Linkages across Sovereign Debt Markets
... spreads to the benchmark of 0.43 because the bond price functions at home respond not only to foreign defaults but also to the level of foreign borrowing. We also consider the case of correlated income shocks. We use the joint process for output for Italy, Greece, and Spain to calibrate the model’s ...
... spreads to the benchmark of 0.43 because the bond price functions at home respond not only to foreign defaults but also to the level of foreign borrowing. We also consider the case of correlated income shocks. We use the joint process for output for Italy, Greece, and Spain to calibrate the model’s ...
Debt, Recovery Rates and the Greek Dilemma - Eureka
... income directly that do not depend on the business cycle can be summarised within the TFP shock we model. ...
... income directly that do not depend on the business cycle can be summarised within the TFP shock we model. ...
Monetary and Fiscal Policy with Sovereign Default
... sovereign default literature (see Reinhart and Rogoff, 2011). In a closed economy, a default does not redistribute resources from foreign lenders to domestic citizens. The government may still choose not to repay its debt to relax its budget constraint and reduce distortionary taxes. The model is c ...
... sovereign default literature (see Reinhart and Rogoff, 2011). In a closed economy, a default does not redistribute resources from foreign lenders to domestic citizens. The government may still choose not to repay its debt to relax its budget constraint and reduce distortionary taxes. The model is c ...
NBER WORKING PAPER MARKETS AND PLANNING
... purposeof this paper is to focus on one dimension of these linkages- the possibility the planning horizon of the policy maker differs from that of the economic agent. This issue may be of special relevance for the default decisions in the context of country risk. The experience of ...
... purposeof this paper is to focus on one dimension of these linkages- the possibility the planning horizon of the policy maker differs from that of the economic agent. This issue may be of special relevance for the default decisions in the context of country risk. The experience of ...
Location Efficient Mortgages: Is the Rationale
... that LEMs will not exacerbate mortgage default. Since repayment histories for LEMs will not be available for several years, we use an indirect test based on the following logic. If it is true, as LEMs advocates claim, that homeowners in location efficient areas can safely be allowed to violate tradi ...
... that LEMs will not exacerbate mortgage default. Since repayment histories for LEMs will not be available for several years, we use an indirect test based on the following logic. If it is true, as LEMs advocates claim, that homeowners in location efficient areas can safely be allowed to violate tradi ...
Commercial Mortgage-backed Securities: Prepayment and Default*
... results in an increase in default rates. In terms of prepayments, it is a function of loan attributes as well, including default. The exercise of the prepayment option leads to the termination of the default option (and vice-versa). These “competing risks” are quite important and complex in the com ...
... results in an increase in default rates. In terms of prepayments, it is a function of loan attributes as well, including default. The exercise of the prepayment option leads to the termination of the default option (and vice-versa). These “competing risks” are quite important and complex in the com ...
Introduction to Volatility
... underlying prices are lognormal distributed. For more information, see Price and Return's distribution. Thus, in a return's distribution, Volatility is the deviation of returns from their mean. If we assume the mean of returnsto be zero, then 10% yearly Volatility represents that in one year return ...
... underlying prices are lognormal distributed. For more information, see Price and Return's distribution. Thus, in a return's distribution, Volatility is the deviation of returns from their mean. If we assume the mean of returnsto be zero, then 10% yearly Volatility represents that in one year return ...
Introduction_to_Volatility
... underlying prices are lognormal distributed. For more information, see Price and Return's distribution. Thus, in a return's distribution, Volatility is the deviation of returns from their mean. If we assume the mean of returnsto be zero, then 10% yearly Volatility represents that in one year return ...
... underlying prices are lognormal distributed. For more information, see Price and Return's distribution. Thus, in a return's distribution, Volatility is the deviation of returns from their mean. If we assume the mean of returnsto be zero, then 10% yearly Volatility represents that in one year return ...
the probability of default under ifrs 9: multi
... The probability of default is one of the most important risk parameters estimated in credit institutions, especially banks, and plays a major role in credit risk analysis and management. Given the fact that one of the fundamental activities of banks is granting loans, the banking industry places a g ...
... The probability of default is one of the most important risk parameters estimated in credit institutions, especially banks, and plays a major role in credit risk analysis and management. Given the fact that one of the fundamental activities of banks is granting loans, the banking industry places a g ...
