Related papers: A Debt Management Problem with Currency Devaluatio…
A model is developed to assess the profitability of loans or mortgages with a specified repayment schedule. Financial institutions face two competing risks: default and prepayment, both influenced by the stochastic evolution of credit…
We deal with the problem of outsourcing the debt for a big investment, according two situations: either the firm outsources both the investment (and the associated debt) and the exploitation to a private consortium, or the firm supports the…
We study the incentives of banks in a financial network, where the network consists of debt contracts and credit default swaps (CDSs) between banks. One of the most important questions in such a system is the problem of deciding which of…
We consider the problem of governing systemic risk in a banking system model. The banking system model consists in an initial value problem for a system of stochastic differential equations whose dependent variables are the log-monetary…
We study how governments promote social welfare through the design of contracting environments. We model the regulation of contracting as default delegation: the government chooses a delegation set of contract terms it is willing to…
We show that a simple and intuitive three-parameter equation fits remarkably well the evolution of the gross domestic product (GDP) in current and constant dollars of many countries during times of recession and recovery. We then argue that…
The writers propose a mathematical Method for deriving risk weights which describe how a borrower's income, relative to their debt service obligations (serviceability) affects the probability of default of the loan. The Method considers the…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Under fairly general assumptions for the distribution of the total net…
Borrowing constraints are a key component of modern international macroeconomic models. The analysis of Emerging Markets (EM) economies generally assumes collateral borrowing constraints, i.e., firms access to debt is constrained by the…
I characterize optimal government policy in a sticky-price economy with different types of consumers and endogenous financial constraints in the banking and entrepreneurial sectors. The competitive equilibrium allocation is constrained…
We develop a model where currency issuers provide liquidity, while users in a trade network choose currency usage for trade settlement. We identify a feedback mechanism where a user's currency preference spillovers to others and increases…
The increasingly complex economic and financial environment in which we live makes the management of liquidity in payment systems and the economy in general a persistent challenge. New technologies are making it possible to address this…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Using a multivariate normal Copula function for the joint default…
We determine the optimal investment strategy of an individual who targets a given rate of consumption and who seeks to minimize the probability of going bankrupt before she dies, also known as {\it lifetime ruin}. We impose two types of…
The current crisis, at the time of writing, has had a profound impact on the financial world, introducing the need for creative approaches to revitalising the economy at the micro level as well as the macro level. In this informal analysis…
Intuitively, the default risk of a single borrower is higher when her or his assets and debt are denominated in different currencies. Additionally, the default dependence of borrowers with assets and debt in different currencies should be…
Financial models are studied where each asset may potentially lose value relative to any other. Conditioning on non-devaluation, each asset can serve as proper num\'eraire and classical valuation rules can be formulated. It is shown when…
As humanity is becoming increasingly confronted by Earth's finite biophysical limits, there is increasing interest in questions about the stability and equitability of a zero-growth capitalist economy, most notably: if one maintains a…
The existing theorization of development economics and transition economics is probably inadequate and perhaps even flawed to accurately explain and analyze a dual economic system such as that in China. China is a country in the transition…
Despite decades of climate policy and rapid improvements in energy efficiency, global CO2 emissions continue to rise, suggesting the presence of structural drivers that offset efficiency gains. Here we identify financial leverage as a key…