Catálogo de publicaciones - libros

Credit derivatives are instruments used to measure, manage, and transfer credit risk. Recently, there has been an explosive growth in the use of these instruments in the financial markets. This article reviews the structure and use of some credit derivative instruments that are popular in practice.

This article presents a set of international parity conditions based on consistent and efficient market behavior. We hypothesize that deviations from parity conditions in international bond, stock, and commodity markets are attributable mainly to relative equity premiums and real interest rate differentials. Testing this hypothesis against four European markets for the recent floating currency period, we gain supportive evidence. Moreover, the deviations of uncovered interest parity, international stock return parity, and purchasing power parity are not independent; the evidence suggests that deviations from the three parities are driven by two common factors: equity premium differential and real interest rate differential.

In January 1997, the U.S. Treasury began to issue inflation-indexed securities (TIIS). The new Treasury security protects investors from inflation by linking the principal and coupon payments to the Consumer Price Index (CPI). This paper discusses the background of issuing TIIS and reviews their unique characteristics.

The asset pricing models of financial economics describe the prices and expected rates of return of securities based on arbitrage or equilibrium theories. These models are reviewed from an empirical perspective, emphasizing the relationships among the various models.

Conditional asset pricing studies predictability in the returns of financial assets, and the ability of asset pricing models to explain this predictability. The relation between predictability and asset pricing models is explained and the empirical evidence for predictability is summarized. Empirical tests of conditional asset pricing models are then briefly reviewed.

Measures for evaluating the performance of a mutual fund or other managed portfolio are interpreted as the difference between the average return of the fund and that of an appropriate benchmark portfolio. Traditional measures use a fixed benchmark to match the average risk of the fund. Conditional performance measures use a dynamic strategy as the benchmark, matching the fund’s risk dynamics. The logic of this approach is explained, the models are described and the empirical evidence is reviewed.

One of the everyday jobs of the treasurer is to manage the cash, and flow of funds through the organization. If the amount or receipt and collection activities are out of control, the entire firm may face bankruptcy. There is an old saying, “If you pay attention to the pennies, the dollars will take care of themselves.” In this spirit, this paper looks at taking care of the daily amounts of cash flowing through the firm in a systematic fashion. The purpose is to understand the importance of the inter-relationships involved and to be able to measure the amount and speed of the cash flow. Once something can be measured, it can be managed.

The stochastic discount factor (SDF) approach to fund performance is a recent innovation in the fund performance literature (). A number of recent studies have used the stochastic discount factor approach to evaluate the performance of managed funds. In this paper, I present an overview of the use of the stochastic discount approach to evaluate the unconditional and conditional performance of the fund. I also discuss estimation issues and provide a brief survey of empirical evidence.

We discuss duration and its development, placing particular emphasis on various applications. The survey begins by introducing duration and showing how traders and portfolio managers use this measure in speculative and hedging strategies. We then turn to convexity, a complication arising from relaxing the linearity assumption in duration. Next, we present immunization — a hedging strategy based on duration. The article goes on to examine stochastic process risk and duration extensions, which address it. We then examine the track record of duration and how the measure applies to financial futures. The discussion then turns to macrohedging the entire balance sheet of a financial institution. We develop a theoretical framework for duration gaps and apply it, in turn, to banks, life insurance companies, and defined benefit pension plans.

Loan contract terms refer to the price and nonprice terms associated with a corporate loan deal between a borrower and a lender or a syndicate of lenders. The specification of loan contract terms differs across loans. These differences are attributable to the tradeoffs between values of loan contract terms that the borrower chooses when negotiating the loan contract, as well as the purpose of the loan and borrower and lending syndicate characteristics. Methodological issues that arise when investigating the relations between loan contract terms include allowing for loan contract terms that are determined simultaneously and accurately estimating credit risk.