Using data on Brazil, Colombia, Mexico, the Philippines, Russia and Turkey, our empirical results show that the exchange rates of their currencies have adequate explanatory power in explaining their US dollar-denominated sovereign bonds, particularly in the post-global financial crisis period....

Using data on Brazil, Colombia, Mexico, the Philippines, Russia and Turkey, our empirical results show that the exchange rates of their currencies have adequate explanatory power in explaining their US dollar-denominated sovereign bonds, particularly in the post-crisis period. We develop a...

The study conducts an empirical test on dollar-denominated sovereign credit spreads in emerging markets, including Brazil, Colombia, Mexico, the Philippines, the Russian Federation, and Turkey to examine their relationship with each country's exchange rate and the United States (US) Treasury...

In this paper we have formulated a simple theoretical model for the dynamics of the time-varying target leverage ratio of a firm under some assumptions based upon empirical observations. In our theoretical model the time evolution of the target leverage ratio of a firm can be derived...

This article provides a generalized two-firm model of default correlation, based on the structural approach that incorporates interest rate risk. In most structural models default is driven by the firms' asset dynamics. In this article, a two-firm model of default is instead driven by the...

Ever since Kirk proposed an approximate price formula for a European call spread option in 1995, Kirk's approximation has become the most widely used among the practitioners, especially in the energy markets. It is well known that Kirk's approximation extends from Margrabe's exchange option...

This paper proposes an analytic method to estimate the option-implied correlation embedded in options on the iTraxx Europe CDS indexes. The option-implied correlation is suggested as a measure of the spillover effect of default risk between the financial and corporate sectors in Europe. In...

This paper studies the discriminatory power and calibration quality of the structural credit risk models under the 'exogenous default boundary' approach including those proposed by Longstaff and Schwartz (1995) and Collin-Dufresne and Goldstein (2001), and 'endogenous default boundary' approach...

Our paper presents a crude oil price model in which the price is confined in a wide moving band. A price crash occurs when the price breaches the lower boundary where a smooth-pasting condition is imposed. Using an asymmetric mean-reverting fundamental (supply/demand) shock, the solution derived...

This paper examines the term structures of default probabilities that are generated by the Collin-Dufresne and Goldstein model and a dynamic-leverage-ratio model. The dynamic-leverage-ratio model is capable of producing term structures of default probabilities which are consistent with some...