Accelerated Investment and Credit Risk under a Low Interest Rate Environment: A Real Options Approach

Empirical studies have found that a low interest rate environment accelerates firmsf investment and debt financing, leading to subsequent balance sheet problems in many countries in recent years. We examine the mechanism whereby firmfs debt financing and investment become more accelerated and the credit risk rises under a low interest rate environment from the perspective of a real options model. We find that firms tend to increase debt financing and investment not only under strong expectations of continued low interest rates but also when there are expectations of future interest rate increases, and such behavior causes higher credit risk. We also find that when future interest rate rises are expected, the investment decisions vary depending on how firms incorporate the possibility of future interest rises. Specifically, myopic firms make glast-minute investmentsh based on concerns over future interest rate hikes and this behavior increases their credit risk. In contrast, economically rational firms choose to decrease their investments, carefully considering the likelihood of future interest rate hikes.Low interest rate environment, Investment behavior, Credit risk, Real options model, Corporate finance, Time-inconsistent discount rate, Behavioral economics

Dynamic Model of Credit Risk in Relationship Lending: A Game- theoretic Real Options Approach

We develop a dynamic credit risk model for the case that banks compete to collect their loans from a firm falling in danger of bankruptcy. We apply a game-theoretic real options approach to investigate bankfs optimal strategies. Our model reveals that the bank with the larger loan amount, namely the main bank, provides an additional loan to support the deteriorating firm when the other bank collects its loan. This suggests that there exists rational forbearance lending by the main bank. Comparative statics show that as the liquidation value is lower, the optimal exit timing for the non-main bank comes at an earlier stage of business downturn and the optimal liquidation timing by the main bank is delayed further. As the interest rate of the loan is lower, the optimal exit timing for the non-main bank comes earlier. These analyses are consistent with the forbearance lending and exposure concentration of main banks observed in Japan.Credit risk, Relationship lending, Real option, Game theory, Concentration risk

Dynamic Model of Credit Risk in Relationship Lending: A Game- Theoretic Real Options Approach

We develop a dynamic credit risk model for the case in which banks compete to collect their loans from a firm in danger of bankruptcy. We apply a game-theoretic real options approach to investigate banksf optimal strategies. Our model reveals that the bank with the larger loan amount, namely, the main bank, provides an additional loan to support the deteriorating firm when the other bank collects its loan. This suggests that there exists rational forbearance lending by the main bank. Comparative statics show that as the liquidation value is lower, the optimal exit timing for the nonmain bank comes at an earlier stage in the business downturn and the optimal liquidation timing by the main bank is delayed further. As the interest rate of the loan is lower, the optimal exit timing for the non-main bank comes earlier. These analyses are consistent with the forbearance lending and exposure concentration of main banks observed in Japan.Credit risk; Relationship lending; Real option; Game theory; Concentration risk

On existence of matter outside a static black hole

It is expected that matter composed of a perfect fluid cannot be at rest outside of a black hole if the spacetime is asymptotically flat and static (non-rotating). However, there has not been a rigorous proof for this expectation without assuming spheical symmetry. In this paper, we provide a proof of non-existence of matter composed of a perfect fluid in static black hole spacetimes under certain conditions, which can be interpreted as a relation between the stellar mass and the black hole mass.Comment: 4pages, final version accepted for publication in Journal of Mathematical Physic

Functional significance of central D1 receptors in cognition: beyond working memory

The role of dopamine D1 receptors in prefrontal cortex function, including working memory, is well acknowledged. However, relatively little is known about their role in other cognitive or emotional functions. We measured both D1 and D2 receptors in the brain using positron emission tomography in healthy subjects, with the aim of elucidating how regional D1 and D2 receptors are differentially involved in cognitive and emotional functions beyond working memory. We found an inverted U-shaped relation between prefrontal D1 receptor availability and Wisconsin Card Sorting Test performance, indicating that too little or too much D1 receptor stimulation impairs working memory or set shifting. In addition, variability of D1 receptor availability in the amygdala and striatum was related to individual differences in emotional responses and decision-making processes, respectively. These observations suggest that the variability of available D1 receptors might be associated with individual differences in brain functions that require phasic dopamine release. An interdisciplinary approach combining molecular imaging of dopamine neurotransmission with cognitive neuroscience and clinical psychiatry will provide new perspectives for understanding the neurobiology of neuropsychiatric disorders such as schizophrenia, addiction and Parkinson's disease, as well as novel therapeutics for cognitive impairments observed in them