Thermodynamics is important for the design of amine scrubbing CO₂ capture processes. CO₂ solubility and amine volatility in aqueous amines were measured at high temperature and pressure. A rigorous thermodynamic model was developed for MEA-CO₂-H₂O in Aspen Plus®. CO₂ solubility at 80-190°C was obtained from total pressure measurements. Empirical models as a function of temperature and loading were developed for CO₂ solubility from 40 to 160°C in aqueous monoethanolamine (MEA), piperazine (PZ), 1-methylpiperazine (1MPZ), 2-methylpiperazine (2MPZ), PZ/2MPZ, diglycolamine® (DGA®), PZ/1MPZ/1,4-dimethylpiperazine (1,4-DMPZ), and PZ/methyldiethanolamine (MDEA). The high temperature CO₂ solubility data for MEA is comparable to literature and compatible with previous low temperature data. For MEA and PZ, amine concentration does not have obvious effects on the CO₂ solubility. The heat of CO₂ absorption derived from these models varies from 66 kJ/mol for 4 m (molal) PZ/4 m 2MPZ and to 72, 72, and 73 kJ/mol for MEA, 7 m MDEA/2 m PZ, and DGA. The heat of absorption estimated from the total pressure data does not vary significantly with temperature. At 0-0.5 loading ([alpha]), 313-413 K, 3.5-11 m MEA (mol fraction x is 0.059-0.165), the empirical model of MEA volatility is ln(PMEA/xMEA) = 30.0-8153/T-2594[alpha]²/T. In 7 m MEA with 0.2 and 0.5 loading, PMEA is 920 and 230 Pa at 120°C. At 0.3-0.5 loading, the enthalpy of MEA vaporization, -[Delta]Hvap,MEA, is about 70-73 kJ/mol MEA. At 0.25-0.4 loading, 313-423 K, 4.7-11.3 m PZ (x is 0.078-0.169), the empirical model of PZ volatility is ln(PPZ/xPZ) = -123+21.6lnT+20.2[alpha]-18174[alpha]²/T. In 8 m PZ with 0.3 and 0.4 loading, PPZ is 400 and 120 Pa at 120°C, and 2620 and 980 Pa at 150°C. At 0.25-0.4 loading, -[Delta]Hvap,PZ is about 85-100 kJ/mol PZ at 150°C and 66-80 kJ/mol PZ at 40°C. [Delta]Hvap,PZ has a larger dependence on CO₂ loading than [Delta]Hvap,MEA in rich solution because of the more complex speciation/reactions in PZ at rich loading. Specific heat capacity of 8 m PZ is 3.43-3.81 J/(g•K) at 70-150°C. Two new thermodynamic models of MEA-CO₂-H₂O were developed in Aspen Plus® starting with the Hilliard (2008) MEA model. One (Model B) includes a new species MEACOOH and it gets a better prediction than the other (Model A) for CO₂ solubility, MEA volatility, heat of absorption, and other thermodynamic results. The Model B prediction matches the experimental pKa of MEACOOH, and the measured concentration of MEACOO-/MEACOOH by NMR. In the prediction the concentration of MEACOOH is 0.1-3% in 7 m MEA at high temperature or high loading, where the heat of formation of MEACOOH has effects on PCO₂ and CO₂ heat of absorption. Model B solved the problems of Model A by adding MEACOOH and matched the experimental data of pKa and speciation, therefore MEACOOH may be considered an important species at high temperature or high loading. Although mostly developed from 7 m MEA data, Model B also gives a good profile for 11 m (40 wt%) MEA. / text

I examine the informational efficiency of stock markets by testing the relation between idiosyncratic volatility and equity mispricing. I find that the level of mispricing declines with idiosyncratic volatility consistent with the notion that greater levels of firm-specific risk reflect greater participation of informed traders in the market for the stock. However, I also find that mispricing increases with idiosyncratic volatility for highly volatile stocks, and this is attributed to both noise trading and arbitrage risk. In addition, I investigate the link between agency costs and equity mispricing, and whether it exists due to information asymmetry or the degree of conflict of interests between managers and shareholders. I provide evidence that the level of agency costs is positively related with mispricing. In contrast to previous studies' claim that the information asymmetry level is a key determinant in the equity mispricing, I find that the conflict of interests is more important than information asymmetry in explaining equity mispricing. Furthermore, the evidence suggests that stock option grants, originally intended to resolve conflicts of interests, actually exaggerate this problem.

