### Refine

#### Document Type

- Journal article (2)
- Doctoral Thesis (1)

#### Keywords

- 5-fluorouracil (1)
- Finanzmathematik (1)
- Firmwert (1)
- Kapitalverflechtungen (1)
- Systemisches Risiko (1)
- asthma (1)
- bevacizumab (1)
- bleb failure (1)
- bleb scarring (1)
- body weight (1)

#### Institute

Based on the work of Eisenberg and Noe [2001], Suzuki [2002], Elsinger [2009] and Fischer [2014], we consider a generalization of Merton's asset valuation approach where n firms are linked by cross-ownership of equities and liabilities. Each firm is assumed to have a single outstanding liability, whereas its assets consist of one system-exogenous asset, as well as system-endogenous assets comprising some fraction of other firms' equity and liability, respectively. Following Fischer [2014], one can obtain no-arbitrage prices of equity and the recovery claims of liabilities as solutions of a fixed point problem, and hence obtain no-arbitrage prices of the `firm value' of each firm, which is the value of the firm's liability plus the firm's equity.
In a first step, we consider the two-firm case where explicit formulae for the no-arbitrage prices of the firm values are available (cf. Suzuki [2002]). Since firm values are derivatives of exogenous asset values, the distribution of firm values at maturity can be determined from the distribution of exogenous asset values. The Merton model and most of its known extensions do not account for the cross-ownership structure of the assets owned by the firm. Therefore the assumption of lognormally distributed exogenous assets leads to lognormally distributed firm values in such models, as the values of the liability and the equity add up to the exogenous asset's value (which has lognormal distribution by assumption). Our work therefore starts from lognormally distributed exogenous assets and reveals how cross-ownership, when correctly accounted for in the valuation process, affects the distribution of the firm value, which is not lognormal anymore. In a simulation study we examine the impact of several parameters (amount of cross-ownership of debt and equity, ratio of liabilities to expected exogenous assets value) on the differences between the distribution of firm values obtained from our model and correspondingly matched lognormal distributions. It becomes clear that the assumption of lognormally distributed firm values may lead to both over- and underestimation of the “true" firm values (within the cross-ownership model) and consequently of bankruptcy risk, too.
In a second step, the bankruptcy risk of one firm within the system is analyzed in more detail in a further simulation study, revealing that the correct incorporation of cross-ownership in the valuation procedure is the more important, the tighter the cross-ownership structure between the two firms. Furthermore, depending on the considered type of cross-ownership (debt or equity), the assumption of lognormally distributed firm values is likely to result in an over- resp. underestimation of the actual probability of default. In a similar vein, we consider the Value-at-Risk (VaR) of a firm in the system, which we calculate as the negative α-quantile of the firm value at maturity minus the firm's risk neutral price in t=0, i.e. we consider the (1-α)100%-VaR of the change in firm value. If we let the cross-ownership fractions (i.e. the fraction that one firm holds of another firm's debt or equity) converge to 1 (which is the supremum of the possible values that cross-ownership fractions can take), we can prove that in a system of two firms, the lognormal model will over- resp. underestimate both univariate and bivariate probabilities of default under cross-ownership of debt only resp. cross-ownership of equity only. Furthermore, we provide a formula that allows us to check for an arbitrary scenario of cross-ownership and any non-negative distribution of exogenous assets whether the approximating lognormal model will over- or underestimate the related probability of default of a firm. In particular, any given non-negative distribution of exogenous asset values (non-degenerate in a certain sense) can be transformed into a new, “extreme" distribution of exogenous assets yielding such a low or high actual probability of default that the approximating lognormal model will over- and underestimate this risk, respectively.
After this analysis of the univariate distribution of firm values under cross-ownership in a system of two firms with bivariately lognormally distributed exogenous asset values, we consider the copula of these firm values as a distribution-free measure of the dependency between these firm values. Without cross-ownership, this copula would be the Gaussian copula. Under cross-ownership, we especially consider the behaviour of the copula of firm values in the lower left and upper right corner of the unit square, and depending on the type of cross-ownership and the considered corner, we either obtain error bounds as to how good the copula of firm values under cross-ownership can be approximated with the Gaussian copula, or we see that the copula of firm values can be written as the copula of two linear combinations of exogenous asset values (note that these linear combinations are not lognormally distributed). These insights serve as a basis for our analysis of the tail dependence coefficient of firm values under cross-ownership. Under cross-ownership of debt only, firm values remain upper tail independent, whereas they become perfectly lower tail dependent if the correlation between exogenous asset values exceeds a certain positive threshold, which does not depend on the exact level of cross-ownership. Under cross-ownership of equity only, the situation is reverse in that firm values always remain lower tail independent, but upper tail independence is preserved if and only if the right tail behaviour of both firms’ values is determined by the right tail behaviour of the firms’ own exogenous asset value instead of the respective other firm’s exogenous asset value.
