This paper presents the derivation of risk neutral probability distributions implied in the prices of call options on the "commercial dollar" (in Reals, the Brazilian currency), negotiated in the Mercantile and Futures Exchange of São Paulo, Brazil. These distributions were used to analyze the...

The crises of the 1990s convinced many observers that intermediate exchange rate arrangements are fragile and crisis prone. But advising emerging markets to abandon the exchange rate as an anchor for policy compels those issuing the call to offer an alternative. This paper asks whether inflation...

I model the functioning of real-time gross settlement systems for large-value interbank transfers as a linear programming problem in which queueing arrangements, splitting of payments, Lombard loans, and interbank credit exposures arise as primal solutions. Then I use the dual programming...

This study investigates the relation between absolute levels of credit risk capital requirements, bank solvency rates and stress scenarios of corporate default rates. The methodology is based on a resampling procedure developed based on the ideas of Carey (2002), which is used to estimate credit...

This paper develops a demand model for bank loans with a two-step decision process. In the first step, the agent chooses the financial institution from which she would like to borrow. In the second step, conditioned in the first decision, the agent chooses the desired amount of the loan. The...

This paper extends Bernanke and Blinder (1988)'s macroeconomic model of credit channel to an environment where the monetary authority has control over a short-term interest rate. The comparative statics regarding changes in the market interest rate, in the required reserve ratio over bank...

Price distributions estimation has become a relevant subject for risk and pricing literature. Special concern resides on tail probabilities, which usually presents more severe observations than those predicted by Normal distributions. This work aims to verify whether the volatility implied in...

Fixed income options contain substantial information on the price of interest rate volatility risk. In this paper, we ask if those options will provide information related to other moments of the objective distribution of interest rates. Based on a dynamic term structure model, we find that...

This article analyses the behavior of the Brazilian interest rate, using three measures of rate of return. The series are decomposed into their long run and short run components, as proposed by Vahid and Engle (1993). The results suggest a convergence of the rates to one long run equilibrium. We...

After the World War II, Brazil was one of the fastest growing economies in the world, growing at an average rate of more than 7% from 1950 to 1980. While Brazilian per capita GDP was roughly 15% of the U.S. per capita GDP in 1950, it achieved 30% in 1980. However, since then, Brazil has been...