJ in Press, 2 new figures, 1 new table of comparison methods, updated discussion, references and typos to reflect version in Pres

Experimental advances with the QICK (Quantum Instrumentation Control Kit) for superconducting quantum hardware

The QICK is a standalone open source qubit controller that was first introduced in 2022. In this follow-up work, we present recent experimental use cases that the QICK uniquely enabled for superconducting qubit systems. These include multiplexed signal generation and readout, mixer-free readout, pre-distorted fast flux pulses, and phase-coherent pulses for parametric operations, including high-fidelity parametric entangling gates. We explain in detail how the QICK was used to enable these experiments

Good and Bad Credit Contagion: Evidence from Credit Default Swaps,”

Abstract This study examines the information transfer effect of credit events across the industry, as captured in the Credit Default Swaps (CDS) and stock markets. Positive correlations across CDS spreads imply dominant contagion effects, whereas negative correlations indicate competition effects. We find strong evidence of dominant contagion effects for Chapter 11 bankruptcies and competition effect for Chapter 7 bankruptcies. We also introduce a purely unanticipated event, which is a large jump in a company's CDS spread, and find that this leads to the strongest evidence of credit contagion across the industry. These results have important implications for the construction of portfolios with credit-sensitive instruments. JEL Classifications: G14 (Market Efficiency), G18 (Policy and Regulation), G33 (Bankruptcy

Structural Properties of Central Galaxies in Groups and Clusters

Using a representative sample of 911 central galaxies (CENs) from the SDSS DR4 group catalogue, we study how the structure of the most massive members in groups and clusters depend on (1) galaxy stellar mass (Mstar), (2) dark matter halo mass of the host group (Mhalo), and (3) their halo-centric position. We establish and thoroughly test a GALFIT-based pipeline to fit 2D Sersic models to SDSS data. We find that the fitting results are most sensitive to the background sky level determination and strongly recommend using the SDSS global value. We find that uncertainties in the background translate into a strong covariance between the total magnitude, half-light size (r50), and Sersic index (n), especially for bright/massive galaxies. We find that n depends strongly on Mstar for CENs, but only weakly or not at all on Mhalo. Less (more) massive CENs tend to be disk (spheroid)-like over the full Mhalo range. Likewise, there is a clear r50-Mstar relation for CENs, with separate slopes for disks and spheroids. When comparing CENs with satellite galaxies (SATs), we find that low mass (<10e10.75 Msun/h^2) SATs have larger median n than CENs of similar Mstar. Low mass, late-type SATs have moderately smaller r50 than late-type CENs of the same Mstar. However, we find no size differences between spheroid-like CENs and SATs, and no structural differences between CENs and SATs matched in both mass and colour. The similarity of massive SATs and CENs shows that this distinction has no significant impact on the structure of spheroids. We conclude that Mstar is the most fundamental property determining the basic structure of a galaxy. The lack of a clear n-Mhalo relation rules out a distinct group mass for producing spheroids, and the responsible morphological transformation processes must occur at the centres of groups spanning a wide range of masses. (abridged)Comment: 22 pages, 14 figures, submitted to MNRA

A Deep VLA Radio Continuum Study of the Core and Outskirts of the Coma Cluster

We present deep 1.4GHz Very Large Array (VLA) radio continuum observations of two ~half square degree fields in the Coma cluster of galaxies. The two fields, "Coma 1" and "Coma 3," correspond to the cluster core and southwest infall region and were selected on account of abundant pre-existing multiwavelength data. In their most sensitive regions the radio data reach 22 uJy rms per 4.4" beam, sufficient to detect (at 5-sigma) Coma member galaxies with log(L) = 20.11 W/Hz. The full catalog of radio detections is presented herein and consists of 1030 sources detected at >=5 sigma, 628 of which are within the combined Coma 1 and Coma 3 area. We also provide optical identifications of the radio sources using data from the Sloan Digital Sky Survey (SDSS). The depth of the radio observations allows us to detect AGN in cluster elliptical galaxies with Mr < -20.5 (AB magnitudes), including radio detections for all cluster ellipticals with Mr < -21.8. At fainter optical magnitudes (-20.5 < Mr <~ -19) the radio sources are associated with star-forming galaxies with star formation rates as low as 0.1 solar masses per year.Comment: 26 pages, accepted for publication in A

Nature and completeness of galaxies detected in the Two Micron All Sky Survey

We cross correlate the well-defined and very complete spectroscopic Main Galaxy Sample (MGS) of 156,000 bright (r<17.5 mag) galaxies from the SDSS with 2MASS sources to explore the nature and completeness of the 2MASS K-band selection of nearby galaxies. 2MASS detects 90% of the MGS brighter than r=17 mag. For r<16, 93.1% of the MGS is found in the 2MASS Extended Source Catalog (XSC). These detections span the representative range of optical and near-IR galaxy properties, but with a surface brightness-dependent bias to preferentially miss the most blue and low-concentration sources, consistent with the most morphologically late-type galaxy population. An XSC completeness of 97.5% is achievable at bright magnitudes, with blue LSBs being the only major source of incompleteness, if one follows our careful matching criteria and weeds out spurious SDSS sources. We conclude that the rapid drop in XSC completeness at r>16 reflects the sharp surface-brightness limit of the extended source detection algorithm in 2MASS. As a result, the r>16 galaxies found in the XSC are over-representative in red early types and under-representative in blue latetypes. At r>16 the XSC suffers an additional selection effect from the 2-3" spatial resolution limit of 2MASS. Therefore, 2MASS continues to detect 90% of of the MGS at 16<r<17, but with a growing fraction found in the Point Source Catalog (PSC) only. Overall, one third of the MGS is detected in the 2MASS PSC but not the XSC. A combined K<13.57 and r<16 selection provides the most representative inventory of galaxies in the local cosmos with near-IR and optical measurements, and 90.8% completeness. Using data from SDSS-DR2, this sample contains 19,156 galaxies with a median redshift of 0.052. (abridged)Comment: Submitted to MNRAS, 20 pages, Latex using mn2e.cls and macros.tex (included), 17 figures, version with full resolution figures at http://www.astro.umass.edu/~dmac/Preprints/mcintosh.hires.p

Moral Hazard and the Portfolio Management Problem.

This paper investigates the significance of nonlinear contracts on the incentive for portfolio managers to collect information. In addition, the manager must be motivated to disclose this information truthfully. The author analyzes three contracting regimes: (1) first-best where effort is observable, (2) linear with unobservable effort, and (3) the optimal contract within the Bhattacharya-Pfleiderer quadratic class. He finds that the linear contract leads to a serious lack of effort expenditure by the manager. This underinvestment problem can be successfully overcome through the use of quadratic contracts. These contracts are shown to be asymptotically optimal for very risk-tolerant principals. Copyright 1993 by American Finance Association.

Optimal Capital Allocation Using RAROC And EVA

This paper analyzes financial institutions' capital allocation decisions when their required equity capital depends on the risk of their projects chosen. We discuss the relevance of strict position limits against discretionary trading through the use of an optimal compensation function. We show that (under full information) the first-best investment decision can be delegated through an economic value added (EVA) compensation contract and solve for the optimal capital allocation rules. We demonstrate how the concept of incremental Value at Risk must be used to deal with the multidivisional firm. The results are extended to deal with asymmetric information on the part of the trading division(s). The analysis defines precisely the notion of risk-adjusted return on capital (RAROC) and how it can be used as a performance measure.Allocation; Banking; Budgeting; Capital; Divisions; Evaluation; Institution; RAROC