Contagion of Sovereign Default Risk: the Role of Two Financial
... bond yields soared up, and along the way, government bond yields for several countries such as Ireland, Portugal, and Spain have substantially increased, suggesting a possibility that the default risk originating in Greece has spread to these countries. The contagion of sovereign default risk is, ho ...
... bond yields soared up, and along the way, government bond yields for several countries such as Ireland, Portugal, and Spain have substantially increased, suggesting a possibility that the default risk originating in Greece has spread to these countries. The contagion of sovereign default risk is, ho ...
Fiscal Austerity during Debt Crises
... on fiscal austerity. One side of the debate considers fiscal austerity plans to be beneficial because by increasing taxes, the government can avoid a default by more easily servicing and reducing the debt.1 The other side of the debate considers fiscal austerity plans to be detrimental because highe ...
... on fiscal austerity. One side of the debate considers fiscal austerity plans to be beneficial because by increasing taxes, the government can avoid a default by more easily servicing and reducing the debt.1 The other side of the debate considers fiscal austerity plans to be detrimental because highe ...
NBER WORKING PAPER SERIES OF BELIEFS. Pierre Collin-Dufresne
... (µ − r) = L λQ − λP 1{τ >t} = LΓλP 1{τ >t} . Hence, JTD can potentially explain high risk-premia on corporate bonds. Second, JTD translates into higher short term credit spreads since, solving equation (5) (for the case of constant drifts and intensities)10 we see that P (t, T ) = e−(µ+λ ...
... (µ − r) = L λQ − λP 1{τ >t} = LΓλP 1{τ >t} . Hence, JTD can potentially explain high risk-premia on corporate bonds. Second, JTD translates into higher short term credit spreads since, solving equation (5) (for the case of constant drifts and intensities)10 we see that P (t, T ) = e−(µ+λ ...
Regime-Switching Measure of Systemic Financial Stress
... the weekly frequency, in contrast to the daily data of a different set of financial variables used in González-Hermosillo and Hesse (2009). This allows my model to reduce the effects of the “noise” in high-frequency data on the identification of regimes. Second, I model the TED and CDS spreads in l ...
... the weekly frequency, in contrast to the daily data of a different set of financial variables used in González-Hermosillo and Hesse (2009). This allows my model to reduce the effects of the “noise” in high-frequency data on the identification of regimes. Second, I model the TED and CDS spreads in l ...
Chapter 8
... of the measures of risk used in investments? How does one compute the expected rate of return for an individual risky asset or a portfolio of assets? ...
... of the measures of risk used in investments? How does one compute the expected rate of return for an individual risky asset or a portfolio of assets? ...
Credit Risk
... changes in debt value caused by changes in obligor credit quality. Changes in value caused not only by possible default events, but also by upgrades and downgrades in credit quality are included. The value-at-risk (VaR) - the volatility of value, not just the expected losses, is assessed. ...
... changes in debt value caused by changes in obligor credit quality. Changes in value caused not only by possible default events, but also by upgrades and downgrades in credit quality are included. The value-at-risk (VaR) - the volatility of value, not just the expected losses, is assessed. ...
Contemporaneous Loan Stress and Termination Risk in Please share
... ratio (DSCR) that captures the yearly impact of local market and property sector forces on loan collateral. To the extent that market forces drive actual property LTV and DSCR, these measures should strongly impact the termination decision. According to the contingent claims theory of mortgage prici ...
... ratio (DSCR) that captures the yearly impact of local market and property sector forces on loan collateral. To the extent that market forces drive actual property LTV and DSCR, these measures should strongly impact the termination decision. According to the contingent claims theory of mortgage prici ...
Risk Sharing between Banks and Markets
... of this reinvestment policy, assuming different correlations among the loan defaults. The simulation results indicate that the standard deviation of the bank’s loan loss rate increases after securitization. Thus, it would be naive to assume that securitization generally reduces the bank’s risks. The ...
... of this reinvestment policy, assuming different correlations among the loan defaults. The simulation results indicate that the standard deviation of the bank’s loan loss rate increases after securitization. Thus, it would be naive to assume that securitization generally reduces the bank’s risks. The ...
