At a summit meeting in December 2011, China and Japan agreed to improve cooperation on developing their financial markets. The agreement covers the settlement of cross-border trade and investment using the two currencies, the direct exchange of the two currencies, the purchase of Chinese...

This paper presents new insights into the dynamics and determinants of arbitrage mispricing in and across seven of the world's largest and most liquid financial markets. Specifically, this paper analyzes mispricing between nominal and inflation-linked bonds (ILB mispricing) in the G7 government...

This Article maps financial crisis containment - extraordinary measures to stop the spread of financial distress - as a category of legal and policy choice. I make three claims.First, containment is distinct from financial regulation, crisis prevention and resolution. Containment is brief; it...

Flekenstein, Longstaff and Lustig (2014) find mispricing between Treasury bonds and Treasury Inflation-Protected Securities (TIPS) in the United States, suggesting that Treasury bonds are expensive relative to TIPS. I examine the existence of a mispricing in the Israeli government bond market, a...

Sovereign bond benchmarks are important determinants of corporate bond issuance and maturity. We show that by providing benchmark rates, long-maturity government issues complement the issuance of similar-maturity corporate issues. Government and corporate bond issues are also substitutes and...

Trading in the CDS market in this paper occurs because irrational investors have optimal beliefs about the default state of the economy, those investors tend to be overly optimistic that default is less likely. Since the imposition of the CDS ban on member states of the European Union in 2012,...

We consider an arbitrage strategy which exactly replicates the cash flow of a sovereign nominal bond using inflation swaps and inflation-linked bonds. The strategy reveals a violation of the law of one price in the G7 countries which is largest for the eurozone. Testing the strategy's exposure...

Why do countries tend to repay their domestic and external debt, even though the legal enforcement of the sovereign debt contract is limited? Contrary to conventional wisdom, we argue that temporary market exclusion after default is costly. When the domestic financial market is characterized by...

Why do countries tend to repay their domestic and external debt, even though the legal enforcement of the sovereign debt contract is limited? Contrary to conventional wisdom, we argue that temporary market exclusion after default is costly. When the domestic financial market is characterized by...