Next, we return to systems of n≥2 firms and analyze sensitivities of no-arbitrage prices of equity and the recovery claims of liabilities with respect to the model parameters. In the literature, such sensitivities are provided with respect to exogenous asset values by Gouriéroux et al. [2012], and we extend the existing results by considering how these no-arbitrage prices depend on the cross-ownership fractions and the level of liabilities. For the former, we can show that all prices are non-decreasing in any cross-ownership fraction in the model, and by use of a version of the Implicit Function Theorem we can also determine exact derivatives. For the latter, we show that the recovery value of debt and the equity value of a firm are non-decreasing and non-increasing in the firm's nominal level of liabilities, respectively, but the firm value is in general not monotone in the firm's level of liabilities. Furthermore, no-arbitrage prices of equity and the recovery claims of liabilities of a firm are in general non-monotone in the nominal level of liabilities of other firms in the system. If we confine ourselves to one type of cross-ownership (i.e. debt or equity), we can derive more precise relationships. All the results can be transferred to risk-neutral prices before maturity.
Finally, following Gouriéroux et al. [2012] and as a kind of extension to the above sensitivity results, we consider how immediate changes in exogenous asset values of one or more firms at maturity affect the financial health of a system of n initially solvent firms. We start with some theoretical considerations on what we call the contagion effect, namely the change in the endogenous asset value of a firm caused by shocks on the exogenous assets of firms within the system. For the two-firm case, an explicit formula is available, making clear that in general (and in particular under cross-ownership of equity only), the effect of contagion can be positive as well as negative, i.e. it can both, mitigate and exacerbate the change in the exogenous asset value of a firm. On the other hand, we cannot generally say that a tighter cross-ownership structure leads to bigger absolute contagion effects. Under cross-ownership of debt only, firms cannot profit from positive shocks beyond the direct effect on exogenous assets, as the contagion effect is always non-positive. Next, we are concerned with spillover effects of negative shocks on a subset of firms to other firms in the system (experiencing non-negative shocks themselves), driving them into default due to large losses in their endogenous asset values. Extending the results of Glasserman and Young [2015], we provide a necessary condition for the shock to cause such an event. This also yields an upper bound for the probability of such an event. We further investigate how the stability of a system of firms exposed to multiple shocks depends on the model parameters in a simulation study. In doing so, we consider three network types (incomplete, core-periphery and ring network) with simultaneous shocks on some of the firms and wiping out a certain percentage of their exogenous assets. Then we analyze for all three types of cross-ownership (debt only, equity only, both debt and equity) how the shock intensity, the shock size, and network parameters as the number of links in the network and the proportion of a firm's debt or equity held within the system of firms influences several output parameters, comprising the total number of defaults and the relative loss in the sum of firm values, among others. Comparing our results to the studies of Nier et al. [2007], Gai and Kapadia [2010] and Elliott et al. [2014], we can only partly confirm their results with respect to the number of defaults. We conclude our work with a theoretical comparison of the complete network (where each firm holds a part of any other firm) and the ring network with respect to the number of defaults caused by a shock on a single firm, as it is done by Allen and Gale [2000]. In line with the literature, we find that under cross-ownership of debt only, complete networks are “robust yet fragile" [Gai and Kapadia, 2010] in that moderate shocks can be completely withstood or drive the firm directly hit by the shock in default, but as soon as the shock exceeds a certain size, all firms are simultaneously in default. In contrast to that, firms default one by one in the ring network, with the first “contagious default" (i.e. a default of a firm not directly hit by the shock) already occurs for smaller shock sizes than under the complete network.

