In this paper we analyse the comparative pricing of vanilla and GDP linkedsovereign debt. The key feature of GDP linked bonds is that their cashflowscoupons,principal or both-are linked to the evolution of the country’s nationalincome. While it has long been argued that indexing debt to...

Adverse shocks to stock markets propagate across the world, with a jump in one region of the worldseemingly causing an increase in the likelihood of a different jump in another region of the world.To capture this effect mathematically, we introduce a model for asset return dynamics with a...

This paper examines the price impact of trading intensity on an emerging futures market. Utilizing anovel volume-augmented duration model of price discovery, the intensity effect is decomposed intoliquidity and information components for the MexDer 28-day interest rate futures contract. We...

Forbes and Rigobon (2002) claim there was no contagion among international stock markets duringthe 1997 Asian crisis, with contagion being defined as an increase in dependence. We revisit thisissue using a more robust methodology based on copula. After controlling for heteroskedasticitywith the...

I explain the key failure mechanics of large dealer banks, and some policy implications. This is not a review of the financial crisis of 2007–2009. Systemic risk is considered only in passing. Both the financial crisis and the systemic...

This paper examines why unsolicited ratings tend to be lower than solicited ratings. Bothself-selection among issuers and strategic conservatism of rating agencies may be reasonableexplanations. Analyses of default incidences of non-U.S. borrowers between January 1996and December 2006 show that...

We empirically analyse the appropriateness of indexing emerging market sovereign debt to USreal interest rates. We find that policy-induced exogenous increases in US rates raise default riskin emerging market economies, as hypothesised in the theoretical literature. However, we also findevidence...

Credit default swaps (CDSs) are among the most successful financial innovationsof recent years, which is reflected in the rapidly expanding market. CDS trading occurs inthe over-the-counter market, which relies heavily on broker intermediation to arrangetrades. We provide empirical evidence that...

In this paper, we investigate the German stock market with regard to negative stubvalues or parent company puzzles. These are situations where a firms marketvalue is less than the value of its ownership stake in a publicly traded subsidiary.According to MITCHELL/PULVINO/STAFFORD (2002), negative...

While virtually all currency crisismodels recognise that the fate of a currency peg depends onhow tenaciously policy makers defend it, they seldom model how this is done. We incorporatethemechanics of speculation and the interest rate defence against it in the model ofMorrisand Shin (American...