The Optimal Capital Structure of Banks: Balancing Deposit Insurance, Capital Requirements and Tax-Advantaged Debt

The capital structure and regulation of financial intermediaries is an important topic for practitioners, regulators and academic researchers. In general, theory predicts that firms choose their capital structures by balancing the benefits of debt (e.g., tax and agency benefits) against its costs (e.g., bankruptcy costs). However, when traditional corporate finance models have been applied to insured financial institutions, the results have generally predicted corner solutions (all equity or all debt) to the capital structure problem. This paper studies the impact and interaction of deposit insurance, capital requirements and tax benefits on a bankÇs choice of optimal capital structure. Using a contingent claims model to value the firm and its associated claims, we find that there exists an interior optimal capital ratio in the presence of deposit insurance, taxes and a minimum fixed capital standard. Banks voluntarily choose to maintain capital in excess of the minimum required in order to balance the risks of insolvency (especially the loss of future tax benefits) against the benefits of additional debt. Because we derive a closed- form solution, our model provides useful insights on several current policy debates including revisions to the regulatory framework for GSEs, tax policy in general and the tax exemption for credit unions.

Hedging under liquidity constraints

Although risk management can be justified by financial distress, the theoretical models usually contain hedging instruments free of funding risk. In practice, management of the counterparty risk in derivative transactions is of enhanced importance, consequently not only is trading on exchanges subject to the presence of a margin account, but also in bilateral (OTC) agreements parties will require margins or collateral from their partners in order to hedge the mark-tomarket loss of the transaction. The aim of this paper is to present and compare two models where the financing need of the hedging instrument also appears, influencing the hedging strategy and the optimal hedging ratio. Both models contain the same source of risk and optimisation criterion, but the liquidity risk is modelled in different ways. In the first model, there is no additional financing resource that can be used to finance the margin account in case of a margin call, which entails the risk of liquidation of the hedging position. In the second model, the financing is available but a given credit spread is to be paid for this, so hedging can become costly.

Growth and characterization of pure and doped single crystals of $CuGeO_{3}$

Good quality single crystals of copper metagermanite, CuGeO3, are grown by flux technique. Growth is carried out at relatively low temperatures by using Bi2O3 along with CuO in an optimal flux ratio. Besides rendering the procedure simple, lower growth temperature reduces growth defect concentration. Single crystals of Cu1 - xCoxGeO3 and CuGe1 - yGayO3 are grown by the same method for different values of x and y to investigate the influence of in-chain and off-chain doping on spin-Peierls (SP) transition. Change in color, morphology and surface features as a result of doping are briefly discussed. Spin-Peierls transition of these crystals is studied by susceptibility measurements on a commercial SQUID magnetometer. Cationic substitution resulted in reduction of spin-Peierls transition temperature (T-SP) of CuGeO3. Substitution of magnetic impurity cobalt in-chain site caused more pronounced effects such as suppression of SP phase.

Evaluation of isopentane, R-245fa and their mixtures as working fluids for organic Rankine cycles

Low grade thermal energy from sources such as solar, geothermal and industrial waste heat in the temperature range of 380-425 K can be converted to electrical energy with reasonable efficiency using isopentane and R-245fa. While the former is flammable and the latter has considerable global warming potential, their mixture in 0.7/0.3 mole fraction is shown to obviate these disadvantages and yet retain dominant merits of each fluid. A realistic thermodynamic analysis is carried out wherein the possible sources of irreversibilities such as isentropic efficiencies of the expander and the pump and entropy generation in the regenerator, boiler and condenser are accounted for. The performance of the system in the chosen range of heat source temperatures is evaluated. A technique of identifying the required source temperature for a given output of the plant and the maximum operating temperature of the working fluid is developed. This is based on the pinch point occurrence in the boiler and entropy generation in the boiling and superheating regions of the boiler. It is shown that cycle efficiencies of 10-13% can be obtained in the range investigated at an optimal expansion ratio of 7-10. (C) 2012 Elsevier Ltd. All rights reserved.

