Using Option Theory and Fundamentals to Assessing Default Risk of Listed Firms

In this paper, we use option based measures of financial performance that utilize market information in a binary probit regression to examine their informational context and properties as distress indicators and to estimate default probabilities for listed firms. Then, we enrich them with fundamentals that utilize accounting information. The results suggest that by adding accounting information from financial statements to market information from equity prices we can improve both in sample fitting and out of sample predictability of defaults. Therefore, option theory does not generate sufficient statistics of the actual default frequency. Our main conclusion is that while market information can be extremely valuable, it is most useful when coupled with accounting information in assessing default risk of listed firms.option theory; fundamentals; default risk

Extending the Merton Model: A Hybrid Approach to Assessing Credit Quality

In this paper we have combined fundamental analysis and contingent claim analysis into a hybrid model of credit risk measurement. We have extended the standard Merton approach to estimate a new risk neutral distance to default metric, assuming a more complex capital structure, adjusting for dividend payments, introducing randomness to the default point and allowing a fractional recovery when default occurs. Then, using financial ratios, other accounting based measures and the risk neutral distance metric from our structural model as explanatory variables we estimate the hybrid model with an ordered probit regression method. Using the same econometric method, we estimate a model using financial ratios and accounting variables as explanatory variables and a model using our risk neutral distance to default metric as unique explanatory variable.We have found that by enriching the risk-neutral distance to default metric with financial ratios and accounting variables into the hybrid model, we can improve both in sample fit of credit ratings and out of sample predictability of defaults. Our main conclusion is that financial ratios and accounting variables contain significant and incremental information, thus the risk neutral distance to default metric does not reflect all available information regarding the credit quality of a firm.credit risk, distance to default, financial ratios, accounting variables

The Implications of Retained and Distributed Earnings for Future Profitability and Market Mispricing

In this paper, we investigate the informational content of retained and distributed earnings for future profitability and market mispricing. We find that investors act as if the components of retained earnings (current operating accruals, non current operating accruals and retained cash flows) have similar implications for future profitability, leading to an overvaluation of their differential persistence. They also do not distinguish between the distinct properties of distributed earnings, correctly anticipate the persistence of net cash distributions to debt holders (net debt repayment) and underestimate the persistence of net cash distributions to equity holders (dividends minus net stock issues). Our evidence suggests that the accrual anomaly documented in the accounting literature and the anomaly on net stock issues documented in the finance literature could be a subset of a larger anomaly on retained earnings. Overall, our findings on the sources of this anomaly, indicate that it is primary attributable to investorÕs limited attention or limited cognitive power on understanding managerial empire building tendencies and managerial violation of accounting principles.retained earnings, distributed earnings, accruals, net stock issues, earnings management.

Using Option Theory and Fundamentals to Assessing Default Risk of Listed Firms

In this paper, we use option based measures of financial performance that utilize market information in a binary probit regression to examine their informational context and properties as distress indicators and to estimate default probabilities for listed firms. Then, we enrich them with fundamentals that utilize accounting information. The results suggest that by adding accounting information from financial statements to market information from equity prices we can improve both in sample fitting and out of sample predictability of defaults. Therefore, option theory does not generate sufficient statistics of the actual default frequency. Our main conclusion is that while market information can be extremely valuable, it is most useful when coupled with accounting information in assessing default risk of listed firms

Using Option Theory and Fundamentals to Assessing Default Risk of Listed Firms

In this paper, we use option based measures of financial performance that utilize market information in a binary probit regression to examine their informational context and properties as distress indicators and to estimate default probabilities for listed firms. Then, we enrich them with fundamentals that utilize accounting information. The results suggest that by adding accounting information from financial statements to market information from equity prices we can improve both in sample fitting and out of sample predictability of defaults. Therefore, option theory does not generate sufficient statistics of the actual default frequency. Our main conclusion is that while market information can be extremely valuable, it is most useful when coupled with accounting information in assessing default risk of listed firms

