This paper investigates whether Japanese banks had been following herd behavior in the domestic loan market from 1975 through 2002. Applying the technique developed by Lakonishok, Shleifer, and Vishny (LSV) (1992, J. of Fin. Econ.) to the data of loans outstanding to different types of...

This paper investigates whether Japanese banks had been following herd behavior in the domestic loan market from 1975 through 2002. Applying the technique developed by Lakonishok, Shleifer, and Vishny (LSV) (1992, J. of Fin. Econ.) to the data of loans outstanding to different types of...

In this paper we study the question of debt sustainability from a risk management perspective. The debt accumulation equation for any country involves variables that are stochastic and closely intertwined. When these aspects are taken into consideration the notion of debt sustainability is...

In this paper, we relate security returns in the thirty securities in the Dow Jones index to regime shifts in the market portfolio (S&P500) volatility. We model market volatility as a multiple-state Markov switching process of order one and estimate non-diversifiable security risk (beta) in the...

This paper introduces a nonparametric estimator for tail dependence in the constant conditional correlation GARCH framework, in contrast to existing estimators that impose the iid assumption. So long as stationarity is satisfied, the difference between the distribution of the tail dependence...

Collective action clauses (CACs) are provisions specifying that a supermajority of bondholders can change the terms of a bond. We study how CACs determine governments’ fiscal incentives, sovereign bond prices and default probabilities in environments with and without contingent debt and...

This paper presents a simple model of debt contracts in order to analyze the conditions under which domestic residents would choose to denominate debts in ``dollars''. In the model, borrowers are producers of non-traded goods, and subject to shocks on prices. The real exchange rate varies in...

If country and currency risk premiums are positively correlated, a negative international liquidity shock harms twice the economy, thereby substantially increasing interest rates. This harmful positive correlation between country and currency risk premiums observed in some countries is called...

We propose a semi-parametric approach to investigate whether co-dependence across markets increase in periods of extreme returns. Given that returns on one market fall in the extreme tail of their own distribution, we compute the conditional probability that returns on another market will also...