Value at Risk - dedeklegacy.cz
... risk-neutral environment means that expected return required by all investors on all investment is the risk-free interest rate (consequence of the efficient market hypothesis) risk-neutral probability is the probability that a risky bond will default during the its life in risk-neutral environment ( ...
... risk-neutral environment means that expected return required by all investors on all investment is the risk-free interest rate (consequence of the efficient market hypothesis) risk-neutral probability is the probability that a risky bond will default during the its life in risk-neutral environment ( ...
Defaultable Debt, Interest Rates, and the Current Account
... and interest rates. In the current framework where all interest rate movements are driven by changes in the default rate, the steepness of the interest‐rate schedule makes it challenging even qualitatively to match the positive correlation between interest rates and the current account. This is b ...
... and interest rates. In the current framework where all interest rate movements are driven by changes in the default rate, the steepness of the interest‐rate schedule makes it challenging even qualitatively to match the positive correlation between interest rates and the current account. This is b ...
NBER WORKING PAPER SERIES Mark Aguiar Gita Gopinath
... the positive correlation between interest rates and current account observed in the data. This is distinct from what is obtained in Arellano (2003) and Kehoe and Perri (2002). A point to note is that we are able to generate positive comovement between interest rates and the current account without r ...
... the positive correlation between interest rates and current account observed in the data. This is distinct from what is obtained in Arellano (2003) and Kehoe and Perri (2002). A point to note is that we are able to generate positive comovement between interest rates and the current account without r ...
Nonparametric Methods and Option Pricing
... rapidly growing. Recent papers include At-Sahalia (1993, 1996), AtSahalia and Lo (1995), Baum and Barkoulas (1996), Bossaerts, Hafner and Hardle (1995), Broadie, Detemple, Ghysels and Torres (1995,1996), Elsheimer et al. (1995), Ghysels and Ng (1996), Gourieroux, Monfort and Tenreiro (1994, 19 ...
... rapidly growing. Recent papers include At-Sahalia (1993, 1996), AtSahalia and Lo (1995), Baum and Barkoulas (1996), Bossaerts, Hafner and Hardle (1995), Broadie, Detemple, Ghysels and Torres (1995,1996), Elsheimer et al. (1995), Ghysels and Ng (1996), Gourieroux, Monfort and Tenreiro (1994, 19 ...
Long-duration Bonds and Sovereign Defaults
... by the government. Previous quantitative studies assume that sovereign bonds mature after one quarter. Instead, we allow the government to borrow using long-duration bonds. We assume that the government issues bonds that pay an infinite stream of coupons until a default is declared. The coupon paym ...
... by the government. Previous quantitative studies assume that sovereign bonds mature after one quarter. Instead, we allow the government to borrow using long-duration bonds. We assume that the government issues bonds that pay an infinite stream of coupons until a default is declared. The coupon paym ...
Practical Applications of Post Modern Portfolio Theory
... many problems with determining an investor’s optimal asset allocation portfolio using the (MVO) formula. See Exhibit C for information on the problems with MVO software programs. Determining expected returns of asset classes Your Guess is As Good as Mine One of the key variables required in the MVO ...
... many problems with determining an investor’s optimal asset allocation portfolio using the (MVO) formula. See Exhibit C for information on the problems with MVO software programs. Determining expected returns of asset classes Your Guess is As Good as Mine One of the key variables required in the MVO ...
Defaultable Debt, Interest Rates and the Current Account
... cannot transact with international capital markets (i.e. reverts to financial autarky). Let V G denote the value function given that the agent decides to maintain a good credit history this period. The value of being in good credit standing at the start of period t with net ...
... cannot transact with international capital markets (i.e. reverts to financial autarky). Let V G denote the value function given that the agent decides to maintain a good credit history this period. The value of being in good credit standing at the start of period t with net ...
Schroders The effect of unstable correlations on portfolio diversification
... diversification within a portfolio. Particularly for those investors who prefer to meet a given expected return objective with minimum (acceptable) downside volatility, the level of diversification within a portfolio will matter a great deal. In the context of long term modelling, there is an assump ...
... diversification within a portfolio. Particularly for those investors who prefer to meet a given expected return objective with minimum (acceptable) downside volatility, the level of diversification within a portfolio will matter a great deal. In the context of long term modelling, there is an assump ...