Local currency systemic risk

Emerging country governments increasingly issue local currency denominated bonds and foreign investors have been increasing their holdings of these assets. By issuing debt denominated in local currency, emerging country governments eliminate exchange rate risk. The growing stock of local currency government debt in the financial portfolios of foreign investors increases their diversification and exposure to fast growing economies. In this paper, we highlight some of the risks associated to this recent trend. First, we adopt the CoV aR risk-measure to estimate the vulnerability of individual countries to systemic risk in the market for local currency government debt. Second, we show that our country-level estimates of vulnerability increase with the share of local currency debt held by foreign investors. A version of the old adage “When New York sneezes, London catches a cold,” used often to describe the relationship between the stock markets in these two cities, still applies between individual emerging countries and the aggregate market for local currency government debt.     

On international integration of emerging sovereign bond markets

The paper investigates the international integration of EM sovereign dollar-denominated and local-currency bond markets. Factor analysis is used to examine movements in bond yields and common sources of variation. Results suggest that EM dollar-denominated debt markets are highly integrated; one common factor, highly correlated with US and EU interest rates, explains 80% of the total variability in yields. Local currency bond markets are not as internationally integrated, and three common factors explain 74% of total variability. But a global interest rates factor still explains 63% of the yield variation accounted for by common factors. Heterogeneity among EMs is explored.     

Gunboats, reputation, and sovereign repayment: lessons from the Southern Confederacy

Many states that formed the Southern Confederacy defaulted on sovereign debt sold in international capital markets during the 1840s. The Confederacy also elected President Jefferson Davis, who openly advocated the repudiation of U.S. states' debts while a member of Congress. Despite its poor credit record, the Confederate government managed to float cotton bonds in England that constituted under 2% of its expenditures. The bonds were largely issued to settle overdue debts with gun contractors who had cut off trade credit. The South serviced the bonds as late as March 1865, a time of domestic hyperinflation and weeks before the fall of Richmond. Although the Confederate experience shows that trade sanctions can promote debt repayment, the gunboat model can only account for a small amount of lending. A reputation or another type of sanction would be necessary to support higher levels of lending in international capital markets.     

Which firms do prefer Islamic debt? An analysis and evidence from global sukuk and bonds issuing firms

The Islamic debt instrument sukuk has been in the market for two decades; still, we do not know why a firm prefers an Islamic debt over conventional debt, set aside religiosity issue. We argue there is a genuine reason to choose Islamic debt because it has lighter indebtedness, benefits of avoiding external monitoring, and tax incentives. Based on the cross-country data for 346 firms issuing dollar-denominated global sukuk and bonds, we find that firms that prefer Islamic debt and issue sukuk are financially more unstable, and thus exposing to higher insolvency risk as compared to bond issuing firms.     

The role of covenants in bond issue. The case of Russian companies

This study examines the use and determinants of covenants in public debt issued by Russian companies. Based on issue characteristics and firm characteristics, we investigate the likelihood that the inclusion of covenant clauses in financial contracts is positively related to the riskiness of bond issues. Using a hand-collected database of Russian firms that place bonds in both the domestic and Eurobond markets, we provide evidence that Russian bondholders use covenant protection to compensate for different creditor protections when the firm has Eurobonds in its debt portfolio. We also find a general negative relation between covenant protection and the bond's yield.     

标准-普尔政府信用等级评价体系:分析与启示(续)

三、标准-普尔的政府信用等级评价体系的分析方法标准-普尔的政府信用等级评价体系有以下九类 指标. (一)政治风险分析 标准-普尔认为,一个国家(或地区)的政治制度的稳定性、可预测性和透明度,对于分析经济政策决策(包括怎样迅速识别和纠正政策错误)是需要考虑的重要参数。这其中包括国内政治的对抗性程度,政府更迭的频繁程度,以及公共安全事务。对与周边国家的关系,标准-普尔则是从潜在的安全风险的角度     

Bond markets co-movement dynamics and macroeconomic factors: Evidence from emerging and frontier markets

This paper examines the co-movement dynamics of ten emerging and four frontier government bond markets with the US market and the impact of macroeconomic factors and global bond market uncertainty on the time-varying co-movement. We find that macroeconomic factors play important role in explaining time variations in the bond return co-movement. Specifically, domestic macroeconomic factors have higher relative importance than global factors, with domestic monetary policy and domestic inflationary environment identified as the most influential factors. The global bond market uncertainty, based on an implied volatility measure, has explanatory power in driving co-movement dynamics in emerging and frontier bond markets.     

