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Pricing sovereign contingent convertible debt
(The Wharton Financial Institutions Center. The Wharton School, University of Pennsylvania, PA., 2017-11)
We develop a pricing model for sovereign contingent convertible bonds (S-CoCo) with payment standstills triggered by a sovereign's credit default swap CDS spread. One innovation is the modeling of CDS spread regime switching ...
Pricing and Hedging GDP-Linked Bonds in Incomplete Markets
(The Wharton Financial Institutions Center. The Wharton School, University of Pennsylvania, PA, 2017-09)
We model the super-replication of payoffs linked to a country's GDP as a stochastic linear program on a discrete time and state-space scenario tree to price GDP-linked bonds. As a byproduct of the model, we obtain a hedging ...
Portfolio diversification in the sovereign credit swap markets
(Springer, 2017-05)
We develop models for portfolio diversification in the sovereign credit default swap (CDS) markets and show that, despite literature findings that sovereign CDS spreads are affected by global factors, there is sufficient ...
Integrated dynamic models for hedging international portfolio
(The Wharton Financial Institutions CenterThe Wharton School, University of Pennsylvania, PA, 2017-12)
We develop scenario-based stochastic programming models for hedging the risks of international portfolios using options. The models provide an increasing level of integration in managing market and foreign exchange (FX) ...
Stochastic debt sustainability analysis for sovereigns and the scope for optimization modeling
(The Wharton Financial Institutions Center. The Wharton School, University of Pennsylvania, PA., 2017-05)
We express the opinion that sovereign debt sustainability analysis must be augmented by stochastic correlated risk factors and a risk measure to capture tail effects. Crisis situations can thus be adequately specified and ...