Requirement Risk Level Forecast Using Bayesian Networks Classifiers

Requirement engineering is a key issue in the development of a software project. Like any other development activity it is not without risks. This work is about the empirical study of risks of requirements by applying machine learning techniques, specifically Bayesian networks classifiers. We have defined several models to predict the risk level for a given requirement using three dataset that collect metrics taken from the requirement specifications of different projects. The classification accuracy of the Bayesian models obtained is evaluated and compared using several classification performance measures. The results of the experiments show that the Bayesians networks allow obtaining valid predictors. Specifically, a tree augmented network structure shows a competitive experimental performance in all datasets. Besides, the relations established between the variables collected to determine the level of risk in a requirement, match with those set by requirement engineers. We show that Bayesian networks are valid tools for the automation of risks assessment in requirement engineering.

Three Essays in Empirical Asset Pricing

The financial crisis of 2007-2008 led to extraordinary government intervention in firms and markets. The scope and depth of government action rivaled that of the Great Depression. Many traded markets experienced dramatic declines in liquidity leading to the existence of conditions normally assumed to be promptly removed via the actions of profit seeking arbitrageurs. These extreme events motivate the three essays in this work. The first essay seeks and fails to find evidence of investor behavior consistent with the broad 'Too Big To Fail' policies enacted during the crisis by government agents. Only in limited circumstances, where government guarantees such as deposit insurance or U.S. Treasury lending lines already existed, did investors impart a premium to the debt security prices of firms under stress. The second essay introduces the Inflation Indexed Swap Basis (IIS Basis) in examining the large differences between cash and derivative markets based upon future U.S. inflation as measured by the Consumer Price Index (CPI). It reports the consistent positive value of this measure as well as the very large positive values it reached in the fourth quarter of 2008 after Lehman Brothers went bankrupt. It concludes that the IIS Basis continues to exist due to limitations in market liquidity and hedging alternatives. The third essay explores the methodology of performing debt based event studies utilizing credit default swaps (CDS). It provides practical implementation advice to researchers to address limited source data and/or small target firm sample size.

Empirical studies on share issuance and repurchase decisions

Financial constraints influence corporate policies of firms, including both investment decisions and external financing policies. The relevance of this phenomenon has become more pronounced during and after the recent financial crisis in 2007/2008. In addition to raising costs of external financing, the effects of financial crisis limited the availability of external financing which had implications for employment, investment, sale of assets, and tech spending. This thesis provides a comprehensive analysis of the effects of financial constraints on share issuance and repurchases decisions. Financial constraints comprise both internal constraints reflecting the demand for external financing and external financial constraints that relate to the supply of external financing. The study also examines both operating performance and stock market reactions associated with equity issuance methods. The first empirical chapter explores the simultaneous effects of financial constraints and market timing on share issuance decisions. Internal financing constraints limit firms’ ability to issue overvalued equity. On the other hand, financial crisis and low market liquidity (external financial constraints) restrict availability of equity financing and consequently increase the costs of external financing. Therefore, the study explores the extent to which internal and external financing constraints limit market timing of equity issues. This study finds that financial constraints play a significant role in whether firms time their equity issues when the shares are overvalued. The conclusion is that financially constrained firms issue overvalued equity when the external equity market or the general economic conditions are favourable. During recessionary periods, costs of external finance increase such that financially constrained firms are less likely to issue overvalued equity. Only unconstrained firms are more likely to issue overvalued equity even during crisis. Similarly, small firms that need cash flows to finance growth projects are less likely to access external equity financing during period of significant economic recessions. Moreover, constrained firms have low average stock returns compared to unconstrained firms, especially when they issue overvalued equity. The second chapter examines the operating performance and stock returns associated with equity issuance methods. Firms in the UK can issue equity through rights issues, open offers, and private placement. This study argues that alternative equity issuance methods are associated with a different level of operating performance and long-term stock returns. Firms using private placement are associated with poor operating performance. However, rights issues are found empirically to be associated with higher operating performance and less negative long-term stock returns after issuance in comparison to counterpart firms that issue private placements and open offers. Thus, rights issuing firms perform better than open offers and private placement because the favourable operating performance at the time of issuance generates subsequent positive long-run stock price response. Right issuing firms are of better quality and outperform firms that adopt open offers and private placement. In the third empirical chapter, the study explores the levered share repurchase of internally financially unconstrained firms. Unconstrained firms are expected to repurchase their shares using internal funds rather than through external borrowings. However, evidence shows that levered share repurchases are common among unconstrained firms. These firms display this repurchase behaviour when they have bond ratings or investment grade ratings that allow them to obtain cheap external debt financing. It is found that internally financially unconstrained firms borrow to finance their share repurchase when they invest more. Levered repurchase firms are associated with less positive abnormal returns than unlevered repurchase firms. For the levered repurchase sample, high investing firms are associated with more positive long-run abnormal stock returns than low investing firms. It appears the market underreact to the levered repurchase in the short-run regardless of the level of investments. These findings indicate that market reactions reflect both undervaluation and signaling hypotheses of positive information associated with share repurchase. As the firms undertake capital investments, they generate future cash flows, limit the effects of leverage on financial distress and ultimately reduce the risk of the equity capital.

