• Working Paper  Open Access

      Contingent convertible bonds for sovereign debt risk management 

      Consiglio, Andrea; Zenios, Stavros A. (The Wharton Financial Institutions Center. The Wharton School, University of Pennsylvania, PA., 2015-11)
      We consider convertible bonds that contractually stipulate payment standstill, contingent on a market indicator of a sovereign's creditworthiness breaching a distress threshold. This financial innovation limits ex-ante the ...
    • Working Paper  Open Access

      Integrated dynamic models for hedging international portfolio 

      Topaloglou, Nikolas; Vladimirou, Hercules; Zenios, Stavros A. (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) ...
    • Working Paper  

    • Working Paper  Open Access

      A Political Capital Asset Pricing Model 

      Pagliardi, Giovanni; Poncet, Patrice; Zenios, Stavros A. (The Wharton Financial Institutions Center. The Wharton School, University of Pennsylvania, PA, 2019-03)
      We construct a bivariate factor of political stability and economic policy confidence, and show that it commands a significant premium of up to 15% per annum, in the global, developed, and emerging markets, robust to ...
    • Working Paper  Open Access

      Politics, policy, and international stock peturns 

      Gala, Vito; Pagliardi, Giovanni; Zenios, Stavros A. (2018-08)
      Politics and policy are distinct, though interrelated, factors affecting the economy. Using novel measures of political stability and confidence in economic policy we document predictable variation in stock market returns ...
    • Working Paper  Open Access

      Portfolio diversification in the sovereign credit swap markets 

      Consiglio, Andrea; Lotfi, Somayyeh; Zenios, Stavros A. (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 ...
    • Working Paper  Open Access

      Pricing and Hedging GDP-Linked Bonds in Incomplete Markets 

      Consiglio, Andrea; Zenios, Stavros A. (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 ...
    • Working Paper  Open Access

      Pricing sovereign contingent convertible debt 

      Consiglio, Andrea; Tumminello, Michele; Zenios, Stavros A. (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 ...
    • Working Paper  Open Access

      Risk management for sovereign financing within a debt sustainability framework 

      Athanasopoulou, Marialena; Consiglio, Andrea; Erce, Aitor; Gavilan Gonzalez, Angel; Moshammer, Edmund; Zenios, Stavros A. (European Stability Mechanism Working Paper No. 31, 2018-09)
      The mix of instruments used to finance a sovereign is a key determinant of debt sustainability through its effect on funding costs and risks. We extend standard debt sustainability analysis to incorporate debt-financing ...
    • Working Paper  Open Access

      Risk management optimization for sovereign debt restructuring 

      Consiglio, Andrea; Zenios, Stavros A. (Journal of Globalization and Development, Vol. 6(2), pp. 181–213, Feb. 2016.; The Wharton School Financial Institutions Centre No. 14-10., 2015-12)
      Debt restructuring is one of the policy tools available for resolving sovereign debt crises and, while unorthodox, it is not uncommon. We propose a scenario analysis for debt sustainability and integrate it with scenario ...
    • Working Paper  Open Access

      Robust VaR and CVaR optimization under joint ambiguity in distributions, means, and covariances 

      Lotfi, Somayyeh; Zenios, Stavros A. (The Wharton Financial Institutions Center. The Wharton School, University of Pennsylvania, PA., 2016-04)
      We develop robust models for optimization of the VaR and CVaR risk measures with a minimum expected return constraint under joint ambiguity in distribution, mean returns, and covariance matrix. We formulate models for ...
    • Working Paper  Open Access

      State Contingent Debt as Insurance for Euro-Area Sovereigns 

      Demertzis, Maria; Zenios, Stavros A. (2018-04)
      The euro-area sovereign debt crisis is receding. Europe is on a recovery path, growth is broad-based and unemployment is falling. One after the other, countries hit hardest by the crisis are exiting their adjustment ...
    • Working Paper  Open Access

      Stochastic debt sustainability analysis for sovereigns and the scope for optimization modeling 

      Consiglio, Andrea; Zenios, Stavros A. (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 ...