Investigation of the dilution process for measurement of particulate matter from spark-ignition engines

Measurements of particulate matter (PM) from spark ignition (SI) engine exhaust using dilution tunnels will become more prevalent as emission standards are tightened. Hence, a study of the dilution process was undertaken in order to understand how various dilution related parameters affect the accuracy with which PM sizes and concentrations can be determined. A SI and a compression ignition (CI) engine were separately used to examine parameters of the dilution process; the present work discusses the results in the context of SI exhaust dilution. A Scanning Mobility Particle Sizer (SMPS) was used to measure the size distribution, number density, and volume fraction of PM. Temperature measurements in the exhaust pipe and dilution tunnel reveal the degree of mixing between exhaust and dilution air, the effect of flowrate on heat transfer from undiluted and diluted exhaust to the environment, and the minimum permissible dilution ratio for a maximum sample temperature of 52°C. Measurements of PM concentrations as a function of dilution ratio show the competing effects of temperature and particle/vapor concentrations on particle growth dynamics, which result in a range of dilution ratios-from 13 to 18-where the effect of dilution ratio, independent of flowrate, is kept to a minimum. This range of dilution ratios is therefore optimal in order to achieve repeatable PM concentration measurements. Particle dynamics during transit through the tunnel operating at the optimal dilution ratio was found statistically insignificant compared to data scatter. Such small differences in number concentration may be qualitatively representative of particle losses for SI exhaust, but small increases in PM volume fraction during transit through the tunnel may significantly underestimate accretion of mass due to unburned hydrocarbons (HCs) emitted by SI engines. The fraction of SI-derived PM mass due to adsorbed/absorbed vapor, estimated from these data, is consistent with previous chemical analyses of PM. © 1998 Society of Automotive Engineers, Inc.

Production and characterization of biodiesel from tung oil

The feasibility of biodiesel production from tung oil was investigated. The esterification reaction of the free fatty acids of tung oil was performed using Amberlyst-15. Optimal molar ratio of methanol to oil was determined to be 7.5:1, and Amberlyst-15 was 20.8wt% of oil by response surface methodology. Under these reaction conditions, the acid value of tung oil was reduced to 0.72mg KOH/g. In the range of the molar equivalents of methanol to oil under 5, the esterification was strongly affected by the amount of methanol but not the catalyst. When the molar ratio of methanol to oil was 4.1:1 and Amberlyst-15 was 29.8wt% of the oil, the acid value decreased to 0.85mg KOH/g. After the transesterification reaction of pretreated tung oil, the purity of tung biodiesel was 90.2wt%. The high viscosity of crude tung oil decreased to 9.8mm(2)/s at 40 degrees C. Because of the presence of eleostearic acid, which is a main component of tung oil, the oxidation stability as determined by the Rancimat method was very low, 0.5h, but the cold filter plugging point, -11 degrees C, was good. The distillation process did not improve the fatty acid methyl ester content and the viscosity.

Essays on energy derivatives pricing and financial risk management

This thesis consists of an introductory chapter (essay I) and five more empirical essays on electricity markets and CO2 spot price behaviour, derivatives pricing analysis and hedging. Essay I presents the structure of the thesis and electricity markets functioning and characteristics, as well as the type of products traded, to be analyzed on the following essays. In the second essay we conduct an empirical study on co-movements in electricity markets resorting to wavelet analysis, discussing long-term dynamics and markets integration. Essay three is about hedging performance and multiscale relationships in the German electricity spot and futures markets, also using wavelet analysis. We concentrate the investigation on the relationship between coherence evolution and hedge ratio analysis, on a time-frequency-scale approach, between spot and futures which conditions the effectiveness of the hedging strategy. Essays four, five and six are interrelated between them and with the other two previous essays given the nature of the commodity analyzed, CO2 emission allowances, traded in electricity markets. Relationships between electricity prices, primary energy fuel prices and carbon dioxide permits are analyzed on essay four. The efficiency of the European market for allowances is examined taking into account markets heterogeneity. Essay five analyzes stylized statistical properties of the recent traded asset CO2 emission allowances, for spot and futures returns, examining also the relation linking convenience yield and risk premium, for the German European Energy Exchange (EEX) between October 2005 and October 2009. The study was conducted through empirical estimations of CO2 allowances risk premium, convenience yield, and their relation. Future prices from an ex-post perspective are examined to show evidence for significant negative risk premium, or else a positive forward premium. Finally, essay six analyzes emission allowances futures hedging effectiveness, providing evidence for utility gains increases with investor’s preference over risk. Deregulation of electricity markets has led to higher uncertainty in electricity prices and by presenting these essays we try to shed new lights about structuring, pricing and hedging in this type of markets.

The cross-currency hedging performance of implied versus statistical forecasting models

This article examines the ability of several models to generate optimal hedge ratios. Statistical models employed include univariate and multivariate generalized autoregressive conditionally heteroscedastic (GARCH) models, and exponentially weighted and simple moving averages. The variances of the hedged portfolios derived using these hedge ratios are compared with those based on market expectations implied by the prices of traded options. One-month and three-month hedging horizons are considered for four currency pairs. Overall, it has been found that an exponentially weighted moving-average model leads to lower portfolio variances than any of the GARCH-based, implied or time-invariant approaches.