AN EMPIRICAL ASSESSMENT OF USER ONLINE SECURITY BEHAVIOR: EVIDENCE FROM A UNIVERSITY

The ever-increasing number and severity of cybersecurity breaches makes it vital to understand the factors that make organizations vulnerable. Since humans are considered the weakest link in the cybersecurity chain of an organization, this study evaluates users’ individual differences (demographic factors, risk-taking preferences, decision-making styles and personality traits) to understand online security behavior. This thesis studies four different yet tightly related online security behaviors that influence organizational cybersecurity: device securement, password generation, proactive awareness and updating. A survey (N=369) of students, faculty and staff in a large mid-Atlantic U.S. public university identifies individual characteristics that relate to online security behavior and characterizes the higher-risk individuals that pose threats to the university’s cybersecurity. Based on these findings and insights from interviews with phishing victims, the study concludes with recommendations to help similat organizations increase end-user cybersecurity compliance and mitigate the risks caused by humans in the organizational cybersecurity chain.

Credit risk & forward price models

Doutoramento em Gestão

Capital structure, risk and asymmetric information : theory and evidence

This paper proposes a principal-agent model between banks and firms with risk and asymmetric information. A mixed form of finance to firms is assumed. The capital structure of firms is a relevant cause for the final aggregate level of investment in the economy. In the model analyzed, there may be a separating equilibrium, which is not economically efficient, because aggregate investments fall short of the first-best level. Based on European firm-level data, an empirical model is presented which validates the result of the relevance of the capital structure of firms. The relative magnitude of equity in the capital structure makes a real difference to the profits obtained by firms in the economy.

Interest rate (in)sensitivity of emerging market corporate debt : economic analysis based on 2002-2015 empirical evidence

Interest rate sensitivity assessment framework based on fixed income yield indexes is developed and applied to two types of emerging market corporate debt: investment grade and high yield exposures. Our research advances beyond the correlation analyses focused on co- movements in yields and/or spreads of risky and risk-free assets. We show that correlation- based analyses of interest rate sensitivity could appear rather inconclusive and, hence, we investigate the bottom line profit and loss of a hypothetical model portfolio of corporates. We consider historical data covering the period 2002 – 2015, which enable us to assess interest rate sensitivity of assets during the development, the apogee, and the aftermath of the global financial crisis. Based on empirical evidence, both for investment and speculative grades securities, we find that the emerging market corporates exhibit two different regimes of sensitivity to interest rate changes. We observe switching from a positive sensitivity under the normal market conditions to a negative one during distressed phases of business cycles. This research sheds light on how financial institutions may approach interest rate risk management, evidencing that even plain vanilla portfolios of emerging market corporates, which on average could appear rather insensitive to the interest rate risk in fact present a binary behavior of their interest rate sensitivities. Our findings allow banks and financial institutions for optimizing economic capital under Basel III regulatory capital rules.

Four Essays of Environmental Risk-Mitigation

Expected damages of environmental risks depend both on their intensities and probabilities. There is very little control over probabilities of climate related disasters such as hurricanes. Therefore, researchers of social science are interested identifying preparation and mitigation measures that build human resilience to disasters and avoid serious loss. Conversely, environmental degradation, which is a process through which the natural environment is compromised in some way, has been accelerated by human activities. As scientists are finding effective ways on how to prevent and reduce pollution, the society often fails to adopt these effective preventive methods. Researchers of psychological and contextual characterization offer specific lessons for policy interventions that encourage human efforts to reduce pollution. This dissertation addresses four discussions of effective policy regimes encouraging pro-environmental preference in consumption and production, and promoting risk mitigation behavior in the face of natural hazards. The first essay describes how the speed of adoption of environment friendly technologies is driven largely by consumers’ preferences and their learning dynamics rather than producers’ choice. The second essay is an empirical analysis of a choice experiment to understand preferences for energy efficient investments. The empirical analysis suggests that subjects tend to increase energy efficient investment when they pay a pollution tax proportional to the total expenditure on energy consumption. However, investments in energy efficiency seem to be crowded out when subjects have the option to buy health insurance to cover pollution related health risks. In context of hurricane risk mitigation and in evidence of recently adopted My Safe Florida Home (MSFH) program by the State of Florida, the third essay shows that households with home insurance, prior experience with damages, and with a higher sense of vulnerability to be affected by hurricanes are more likely to allow home inspection to seek mitigation information. The fourth essay evaluates the impact of utility disruption on household well being based on the responses of a household-level phone survey in the wake of hurricane Wilma. Findings highlight the need for significant investment to enhance the capacity of rapid utility restoration after a hurricane event in the context of South Florida.

