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Modelling the dependency between currency and debt crises: An option based approach

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  • Maltritz, Dominik
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    Abstract

    The interrelation between currency and debt crises is considered in a model relying on option pricing theory. By capturing uncertainty and time aspects in this stochastic and dynamic framework we analyze parameters that determine the probabilities and dependencies of these crises.

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    File URL: http://www.sciencedirect.com/science/article/B6V84-4S08JS7-6/2/75d00dde267fe93ab82b914cb72d8033
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    Bibliographic Info

    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 100 (2008)
    Issue (Month): 3 (September)
    Pages: 344-347

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    Handle: RePEc:eee:ecolet:v:100:y:2008:i:3:p:344-347

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    Web page: http://www.elsevier.com/locate/ecolet

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    1. Benigno, Pierpaolo & Missale, Alessandro, 2004. "High public debt in currency crises: fundamentals versus signaling effects," Journal of International Money and Finance, Elsevier, vol. 23(2), pages 165-188, March.
    2. Carmen M. Reinhart, 2002. "Default, Currency Crises, and Sovereign Credit Ratings," World Bank Economic Review, World Bank Group, vol. 16(2), pages 151-170, August.
    3. Michael Chui & Prasanna Gui & Andrew G Haldane, 2000. "Sovereign liquidity crises: analytics and implications for public policy," Bank of England working papers 121, Bank of England.
    4. Delianedis, Gordon & Geske, Robert, 1998. "Credit Risk and Risk Neutral Default Probabilities: Information About Migrations and Defaults," University of California at Los Angeles, Anderson Graduate School of Management qt7dm2d31p, Anderson Graduate School of Management, UCLA.
    5. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
    6. Eaton, Jonathan & Gersovitz, Mark & Stiglitz, Joseph E., 1986. "The pure theory of country risk," European Economic Review, Elsevier, vol. 30(3), pages 481-513, June.
      • Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1991. "The Pure Theory of Country Risk," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 391-435 National Bureau of Economic Research, Inc.
    7. Corsetti, G. & Mackowiak, B., 2000. "Nominal Debt and the Dynamics of Currency Crises," Papers 820, Yale - Economic Growth Center.
    8. Giancarlo Corsetti & Bartosz Mackowiak, 2000. "Nominal Debt and the Dynamics of Currency Crises," Working Papers 820, Economic Growth Center, Yale University.
    9. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
    10. Roberto Chang & Andres Velasco, 1998. "Financial crises in emerging markets: a canonical model," Working Paper 98-10, Federal Reserve Bank of Atlanta.
    11. Allan Drazen, 2000. "Political Contagion in Currency Crises," NBER Chapters, in: Currency Crises, pages 47-67 National Bureau of Economic Research, Inc.
    12. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
    13. Geske, Robert, 1977. "The Valuation of Corporate Liabilities as Compound Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(04), pages 541-552, November.
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