comparable to that of returns in stock markets. Evidence is shown that there may be only minimal possibility of cross hedging … examined. Such markets, by allowing hedging of these aggregate income risks, might make for dramatically more effective … international macroeconomic risk sharing than is possible today. Retail institutions are described that might develop around such …

country risk, the paper discusses a number of modifications in the standard theory of efficient international financial … markets that are necessitated by the existence of country risk., For macroeconomic policy, the major implications are that … domestic and foreign assets become imperfect substitutes and that world demand for domestic assets is likely to be less than …

political risk borne by parent companies leads them to use less domestic leverage, resulting in lower firm-wide leverage … other firms. These findings illustrate the impact of risk exposures on capital structure …

International data suggests that fluctuations in the level and volatility of the world interest rate (as measured by … economies. We incorporate an estimated time-varying process for the world interest rate into a model of sovereign default … calibrated to a panel of emerging economies. Time variation in the world interest rate interacts with default incentives in the …

weight on downside risk [as modeled by Gul (1991)]. Policy uncertainty is induced by the Disappointment aversion implies that …

in foreign currency. So the firm's hedging strategy is simple: sell foreign currency futures equal to the value of its … and its marginal cost in order to assess its exposure to exchange rates. So its hedging strategy also requires detailed …

Foreign portfolio investment is threatened by the risk of default and repudiation, while direct foreign investment is … threatened by the risk of expropriation. These two contractual forms of investment can differ substantially in: (1) the amount of …

We provide methods of decomposing the variance of world national incomes into components in such a way as to indicate … the most important risk-sharing opportunities, and, therefore, the most important missing international risk markets to … establish. One method uses a total variance reduction criterion, and identifies risk-sharing opportunities in terms of …

because the former allows risk sharing across countries while the latter does not. The analysis is performed in a two …-country overlapping generations model, where markets are incomplete under either exchange regime. In this second best world, it is … demonstrated that the ability to share risk across countries in the fixed rate regime does not necessarily lead to higher welfare …