Credit risk is influenced by interest rates and market liquidity. This paper examines the direct and indirect impacts of unexpected monetary policy shifts on the growth of corporate credit risk, with the aim of quantifying the size and direction of the response. The results surprisingly indicate...

Bond issuers frequently immunize/hedge their interest rate exposure by means of interest rate swaps (IRS). The receiving leg matches all bond cash-flows, while the pay leg requires floating rate coupon payments of form LIBOR + a spread. The goal of hedging against interest rate risk is only...

The study investigates the role of credit risk in a continuous time stochastic asset allocation model, since the traditional dynamic framework does not provide credit risk flexibility. The general model of the study extends the traditional dynamic efficiency framework by explicitly deriving the...

In this paper we propose a methodology that we believe improves the effectiveness of several common assumptions underlying Modern Portfolio Theory's dynamic optimization framework. The paper derives a general outline of a stochastic nonlinear-quadratic control for analyzing and solving a...

The recent global economic downturn in a number of economies was preceded by rising credit market risk brought on by a massive financial market failure. This paper develops a small open economy model that analyzes the interaction of business cycle volatilities with capital accumulation and the...

In this paper, we extend the debate concerning Credit Default Swap valuation to include time varying correlation and co-variances. Traditional multi-variate techniques treat the correlations between covariates as constant over time; however, this view is not supported by the data. Secondly, since...

Using data from the National Longitudinal Study of Adolescent Health, this study examines the impact of high school cohort composition on the educational and labor market outcomes of individuals during their early 20s and again during their late 20s and early 30s. We find that the positive...

This essay provides and economic analysis of the problem of modern-day maritime piracy. The essay first reviews the current scope of the problem, and then develops an economic of model of piracy that emphasizes the strategic interaction between the efforts of pirates to locate potential targets,...

The Tinbergen Rule states that achieving the desired targets requires an equal number of instruments. This paper shows that time inconsistency does not exist in the case of an equal number of instruments and targets. Target uncontrollability and time inconsistency, however, emerge as problems in...

There appear to be two seemingly contradictory images of law and economic change in the Islamic world. Whereas some scholars have viewed Islamic societies as rigid and incapable of adapting to a changing environment, others have held the opposite image of Islamic societies as flexible, quick to...