This paper estimates the effects of fiscal institutions on fiscal policy outcomes, addressing issues related to measurement and endogeneity in a novel way. Recently developed indices, based on partially ordered set theory, are used to quantify the stringency of fiscal rules. Identification of their effects is achieved by exploiting the exogeneity of institutional variables (checks and balances, government fragmentation, inflation targeting), which are found to be relevant determinants of fiscal rules. Our two-stage least squares estimates for (up to) 79 countries over the period 1985-2012 provide strong evidence that countries with more stringent fiscal rules have higher fiscal balances (lower deficits), lower interest rate spreads on government bonds, and lower output volatility. (authors' abstract) / Series: Department of Economics Working Paper Series

I compared various MIDAS (mixed data sampling) regression models to predict volatility from one week to one month with different regressors based on the records of Chinese Shanghai composite index. The main regressors are in 2 types, one is the realized power (involving 5-min absolute returns), the other is the quadratic variation, computed by squared returns. And realized power performs best at all the forecast horizons. I also compare the effect of lag numbers in regression, form 1 to 200, and it doesn’t change much after 50. In 3 week and month predict horizons, the fitness result with different lag numbers has a waving type among all the regressors, that implies there exists a seasonal effect which is the same as predict horizons in the lagged variables. At last,the out-of -sample and in-sample result of RV and RAV are quite similar, but in sometimes, out-of sample performs better.

The purpose of this thesis is to investigate and analyze the effect of exchange rate volatility between the euro and the Mexican peso on the exports from the first eleven euro area countries (EA-11) to Mexico. The ten product groups recognized by the Standard International Trade Classification (SITC) are dealt with separately in identifying the influence of exchange rate volatility on the exports. Aggregated data for exchange rates and trade between 1999 and 2008 are analyzed using regressions. In addition to the exchange rate volatility, the variables included in the analysis are: the industrial production index (IPI) of the EA-11 countries, the IPI for Mexico, the nominal exchange rate between the two currencies, the consumer price index (CPI) in Mexico and the harmonized indices of consumer prices (HICPs) for the EA-11. The reaction of trade to exchange rate volatility is a fundamental issue in macroeconomics. It has taken more importance in the recent decades as the scope of international transactions has expanded and the economic activity of one country affects other countries. There have been several studies about the relation between the exchange rate volatility and its influence on trade that have arrived to different results. The conclusion of this thesis is that the exchange rate volatility has a positive and highly significant effect in the exports of only one of the ten evaluated product groups.

In classic GARCH models for financial returns the innovations are usually assumed to be normally distributed. However, it is generally accepted that a non-normal innovation distribution is needed in order to account for the heavier tails often encountered in financial returns. Since the structure of the normal inverse Gaussian (NIG) distribution makes it an attractive alternative innovation distribution for this purpose, we extend the normal GARCH model by assuming that the innovations are NIG-distributed. We use the normal variance mixture interpretation of the NIG distribution to show that a NIG innovation may be interpreted as a normal innovation coupled with a multiplicative random impact factor adjustment of the ordinary GARCH volatility. We relate this new volatility estimate to realised volatility and suggest that the random impact factors are due to a news noise process influencing the underlying returns process. This GARCH model with NIG-distributed innovations leads to more accurate parameter estimates than the normal GARCH model. In order to obtain even more accurate parameter estimates, and since we expect an information gain if we use more data, we further extend the model to cater for high, low and close data, as well as full intraday data, instead of only daily returns. This is achieved by introducing the Brownian inverse Gaussian (BIG) process, which follows naturally from the unit inverse Gaussian distribution and standard Brownian motion. Fitting these models to empirical data, we find that the accuracy of the model fit increases as we move from the models assuming normally distributed innovations and allowing for only daily data to those assuming underlying BIG processes and allowing for full intraday data. However, we do encounter one problematic result, namely that there is empirical evidence of time dependence in the random impact factors. This means that the news noise processes, which we assumed to be independent over time, are indeed time dependent, as can actually be expected. In order to cater for this time dependence, we extend the model still further by allowing for autocorrelation in the random impact factors. The increased complexity that this extension introduces means that we can no longer rely on standard Maximum Likelihood methods, but have to turn to Simulated Maximum Likelihood methods, in conjunction with Efficient Importance Sampling and the Control Variate variance reduction technique, in order to obtain an approximation to the likelihood function and the parameter estimates. We find that this time dependent model assuming an underlying BIG process and catering for full intraday data fits generated data and empirical data very well, as long as enough intraday data is available. / Thesis (Ph.D. (Risk Analysis))--North-West University, Potchefstroom Campus, 2006.

This paper investigates the effect of correlation and volatilities of firm and project cash flows on the choice of project finance. I use a pure-play approach to measure unobservable project cash flows for a sample of 440 US and non-US firms that invested in 577 projects from 1990 to 2008 and find evidence that the probability of project finance is increasing in cash flow volatility difference between firm and project cash flows. The likelihood of the project finance is greater when volatilities are different and the correlation between firm and project cash flows is high. I also find that firms are likely to choose corporate finance for low correlation and low and similar volatilities between firm and project cash flows. This empirical work is consistent with the theoretical predictions in Leland (2007) that provides a potential explanation for the existence of project finance based on financial synergies.