地方政府发行公债存在的风险及对策

中国政府为了促进经济的发展,已于2009年发行了2000亿地方政府债券,地方政府发行公债的过程中一定会面对各种各样的风险。本文主要介绍了发行过程中遇到的各种风险以及风险成因,并提出了降低地方政府发行公债风险的对策建议,希望对我国地方公债的风险研究有一定的推动作用。     

Sovereign defaults and liquidity crises

Sovereign debt crises in emerging markets are usually associated with liquidity and banking crises. The conventional view is that the domestic turmoil is the consequence of foreign retaliation, although there is no clear empirical evidence on “classic” default penalties. This paper emphasizes, instead, a direct link between sovereign defaults and liquidity crises building on two natural assumptions: (i) government bonds represent a source of liquidity for the domestic private sector and (ii) the government cannot discriminate between domestic and foreign creditors in the event of default. In this context, external debt emerges even in the absence of classic penalties, and government default is countercyclical, triggers a liquidity crunch, and amplifies output volatility. In addition, a reform that involves a substitution of government bonds with privately-sourced liquidity instruments could backfire by restricting governments' access to foreign credit.     

DEFAULT RISK INSURANCE AND INCOMPLETE MARKETS1

This paper uses the existence of secondary markets for debt instruments with default risk (e.g. corporate bonds) to define default insurance along the lines of financial economics. It examines whether, in the case of several risk-neutral measures, characteristics of default can be uniquely determined by the prices of contracts involving default-prone securities.     

Greenium in the Chinese corporate bond market

This paper explores the pricing implications of green bonds in the Chinese corporate bond market. We document a large greenium in the Chinese green bond market, whereby green bonds are issued at lower offering yield spreads in the primary market and traded at lower yields in the secondary market. The magnitude of the Chinese greenium is substantially greater than other international green bond markets. Exploring the underlying mechanisms, we document convincing evidence that mitigation of information asymmetry and exposure to salient environmental stimuli such as air pollution are plausible explanations of the greenium.     

Are changes in spreads of external-market debt also induced by contagion?

As governments and private companies from emerging markets have increasingly issued foreign-currency denominated debt through the 1990s, the economies concerned have become more vulnerable to abrupt changes in sovereign risk. At the same time, with closer economic integration countries have become more likely to be affected by economic problems that arise in neighboring countries. The following article uses the example of four Latin American countries to evaluate empirically the extent to which “contagion” explains changes in sovereign risk.     

Pricing risky corporate bonds: An empirical study

This paper empirically studies a model for pricing risky corporate bonds proposed by Baaquie—based on the seminal Merton. The proposed model provides an exact solution for the price of a risky corporate bond with a finite maturity and explains the market price of corporate fixed coupon bonds as being the result of the market risk that is carried by the bond. Baaquie's model is empirically tested using 42 fixed coupon bonds issued by 23 US corporations, between 2011 and 2017. It is found that the proposed model estimates most bond prices quite accurately. Market time (similar to the concept of psychological time), which is distinct from calendar time, is quantified in the paper and is an exogenous behavioral parameter that plays a pivotal role in improving the accuracy of the pricing model for long-maturity risky bonds.     

关于地方政府融资平台公司融资的分析与思考

本文分析了我国地方政府融资平台融资的现状和发展趋势,并通过与希腊政府负债的对比,指出地方政府融资平台公司负债虽然有一些潜在的风险因素,但并不会演化为"中国版的债务危机";对地方政府融资平台公司的负债不能掉以轻心,而应未雨绸缪,通过深化财税体制改革、转变政府职能以及转变经济发展方式等长效机制,引导地方政府融资健康有序发展。     

PRICING EQUITY DERIVATIVES SUBJECT TO BANKRUPTCY

We solve in closed form a parsimonious extension of the Black–Scholes–Merton model with bankruptcy where the hazard rate of bankruptcy is a negative power of the stock price. Combining a scale change and a measure change, the model dynamics is reduced to a linear stochastic differential equation whose solution is a diffusion process that plays a central role in the pricing of Asian options. The solution is in the form of a spectral expansion associated with the diffusion infinitesimal generator. The latter is closely related to the Schrödinger operator with Morse potential. Pricing formulas for both corporate bonds and stock options are obtained in closed form. Term credit spreads on corporate bonds and implied volatility skews of stock options are closely linked in this model, with parameters of the hazard rate specification controlling both the shape of the term structure of credit spreads and the slope of the implied volatility skew. Our analytical formulas are easy to implement and should prove useful to researchers and practitioners in corporate debt and equity derivatives markets.     

