Related papers: Relating debt and currency crises -- towards a gen…
Recent developments in the global liberalization of equity and currency markets, coupled to advances in trading technologies, are making markets increasingly interdependent. This increased fluidity raises questions about the stability of…
The emerging system at the European level can be conceptualized as a pattern of relations among member states that tends to be reproduced despite disturbances in individual trajectories. The Markov property is used as an indicator of…
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…
Misperceptions about extreme dependencies between different financial assets have been an im- portant element of the recent financial crisis. This paper studies inhomogeneity in dependence structures using Markov switching regular vine…
The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…
We show how bad and good volatility propagate through forex markets, i.e., we provide evidence for asymmetric volatility connectedness on forex markets. Using high-frequency, intra-day data of the most actively traded currencies over 2007 -…
In the framework of the theory of Equilibrium Manifold of a Pure Exchange Economy, introduced by Balasko, we give a rigorous definition of a crisis transition and establish some infinitesimal criteria which distinguish unavoidable crises…
For nearly every major stock market there exist equity and implied volatility indices. These play important roles within finance: be it as a benchmark, a measure of general uncertainty or a way of investing or hedging. It is well known in…
This paper attempts to find a relationship between agents' risk aversion and inequality of incomes. Specifically, a model is proposed for the evolution in time of surplus/deficit distribution, and the long-time distributions are…
This paper develops a new methodology for studying continuous-time Nash equilibrium in a financial market with asymmetrically informed agents. This approach allows us to lift the restriction of risk neutrality imposed on market makers by…
During the last two years, Europe has been facing a debt crisis, and Greece has been at its center. In response to the crisis, drastic actions have been taken, including the halving of Greek debt. Policy makers acted because interest rates…
We solve an infinite time-horizon bounded-variation stochastic control problem with regime switching between $N$ states. This is motivated by the problem of a government that wants to control the country's debt-to-GDP (gross domestic…
We consider a model of debt management, where a sovereign state trade some bonds to service the debt with a pool of risk-neutral competitive foreign investors. At each time, the government decides which fraction of the gross domestic…
In dynamical framework the conflict between government and the central bank according to the exchange Rate of payment of fixed rates and fixed rates of fixed income (EMU) convergence criteria such that the public debt / GDP ratio The method…
In this paper, we present own point of view how the unexpected fluctuations of the long-term real interest rate can be explained. We describe a macroeconomic environment by the modification of the fundamental macroeconomic equilibrium model…
This paper analyzes nonlinearities in the international transmission of financial shocks originating in the US. To do so, we develop a flexible nonlinear multi-country model. Our framework is capable of producing asymmetries in the…
Interbank lending and borrowing occur when financial institutions seek to settle and refinance their mutual positions over time and circumstances. This interactive process involves money creation at the aggregate level. Coordination…
The potential approach is a general and simple method for modelling interest rates, foreign exchange rates, and in principle other types of financial assets. This paper takes data on some liquid interest rate derivatives, and fits potential…
A generalized continuous economic model is proposed for random markets. In this model, agents interact by pairs and exchange their money in a random way. A parameter controls the effectiveness of the transactions between the agents. We show…
Currency crises are frequently discussed retrospectively as a necessary and deterministic outcome of a finite sequence of fiscal decisions, monetary manoeuvres, and limited exogenous inputs. Parallelly, the Twin Deficits Hypothesis (TDH)…