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

  • Maltritz, Dominik
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    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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    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
    Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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    1. Chui, Michael & Gai, Prasanna & Haldane, Andrew G., 2002. "Sovereign liquidity crises: Analytics and implications for public policy," Journal of Banking & Finance, Elsevier, vol. 26(2-3), pages 519-546, March.
    2. Corsetti, G. & Mackowiak, B., 2000. "Nominal Debt and the Dynamics of Currency Crises," Papers 820, Yale - Economic Growth Center.
    3. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-19, June.
    4. 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.
    5. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
    6. 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.
    7. Allan Drazen, 1999. "Political Contagion in Currency Crises," NBER Working Papers 7211, National Bureau of Economic Research, Inc.
    8. 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.
    9. 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.
    10. 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.
    11. 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.
    12. Chang, R. & Velasco, A., 1998. "Financial Crises in Emerging Markets: A Canonical Model," Working Papers 98-21, C.V. Starr Center for Applied Economics, New York University.
    13. Giancarlo Corsetti & Bartosz Mackowiak, 2000. "Nominal Debt and the Dynamics of Currency Crises," Working Papers 820, Economic Growth Center, Yale University.
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