Self-reinforced composites obtained by the partial oxypropylation of cellulose fibers. 1. Characterization of the materials obtained with different types of fibers

The in-depth oxypropylation of different types of cellulose fibers, namely Avicel, Rayon, Kraft, and Filter Paper, was investigated. New biphasic mono-component materials were obtained, which could be hot-pressed to form films of cellulose fibers dispersed into a thermoplastic matrix. The success of this chemical modification was assessed by FTIR spectroscopy, X-ray diffraction, scanning electron microscopy. differential scanning calorimetry, thermogravimetric analysis and contact angle measurements. The optimization of this process led to the establishment of the optimal molar ratio between the cellulose CH groups and propylene oxide, which varied as a function of the specific morphology of the fibers. (C) 2008 Elsevier Ltd. All rights reserved.

Plasmons as sensors

“Plasmon” is a synonym for collective oscillations of the conduction electrons in a metal nanoparticle (excited by an incoming light wave), which cause strong optical responses like efficient light scattering. The scattering cross-section with respect to the light wavelength depends not only on material, size and shape of the nanoparticle, but also on the refractive index of the embedding medium. For this reason, plasmonic nanoparticles are interesting candidates for sensing applications. Here, two novel setups for rapid spectral investigations of single nanoparticles and different sensing experiments are presented.rnrnPrecisely, the novel setups are based on an optical microscope operated in darkfield modus. For the fast single particle spectroscopy (fastSPS) setup, the entrance pinhole of a coupled spectrometer is replaced by a liquid crystal device (LCD) acting as spatially addressable electronic shutter. This improvement allows the automatic and continuous investigation of several particles in parallel for the first time. The second novel setup (RotPOL) usesrna rotating wedge-shaped polarizer and encodes the full polarization information of each particle within one image, which reveals the symmetry of the particles and their plasmon modes. Both setups are used to observe nanoparticle growth in situ on a single-particle level to extract quantitative data on nanoparticle growth.rnrnUsing the fastSPS setup, I investigate the membrane coating of gold nanorods in aqueous solution and show unequivocally the subsequent detection of protein binding to the membrane. This binding process leads to a spectral shift of the particles resonance due to the higher refractive index of the protein compared to water. Hence, the nanosized addressable sensor platform allows for local analysis of protein interactions with biological membranes as a function of the lateral composition of phase separated membranes.rnrnThe sensitivity on changes in the environmental refractive index depends on the particles’ aspect ratio. On the basis of simulations and experiments, I could present the existence of an optimal aspect ratio range between 3 and 4 for gold nanorods for sensing applications. A further sensitivity increase can only be reached by chemical modifications of the gold nanorods. This can be achieved by synthesizing an additional porous gold cage around the nanorods, resulting in a plasmon sensitivity raise of up to 50 % for those “nanorattles” compared to gold nanorods with the same resonance wavelength. Another possibility isrnto coat the gold nanorods with a thin silver shell. This reduces the single particle’s resonance spectral linewidth about 30 %, which enlarges the resolution of the observable shift. rnrnThis silver coating evokes the interesting effect of reducing the ensemble plasmon linewidth by changing the relation connecting particle shape and plasmon resonance wavelength. This change, I term plasmonic focusing, leads to less variation of resonance wavelengths for the same particle size distribution, which I show experimentally and theoretically.rnrnIn a system of two coupled nanoparticles, the plasmon modes of the transversal and longitudinal axis depend on the refractive index of the environmental solution, but only the latter one is influenced by the interparticle distance. I show that monitoring both modes provides a self-calibrating system, where interparticle distance variations and changes of the environmental refractive index can be determined with high precision.

The role of coccolithophore calcification in bioengineering their environment.

Coccolithophorids are enigmatic plankton that produce calcium carbonate coccoliths, which over geological time have buried atmospheric CO2 into limestone, changing both the atmosphere and geology of the Earth. However, the role of coccoliths for the proliferation of these organisms remains unclear; suggestions include roles in anti-predation, enhanced photosynthesis and sun-screening. Here we test the hypothesis that calcification stabilizes the pH of the seawater proximate to the organisms, providing a level of acidification countering the detrimental basification that occurs during net photosynthesis. Such bioengineering provides a more stable pH environment for growth and fits the empirical evidence for changes in rates of calcification under different environmental conditions. Under this scenario, simulations suggest that the optimal production ratio of inorganic to organic particulate C (PIC : POCprod) will be lower (by approx. 20%) with ocean acidification and that overproduction of coccoliths in a future acidified ocean, where pH buffering is weaker, presents a risk to calcifying cells.

