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The Risks from Climate Change to Sovereign Debt
In: Climatic Change 172 (30)
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High-performance computing for financial planning
In: Journal of economic dynamics & control, Band 27, Heft 6, S. 907-908
ISSN: 0165-1889
Introduction
In: Journal of economic dynamics & control, Band 21, Heft 8-9, S. 1263-1265
ISSN: 0165-1889
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Contingent Convertible Bonds for Sovereign Debt Risk Management
In: Journal of globalization and development, Band 9, Heft 1
ISSN: 1948-1837
Abstract
We consider convertible bonds that contractually stipulate payment standstill, contingent on a market indicator of a sovereign's credit worthiness breaching a distress threshold. This financial innovation limits ex ante the likelihood of debt crises and imposes ex post risk sharing between creditors and the debtor. Drawing from literature on contingent contracts, neglected risks, and bank CoCo, we extend prevailing arguments in favor of sovereign CoCo (S-CoCo). We discuss issues relating to their design: which market trigger, market discipline and sovereign incentives, and errors of false alarms or missed crises, and provide supporting evidence with eurozone data and a simple simulation on the use of S-CoCo. We develop a risk management model using these instruments to trade off the expected cost for sovereign financing over a long horizon, with tail risk. The model shows how contingent bonds can improve a country's debt risk profile. Using Greece as a case study the model illustrates improvements in expected cost vs. tail risk for the country when using contingent debt.
Pricing and hedging GDP-linked bonds in incomplete markets
In: Journal of economic dynamics & control, Band 88, S. 137-155
ISSN: 0165-1889
State Contingent Debt as Insurance for Euro-Area Sovereigns
In: Journal of Financial Regulation, 5(1):64-90, 2019, Oxford University Press,
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Working paper
Pricing and Hedging GDP-Linked Bonds in Incomplete Markets
In: Journal of Economic Dynamics and Control, Available online Jan. 5, 2018. DOI:10.1016/j.jedc.2018.01.001
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Risk Management Optimization for Sovereign Debt Restructuring
In: Journal of globalization and development, Band 6, Heft 2, S. 181-213
ISSN: 1948-1837
AbstractDebt restructuring is one of the policy tools available for resolving sovereign debt crises and, while unorthodox, it is not uncommon. We propose a scenario analysis for debt sustainability and integrate it with scenario optimization for risk management in restructuring sovereign debt. The scenario dynamics of debt-to-GDP ratio are used to define a tail risk measure, termedconditional Debt-at-Risk. A multi-period stochastic programming model minimizes the expected cost of debt financing subject to risk limits. It provides an operational model to handle significant aspects of debt restructuring: it collects all debt issues in a common framework, and can include contingent claims, multiple currencies and step-up or linked contractual features. Alternative debt profiles – obtained by maturity rescheduling, interest payment concessions or nominal value haircuts – are analyzed for their expected cost-risk tradeoffs. With a suitable re-calculation of the efficient frontier, the risk of debt un-sustainability of alternative risk profiles can be ascertained with a given confidence level. The model is applied to Greece sovereign debt crisis analyzing the suitability of various proposals to restore debt sustainability.
Contingent convertible bonds for sovereign debt risk management
In: Journal of Globalization and Development, Band 9(1)
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Working paper
Risk Profiles for Re-Profiling the Sovereign Debt of Crisis Countries
In: Forthcoming in Journal of Risk Finance
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Working paper
Was the Cyprus Crisis Banking or Sovereign Debt?
In: Journal of Banks and Bank Systems, Band 10, Heft 2, S. 23-34
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Does Freedom Lead to Happiness? Economic Growth and Quality of Life
In: Global Business and Economics Review, Band 15, Heft 2/3
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