Following record low interest rates and fast depreciating U.S. dollar, crude oil prices became under rising pressure and seemed boundless. Oil price process parameters changed drastically in 2003M5-2007M10 toward consistently rising prices. Short-term forecasting would imply persistence of...

A stochastic volatility model where volatility was driven solely by a latent variable called news was estimated for three stock indices. A Markov chain Monte Carlo algorithm was used for estimating Bayesian parameters and filtering volatilities. Volatility persistence being close to one was...

We measure bank vulnerability in emerging markets using the distance-to-default, a risk-neutral indicator based on Merton's (1974) structural model of credit risk. The indicator is estimated using equity prices and balance-sheet data for 38 banks in 14 emerging market countries. Results show it...

In many developing countries, a significant part of economic activity takes place in the informal sector. Earlier work has examined the determinants of the size of the informal sector, focusing separately on factors such as tax and regulation burden, financial market development, and the quality...

Recent efforts at poverty alleviation emphasize increasing government spending on education. However, even if spending were perfectly targeted, it is not evident that spending by itself will lead to higher educational attainment. Bolivian household data is used in this paper to ascertain the...

This paper introduces the Asset and Liability Management (ALM) compound option model. The model builds on the observation that the public sector net worth in a multi-period setting corresponds to the value of an option on an option on total government assets. Hence, the ALM compound option model...