Background
The prevalence of obesity is rising. Obesity can lead to cardiovascular and ventilatory complications through multiple mechanisms. Cardiac and pulmonary function in asymptomatic subjects and the effect of structured dietary programs on cardiac and pulmonary function is unclear.
Objective
To determine lung and cardiac function in asymptomatic obese adults and to evaluate whether weight loss positively affects functional parameters.
Methods
We prospectively evaluated bodyplethysmographic and echocardiographic data in asymptomatic subjects undergoing a structured one-year weight reduction program.
Results
74 subjects (32 male, 42 female; mean age 42±12 years) with an average BMI 42.5±7.9, body weight 123.7±24.9 kg were enrolled. Body weight correlated negatively with vital capacity (R = −0.42, p<0.001), FEV1 (R = −0.497, p<0.001) and positively with P 0.1 (R = 0.32, p = 0.02) and myocardial mass (R = 0.419, p = 0.002). After 4 months the study subjects had significantly reduced their body weight (−26.0±11.8 kg) and BMI (−8.9±3.8) associated with a significant improvement of lung function (absolute changes: vital capacity +5.5±7.5% pred., p<0.001; FEV1+9.8±8.3% pred., p<0.001, ITGV+16.4±16.0% pred., p<0.001, SR tot −17.4±41.5% pred., p<0.01). Moreover, P0.1/Pimax decreased to 47.7% (p<0.01) indicating a decreased respiratory load. The change of FEV1 correlated significantly with the change of body weight (R = −0.31, p = 0.03). Echocardiography demonstrated reduced myocardial wall thickness (−0.08±0.2 cm, p = 0.02) and improved left ventricular myocardial performance index (−0.16±0.35, p = 0.02). Mitral annular plane systolic excursion (+0.14, p = 0.03) and pulmonary outflow acceleration time (AT +26.65±41.3 ms, p = 0.001) increased.
Conclusion
Even in asymptomatic individuals obesity is associated with abnormalities in pulmonary and cardiac function and increased myocardial mass. All the abnormalities can be reversed by a weight reduction program.

Purpose: Scarring after glaucoma filtering surgery remains the most frequent cause for bleb failure. The aim of this study was to assess if the postoperative injection of bevacizumab reduces the number of postoperative subconjunctival 5-fluorouracil (5-FU) injections. Further, the effect of bevacizumab as an adjunct to 5-FU on the intraocular pressure (IOP) outcome, bleb morphology, postoperative medications, and complications was evaluated.
Methods: Glaucoma patients (N = 61) who underwent trabeculectomy with mitomycin C were analyzed retrospectively (follow-up period of 25 ± 19 months). Surgery was performed exclusively by one experienced glaucoma specialist using a standardized technique. Patients in group 1 received subconjunctival applications of 5-FU postoperatively. Patients in group 2 received 5-FU and subconjunctival injection of bevacizumab.
Results: Group 1 had 6.4 ± 3.3 (0–15) (mean ± standard deviation and range, respectively) 5-FU injections. Group 2 had 4.0 ± 2.8 (0–12) (mean ± standard deviation and range, respectively) 5-FU injections. The added injection of bevacizumab significantly reduced the mean number of 5-FU injections by 2.4 ± 3.08 (P ≤ 0.005). There was no significantly lower IOP in group 2 when compared to group 1. A significant reduction in vascularization and in cork screw vessels could be found in both groups (P < 0.0001, 7 days to last 5-FU), yet there was no difference between the two groups at the last follow-up. Postoperative complications were significantly higher for both groups when more 5-FU injections were applied. (P = 0.008). No significant difference in best corrected visual acuity (P = 0.852) and visual field testing (P = 0.610) between preoperative to last follow-up could be found between the two groups.
Conclusion: The postoperative injection of bevacizumab reduced the number of subconjunctival 5-FU injections significantly by 2.4 injections. A significant difference in postoperative IOP reduction, bleb morphology, and postoperative medication was not detected.