In this paper we show that by assuming a constant variance/covariance matrix over the holding period, the VaR limits can often be exceeded within the relevant horizon period. To minimize this risk, we formulate the problem in terms of portfolio selection and propose an innovative methodology...

Over the period 1990-92, India experienced a foreign exchange crisis complicated by political turmoil that led to three rapid downgrades of its credit rating within the short space of a year. However, India did not default or reschedule its debt and with the help of foreign exchange loans after...

The international capital market integration and currency crises of the last decade have renewed the debate on optimal exchange rate regimes. Research is mixed regarding what their effect has been on the system of exchange rate regimes and the anchor currencies at the centre of the system. The...

This paper models capital flows in a rich-poor, two-country, two-asset, dual-risk economy with decreasing absolute risk aversion. The first risk is asset-specific. The second is political and dependent; i.e., related to particular asset outcomes. In this framework, the role of wealth in...