The thesis studies the martingale properties, probabilistic methods and efficient unbiased Monte Carlo simulation methods for various time-homogeneous diffusion models commonly used in mathematical finance. Some of the popular stochastic volatility models such as the Heston model, the Hull-White model and the 3/2 model are special cases. The thesis consists of the following three parts: Part I: Martingale properties in time-homogeneous diffusion models: Part I of the thesis studies martingale properties of stock prices in stochastic volatility models driven by time-homogeneous diffusions. We find necessary and sufficient conditions for the martingale properties. The conditions are based on the local integrability of certain deterministic test functions. Part II: Analytical pricing methods in time-homogeneous diffusion models: Part II of the thesis studies probabilistic methods for determining the Laplace transform of the first hitting time of an integral functional of a time-homogeneous diffusion, and pricing an arithmetic Asian option when the stock price is modeled by a time-homogeneous diffusion. We also consider the pricing of discrete variance swaps and discrete gamma swaps in stochastic volatility models based on time-homogeneous diffusions. Part III: Nearly Unbiased Monte Carlo Simulation: Part III of the thesis studies the unbiased Monte Carlo simulation of option prices when the characteristic function of the stock price is known but its density function is unknown or complicated.

In the absence of taxes and transactions costs, there can be no benefit to corporate reorganization from a financial standpoint, but ‘real world’ limitations and frictions do provide additional value that is gained through divestitures in terms of focus and financial flexibility. Herein, the corporate divestiture decision is analyzed to determine the motivation for a parent company either to cleave its offspring directly to the external capital market in an equity carve-out or to distribute the shares to the existing shareholders in a tax-free spin-off. Cash flow performance, asymmetric information, relative size of the divestiture, and relatedness of the parent’s and subsidiary’s operations are all found to contribute significantly to the divestiture decision. In Canada, an alternate form of security, known as the income trust unit, has become popular for corporate reorganizations, either through an initial public offering or as a conversion of shares. The flow-through structure of income trusts currently allows avoidance of corporate taxation to offer higher pre-tax returns to retail investors, in a market setting where yield is increasingly equated with value. To determine placement of these securities in the market, the risk of the income trust organizational form is analyzed and compared to the standard corporate form. Further, a number of publicly known characteristics of the income trusts can predict the relative risk of this type of investment. In recent ‘hot markets’ for these securities, proof is uncovered that unsuitable firms have been migrating to this sector, but valuation of the investments in this sector has remained fair and full. Although pending legislation will discontinue the tax-exempt status of income trusts in 2011, during their tenure these securities have improved the Canadian market. Based on the data analysis herein, all types of divestitures studied have been predicted to provide commensurate value with respect to risk depending on the nature of the subsidiary. / Thesis (Ph.D, Management) -- Queen's University, 2007-08-15 11:20:20.465

The role of information is central to the study of corporate finance. In the real world where one party usually has more and better information, information asymmetry forms the basis of analysis in many key aspects of modern economics including contract theory and principle-agent problems. Although technology facilitates information flow, information continues to play an important role because we live in an environment in which there is more information and information that is more complex. Moreover, we are experiencing a fundamental shift towards a knowledge-based economy in which ideas and concepts, both in the form of information, gain importance. This thesis examines the role of information as we make this transition in two separate settings: First in a “real impact” setting where knowledge generated at leading research universities spills over into firms nearby, and second, in a "traditional market" setting where analysts help disseminate information. In the post-industrial economy of the 21st century, innovation is the engine of economic growth. As a result, we increasingly value human capital and knowledge. Chapter 2 looks at the location of firms relative to knowledge centers and its impact on stock volatility. I argue that knowledge spillovers foster firm R&D and find supporting evidence. My evidence is consistent with the classic models on the impact of human capital on economic growth (Nelson and Phelps, 1966). Chapter 3 examines the impact of knowledge and innovation on firms’ cash management policies. Bates, Kahle, and Stulz (2009) find that the average cash-to-assets ratio for firms more than doubles in the past decades and attribute it to changing firm characteristics. I identify innovation as a driving force behind these changes, resulting in firms holding more cash as a precaution. In Chapter 4, I study the investment value of information from analysts, or more specifically, analyst target prices. Due to potential conflicts of interest problems, the value that analysts provide to investors remains controversial. Moreover, since the information age is characterized by information overload, it is harder for investors to identify relevant information. I find that institutions trade in the same direction as the consensus target price movement. / Thesis (Ph.D, Management) -- Queen's University, 2012-03-07 14:20:20.178