The impact of unconventional monetary policies on alternative investments

Το έγγραφο στοχεύει να μελετήσει τον αντίκτυπο των αντισυμβατικών νομισματικών πολιτικών που εφαρμόζει η FED και η ΕΚΤ στους τομείς της εναλλακτικής οικονομίας πέρα ​​από τις χρηματιστηριακές αγορές, όπως η αγορά ακινήτων, το εμπόρευμα, η αγορά οίνου, τα σπάνια νομίσματα και τα συμβόλαια μελλοντικής εκπλήρωσης αργού πετρελαίου. Αυτό θα γίνει εξετάζοντας τον αντίκτυπο των αντισυμβατικών νομισματικών πολιτικών σε αυτά τα εναλλακτικά περιουσιακά στοιχεία / τομείς χρησιμοποιώντας τη μέθοδο OLS και κατάλληλες εικονικές μεταβλητές για κάθε πρόγραμμα QE. Βλέπουμε ότι υπάρχει μια αρνητική επίδραση στην πρώτη περίοδο που η FED ξεκίνησε το πρώτο πρόγραμμα QE για την ακίνητη περιουσία, αντίθετα τα προγράμματα QE της ΕΚΤ δεν είχαν σημαντικές επιπτώσεις στην ακίνητη περιουσία. Η επίπτωση στο εμπόρευμα από το πρώτο πρόγραμμα QE της FED είναι αρνητική. Όσον αφορά τον δείκτη LVX του κρασιού, διαπιστώνουμε ότι τα προγράμματα QE της ΕΚΤ δεν ήταν σημαντικά, αλλά τα προγράμματα της FED δημιούργησαν αρνητική επίδραση στην αγορά αυτή με διαφορετικό συντελεστή για κάθε χρονική περίοδο του πρώτου και δεύτερου προγράμματος που ξεκίνησε το FED. Βλέπουμε ότι έχουμε διαφορές ως προς τις επιπτώσεις στις αγορές αυτές μεταξύ των προγραμμάτων που ξεκίνησαν η ΕΚΤ και η Federal Reserve.The paper aims to study the impact of unconventional monetary policies implemented by the FED and ECB on sectors of alternative economy beyond stock markets such as real estate, commodity, wine market, rare coins, and crude oil futures. This will be done by examining the impact of unconventional monetary policies on these alternative assets/sectors using the OLS method and appropriate dummy variables for each QE program. We see that there is a negative impact on the first period that FED launched the first QE program on real estate, on the contrary ECB’s QE programmes did not have significant effects on real estate. The impact on commodity from the first FED’s QE program is negative. On the wine LVX index, we see that that ECB’s QE programmes were not significant but FED’s programmes created a negative impact on this market with different coefficient for every time period of first and second program that FED launched. We see that we have differences on the impacts on these markets between the programmes that ECB and Federal Reserve launched

Asymmetric cost behavior: Theory, meta-analysis, and implications

Asymmetric cost behavior is an emerging and dynamic research area within the context of contemporary cost management research. This study systematically reviews asymmetric cost behavior research published in ABS-ranked journals (53 English-speaking journals) between 2003 and 2020. Additionally, we provide a review of the econometric models and instruments employed in empirical asymmetric cost behavior research and a meta-analysis of prior empirical evidence for the main determinants of the direction and intensity of the asymmetric cost behavior phenomenon. Several research streams are recognized within two major themes of cost asymmetry empirical research: (i) determinants of the asymmetric cost behavior phenomenon, and (ii) cost asymmetry as a determinant of earnings behavior, earnings prediction, and other microeconomic and macroeconomic phenomena. Each major component of our review is accompanied by critical analysis and suggestions for future research. Meta-analysis of the existing body of cost asymmetry studies reveals no publication bias but increasing heterogeneity within existing empirical evidence for cost asymmetry

Reconstituting immune surveillance in breast cancer: molecular pathophysiology and current immunotherapy strategies

Over the past 50 years, breast cancer immunotherapy has emerged as an active field of research, generating novel, targeted treatments for the disease. Immunotherapies carry enormous potential to improve survival in breast cancer, particularly for the subtypes carrying the poorest prognoses. Here, we review the mechanisms by which cancer evades immune destruction as well as the history of breast cancer immunotherapies and recent developments, including clinical trials that have shaped the treatment of the disease with a focus on cell therapies, vaccines, checkpoint inhibitors, and oncolytic viruses

Extracellular vesicles as mediators of therapy resistance in breast cancer microenvironment

Resistance to various therapies, including novel immunotherapies, poses a major challenge in the management of breast cancer and is the leading cause of treatment failure. Bidirectional communication between breast cancer cells and the tumour microenvironment is now known to be an important contributor to therapy resistance. Several studies have demonstrated that crosstalk with the tumour microenvironment through extracellular vesicles is an important mechanism employed by cancer cells that leads to drug resistance via changes in protein, lipid and nucleic acid cargoes. Moreover, the cargo content enables extracellular vesicles to be used as effective biomarkers for predicting response to treatments and as potential therapeutic targets. This review summarises the literature to date regarding the role of extracellular vesicles in promoting therapy resistance in breast cancer through communication with the tumour microenvironment

Incorporating immunotherapy in the management of gastric cancer: molecular and clinical implications

Gastric cancer has a median survival of 11 months, and this poor prognosis has not improved over the last 30 years. Recent pre-clinical data suggest that there is high tumour-related neoantigen expression in gastric cancer cells, suggesting that a clinical strategy that enhances the host’s immune system against cancer cells may be a successful approach to improve clinical outcomes. Additionally, there has been an increasing amount of translational evidence highlighting the relevance of PD-L1 expression in gastric cancer cells, indicating that PD-1/PD-L1 inhibitors may be useful. Several molecular subgroups of gastric cancer have been identified to respond with excellent outcomes to immunotherapy, including microsatellite instable tumours, tumours bearing a high tumour mutational burden, and tumours related to a chronic EBV infection. In gastric cancer, immunotherapy has produced durable responses in chemo-refractory patients; however, most recently there has been a lot of enthusiasm as several large-scale clinical trials highlight the improved survival noted from the incorporation of immunotherapy in the first line setting for advanced gastric cancer. Our review aims to discuss current pre-clinical and clinical data supporting the innovative role of immunotherapy in gastric cancer