How Law and Institutions Shape Financial Contracts: The Case of Bank Loans

We examine empirically how legal origin, creditor rights, property rights, legal formalism, and financial development affect the design of price and non-price terms of bank loans in almost 60 countries. Our results support the law and finance view that private contracts reflect differences in legal protection of creditors and the enforcement of contracts. Loans made to borrowers in countries where creditors can seize collateral in case of default are more likely to be secured, have longer maturity, and have lower interest rates. We also find evidence, however, that ?Coasian? bargaining can partially offset weak legal or institutional arrangements. For example, lenders mitigate risks associated with weak property rights and government corruption by securing loans with collateral and shortening maturity. Our results also suggest that the choice of loan ownership structure affects loan contract terms.

A Circumbinary Planet in Orbit Around the Short-Period White-Dwarf Eclipsing Binary RR Cae

By using six new determined mid-eclipse times together with those collected from the literature, we found that the Observed-Calculated (O-C) curve of RR Cae shows a cyclic change with a period of 11.9 years and an amplitude of 14.3s, while it undergoes an upward parabolic variation (revealing a long-term period increase at a rate of dP/dt =+4.18(+-0.20)x10^(-12). The cyclic change was analyzed for the light-travel time effect that arises from the gravitational influence of a third companion. The mass of the third body was determined to be M_3*sin i' = 4.2(+-0.4) M_{Jup} suggesting that it is a circumbinary giant planet when its orbital inclination is larger than 17.6 degree. The orbital separation of the circumbinary planet from the central eclipsing binary is about 5.3(+-0.6)AU. The period increase is opposite to the changes caused by angular momentum loss via magnetic braking or/and gravitational radiation, nor can it be explained by the mass transfer between both components because of its detached configuration. These indicate that the observed upward parabolic change is only a part of a long-period (longer than 26.3 years) cyclic variation, which may reveal the presence of another giant circumbinary planet in a wide orbit.Comment: It will be published in the MNRA

Fluctuation Theorems of Brownian Particles Controlled by a Maxwell's Demon

We study the stochastic dynamics of Brownian particles in a heat bath and subject to an active feedback control by an external, Maxwell's demon-like agent. The agent uses the information of the velocity of a particle and reduces its thermal agitation by applying a force. The entropy of the particle and the heat bath as a whole, thus, reduces. Entropy pumping [Phys. Rev. Lett. 93, 120602 (2004)] quantifies the entropy reduction. We discover that the entropy pumping has a dual role of work and heat contributing to free energy changes and entropy production of the open-system with the feedback control. Generalized Jarzynski equality and fluctuation theorems for work functional and entropy production are developed with the presence of the entropy pumping.Comment: 4 page

Stochastic Thermodynamics Across Scales: Emergent Inter-attractoral Discrete Markov Jump Process and Its Underlying Continuous Diffusion

The consistency across scales of a recently developed mathematical thermodynamic structure, between a continuous stochastic nonlinear dynamical system (diffusion process with Langevin or Fokker-Planck equations) and its emergent discrete, inter-attractoral Markov jump process, is investigated. We analyze how the system's thermodynamic state functions, e.g. free energy $F$, entropy $S$, entropy production $e_p$, and free energy dissipation $\dot{F}$, etc., are related when the continuous system is describe with a coarse-grained discrete variable. We show that the thermodynamics derived from the underlying detailed continuous dynamics is exact in the Helmholtz free-energy representation. That is, the system thermodynamic structure is the same as if one only takes a middle-road and starts with the "natural" discrete description, with the corresponding transition rates empirically determined. By "natural", we mean in the thermodynamic limit of large systems in which there is an inherent separation of time scales between inter- and intra-attractoral dynamics. This result generalizes a fundamental idea from chemistry and the theory of Kramers by including thermodynamics: while a mechanical description of a molecule is in terms of continuous bond lengths and angles, chemical reactions are phenomenologically described by the Law of Mass Action with rate constants, and a stochastic thermodynamics.Comment: 21 pages, 1 figur

Relative Entropy: Free Energy Associated with Equilibrium Fluctuations and Nonequilibrium Deviations

Using a one-dimensional macromolecule in aqueous solution as an illustration, we demonstrate that the relative entropy from information theory, $\sum_k p_k\ln(p_k/p_k^*)$, has a natural role in the energetics of equilibrium and nonequilibrium conformational fluctuations of the single molecule. It is identified as the free energy difference associated with a fluctuating density in equilibrium, and is associated with the distribution deviate from the equilibrium in nonequilibrium relaxation. This result can be generalized to any other isothermal macromolecular systems using the mathematical theories of large deviations and Markov processes, and at the same time provides the well-known mathematical results with an interesting physical interpretations.Comment: 5 page