Reviewing the hedge funds literature II:hedge funds' returns and risk management characteristics

This paper summarizes the literature on hedge funds (HFs) developed over the last two decades, particularly that which relates to risk management characteristics (a companion piece investigates the managerial characteristics of HFs). It discusses the successes and the shortfalls to date in developing more sophisticated risk management frameworks and tools to measure and monitor HF risks, and the empirical evidence on the role of the HFs and their investment behaviour and risk management practices on the stability of the financial system. It also classifies the HF literature considering the most recent contributions and, particularly, the regulatory developments after the 2007 financial crisis.

Acceptance of smartphone-based mobile shopping:mobile benefits, customer characteristics, perceived risk and the impact of application context

Despite their generally increasing use, the adoption of mobile shopping applications often differs across purchase contexts. In order to advance our understanding of smartphone-based mobile shopping acceptance, this study integrates and extends existing approaches from technology acceptance literature by examining two previously underexplored aspects. Firstly, the study examines the impact of different mobile and personal benefits (instant connectivity, contextual value and hedonic motivation), customer characteristics (habit) and risk facets (financial, performance, and security risk) as antecedents of mobile shopping acceptance. Secondly, it is assumed that several acceptance drivers differ in relevance subject to the perception of three mobile shopping characteristics (location sensitivity, time criticality, and extent of control), while other drivers are assumed to matter independent of the context. Based on a dataset of 410 smartphone shoppers, empirical results demonstrate that several acceptance predictors are associated with ease of use and usefulness, which in turn affect intentional and behavioral outcomes. Furthermore, the extent to which risks and benefits impact ease of use and usefulness is influenced by the three contextual characteristics. From a managerial perspective, results show which factors to consider in the development of mobile shopping applications and in which different application contexts they matter.

Risk premiumin the global creditMarkets: 2006-2012

¿What have we learnt from the 2006-2012 crisis, including events such as the subprime crisis, the bankruptcy of Lehman Brothers or the European sovereign debt crisis, among others? It is usually assumed that in firms that have a CDS quotation, this CDS is the key factor in establishing the credit premiumrisk for a new financial asset. Thus, the CDS is a key element for any investor in taking relative value opportunities across a firm’s capital structure. In the first chapter we study the most relevant aspects of the microstructure of the CDS market in terms of pricing, to have a clear idea of how this market works. We consider that such an analysis is a necessary point for establishing a solid base for the rest of the chapters in order to carry out the different empirical studies we perform. In its document “Basel III: A global regulatory framework for more resilient banks and banking systems”, Basel sets the requirement of a capital charge for credit valuation adjustment (CVA) risk in the trading book and its methodology for the computation for the capital requirement. This regulatory requirement has added extra pressure for in-depth knowledge of the CDS market and this motivates the analysis performed in this thesis. The problem arises in estimating of the credit risk premium for those counterparties without a directly quoted CDS in the market. How can we estimate the credit spread for an issuer without CDS? In addition to this, given the high volatility period in the credit market in the last few years and, in particular, after the default of Lehman Brothers on 15 September 2008, we observe the presence of big outliers in the distribution of credit spread in the different combinations of rating, industry and region. After an exhaustive analysis of the results from the different models studied, we have reached the following conclusions. It is clear that hierarchical regression models fit the data much better than those of non-hierarchical regression. Furthermore,we generally prefer the median model (50%-quantile regression) to the mean model (standard OLS regression) due to its robustness when assigning the price to a new credit asset without spread,minimizing the “inversion problem”. Finally, an additional fundamental reason to prefer the median model is the typical "right skewness" distribution of CDS spreads...

Entrepreneurship in project management systems: proposal of a model and preliminary empirical evidence

This study analyzes the manifestation of the dimensions of Entrepreneurial Orientation (EO) and Project Management Systems (PMS). We used a qualitative approach to conduct exploratory research through a study in literature and a pilot case in a software company. Data was collected from semi structured interviews, documents, and records on file, then triangulated and treated with content analysis. The model proposed for the relationship between the types of PMS (ad hoc, Classic PM, innovation, entrepreneurship/intrapreneurship) and the dimensions of EO (innovativeness, risk-taking, proactiveness, competitive aggressiveness, and autonomy), was partially corroborated by empirical studies. New studies are suggested to validate the applicability and setup of the model.