Measuring idiosyncratic risks in leveraged buyout transactions

The authors use a contingent claims analysis model to calculate the idiosyncratic risks in Leveraged Buyout transactions.Idiosyncratic Risk; LBO; Private Equity; Benchmarking; CCA

Measuring idiosyncratic risks in leveraged buyout transactions

We use a CCA model to calculate implied idiosyncratic risks of LBO transactions. A decisive model feature is the consideration of amortization. From the model, the asset value volatility and the equity value volatility can be derived via a numerical procedure. For a sample of 40 LBO transactions we determine the necessary model parameters and calculate the transactions' implied idiosyncratic risks. We discuss the expected model sensitivities and verify them by variation of the input parameters. With the knowledge of the returns to the equity investors of the LBOs we are able to calculate Sharpe Ratios on individual transaction levels for the first time, thereby fully incorporating the superimposed leverage risks.Idiosyncratic Risk; Private Equity; Benchmarking;

Virtual Testing of Experimental Continuation

We present a critical advance in experimental testing of nonlinear structures. Traditional quasi-static experimental methods control the displacement or force at one or more load-introduction points on a structure. This approach is unable to traverse limit points in the control parameter, as the immediate equilibrium beyond these points is statically unstable, causing the structure to snap to another equilibrium. As a result, unstable equilibria---observed numerically---are yet to be verified experimentally. Based on previous experimental work, and a virtual testing environment developed herein, we propose a new experimental continuation method that can path-follow along unstable equilibria and traverse limit points. To support these developments, we provide insightful analogies between a fundamental building block of our technique---shape control---and analysis concepts such as the principle of virtual work and Galerkin's method. The proposed testing method will enable the validation of an emerging class of nonlinear structures that exploit instabilities for novel functionality

Deleterious localised stress fields:the effects of boundaries and stiffness tailoring in anisotropic laminated plates

The safe design of primary load-bearing structures requires accurate prediction of stresses, especially in the vicinity of geometric discontinuities where deleterious three-dimensional stress fields can be induced. Even for thin-walled structures significant through-thickness stresses arise at edges and boundaries, and this is especially precarious for laminates of advanced fibre-reinforced composites because through-thickness stresses are the predominant drivers in delamination failure. Here, we use a higher-order equivalent single-layer model derived from the Hellinger–Reissner mixed variational principle to examine boundary layer effects in laminated plates comprising constant-stiffness and variable-stiffness laminae and deforming statically in cylindrical bending. The results show that zigzag deformations, which arise due to layerwise differences in the transverse shear moduli, drive boundary layers towards clamped edges and are therefore critically important in quantifying localized stress gradients. The relative significance of the boundary layer scales with the degree of layerwise anisotropy and the thickness to characteristic length ratio. Finally, we demonstrate that the phenomenon of alternating positive and negative transverse shearing deformation through the thickness of composite laminates, previously only observed at clamped boundaries, can also occur at other locations as a result of smoothly varying the material properties over the in-plane dimensions of the laminate