The role of coccolithophore calcification in bioengineering their environment.

Coccolithophorids are enigmatic plankton that produce calcium carbonate coccoliths, which over geological time have buried atmospheric CO2 into limestone, changing both the atmosphere and geology of the Earth. However, the role of coccoliths for the proliferation of these organisms remains unclear; suggestions include roles in anti-predation, enhanced photosynthesis and sun-screening. Here we test the hypothesis that calcification stabilizes the pH of the seawater proximate to the organisms, providing a level of acidification countering the detrimental basification that occurs during net photosynthesis. Such bioengineering provides a more stable pH environment for growth and fits the empirical evidence for changes in rates of calcification under different environmental conditions. Under this scenario, simulations suggest that the optimal production ratio of inorganic to organic particulate C (PIC : POCprod) will be lower (by approx. 20%) with ocean acidification and that overproduction of coccoliths in a future acidified ocean, where pH buffering is weaker, presents a risk to calcifying cells.

Optimal V. O2max-to-mass ratio for predicting 15 km performance among elite male cross-country skiers

The aim of this study was 1) to validate the 0.5 body-mass exponent for maximal oxygen uptake (V. O2max) as the optimal predictor of performance in a 15 km classical-technique skiing competition among elite male cross-country skiers and 2) to evaluate the influence of distance covered on the body-mass exponent for V. O2max among elite male skiers. Twenty-four elite male skiers (age: 21.4±3.3 years [mean ± standard deviation]) completed an incremental treadmill roller-skiing test to determine their V. O2max. Performance data were collected from a 15 km classicaltechnique cross-country skiing competition performed on a 5 km course. Power-function modeling (ie, an allometric scaling approach) was used to establish the optimal body-mass exponent for V . O2max to predict the skiing performance. The optimal power-function models were found to be race speed = 8.83⋅(V . O2max m-0.53) 0.66 and lap speed = 5.89⋅(V . O2max m-(0.49+0.018lap)) 0.43e0.010age, which explained 69% and 81% of the variance in skiing speed, respectively. All the variables contributed to the models. Based on the validation results, it may be recommended that V. O2max divided by the square root of body mass (mL⋅min−1 ⋅kg−0.5) should be used when elite male skiers’ performance capability in 15 km classical-technique races is evaluated. Moreover, the body-mass exponent for V . O2max was demonstrated to be influenced by the distance covered, indicating that heavier skiers have a more pronounced positive pacing profile (ie, race speed gradually decreasing throughout the race) compared to that of lighter skiers.

On the optimal ratio of heavy to light chain genes for efficient recombinant antibody production by CHO cells

Monoclonal antibodies (Mab) are heterotetramers consisting of an equimolar ratio of heavy chain (HC) and light chain (LC) polypeptides. Accordingly, most recombinant Mab expression systems utilize an equimolar ratio of heavy chain (he) to light chain (lc) genes encoded on either one or two plasmids. However, there is no evidence to suggest that this gene ratio is optimal for stable or transient production of recombinant Mab. In this study we have determined the optimal ratio of hc:lc genes for production of a recombinant IgG(4) Mab, cB72.3, by Chinese hamster ovary (CHO) cells using both empirical and mathematical modeling approaches. Polyethyleneimine-mediated transient expression of cB72.3 at varying ratios of hc:lc genes encoded on separate plasmids yielded an optimal Mab titer at a hc:lc gene ratio of 3:2; a conclusion confirmed by separate mathematical modeling of the Mab folding and assembly process using transient expression data. On the basis of this information, we hypothesized that utilization of he genes at low hc:lc gene ratios is more efficient. To confirm this, cB72.3 Mab was transiently produced by CHO cells at constant he and varying lc gene dose. Under these conditions, Mab yield was increased with a concomitant increase in lc gene dose. To determine if the above findings also apply to stably transfected CHO cells producing recombinant Mab, we compared the intra- and extracellular ratios of HC and LC polypeptides for three GS-CHO cells lines transfected with a 1:1 ratio of hc:lc genes and selected for stable expression of the same recombinant Mab, cB72.3. Intra- and extracellular HC:LC polypeptide ratios ranged from 1:2 to 1:5, less than that observed on transient expression of the same Mab in parental CHO cells using the same vector. In conclusion, our data suggest that the optimal ratio of hc:lc genes used for transient and stable expression of Mab differ. In the case of the latter, we infer that optimal Mab production by stably transfected cells represents a compromise between HC abundance limiting productivity and the requirement for excess LC to render Mab folding and assembly more efficient.