European retail giants and the post-LBO reconfiguration of US food retailing

The late 1980s era of leveraged buyouts (LBOs) and dramatically increased levels of corporate debt saw some of its most profound impacts in the US food retail industry. Highly leveraged food retailers committed to servicing their huge debt burdens were forced to divest assets and cut capital expenditure programmes, while rival non-LBO retailers found entry or expansion attractive in markets dominated by IBO firms. In addition, well-capitalized European food retailers, seeking to enter and develop their operations in the USA, were presented with major opportunities. This paper considers the US expansion of the European food retail giants Ahold and Sainsbury during the LBO and post LBO periods. Within the wider context of the deleveraging of the US food retail industry in the 1990s, an accelerating rate of consolidation and a progressive gaining of competitive advantage by the larger multi-regional US chains, the challenge of the European retail giants in the post-LBO reconfiguration of the US industry is assessed.     

可转换债券融资对我国上市公司价值的影响研究

可转换债券兼有股权融资和债权融资的两种效用,通常会促使投资者对转股时机与转股数量有不同的决策,这些决策对发行可转换债券的公司价值有不同影响。文章通过建立影响公司价值的分析模型,探讨我国上市公司发行可转换债券对公司价值所产生的影响,并利用我国上市公司1998年至2014年期间发行可转换债券的样本数据进行实证分析。研究发现：上市公司进行可转换债券融资后,公司价值会因其偿债能力变化而下降;国有股权比例之于公司价值的影响,是通过影响公司经理人经营行为来实现的;成长性不同的公司在债券存续期内的公司价值变化,并不存在显著差异。文章基于委托代理角度对可转换债券影响我国上市公司价值展开研究,在一定程度和范围内拓宽了公司治理问题的分析空间。     

Volatility and shock interactions and risk management implications: Evidence from the U.S. and frontier markets

The study affords comprehensive evidence of shock and volatility interactions between stock markets of each of the twenty four frontier markets and the U.S. for the period 2006:01 to 2015:07. The results from the recent EDCC-GARCH model of Nakatani and Teräsvirta (2009), which permits for concurrent estimation of shock and volatility interactions as well as dynamic conditional correlations (DCC) across assets, shows unidirectional shock and volatility transmissions from the U.S. to the frontier markets. The conditional correlation between the U.S. and each frontier market is very low or negative, offering diversification benefits to U.S. investors. The DCC exhibits slow decay and is insignificantly impacted by previous period's shocks. The results are very intuitive for optimal portfolio allocations using the traditional capital-based as well as the risk-based allocations. The risk parity approach to portfolio management increases (reduces) allocations to lower (higher) risk assets to improve portfolio diversification while increasing the risk-adjusted returns.     

Die Jagd auf den Zins oder: die Fiskalpolitik der Regierung Monti und ihre Folgen

Mario Monti became Prime Minister of Italy in the autumn of 2011 after the refinancing of Italy??s debt in the financial markets had almost failed. The Monti government has since made the lowering of the risk premium for Italy??s government bonds an absolute priority. This, however, has only been somewhat successful. Although the new debt was decreased and the balance of trade recorded a surplus, an interest rate spread remains. At the same time, the government??s austerity measures only deepened the economic crisis. By contrast, the decision of the ECB in September 2012 to buy government bonds of crisis-ridden states without limitation has proven to be far more effective. The introduction of taxes on higher incomes and wealth to finance growth programmes could now help to resolve the economic crisis.     

地方债放行:制度配套与有效监管

地方政府发债问题在讨论数年后再一次成为人们关注的焦点。本文从评价2009年财政部代发2000亿元地方债制度设计入手,介绍了地方债监管制度较为成熟的美国和日本的经验做法。在此基础上,系统阐述了我国地方政府直接发债所需的技术准备与制度配套,并从法律监督、行政监控和市场监管三个层次构建了地方债运行的风险防范体系,最后提出了基于我国国情的地方债渐进式开放模式。