1,721,068 research outputs found
The Price of Cheeky Contracting
Full text linkAn implication of the incompleteness of contracts is that there are going to be gaps and ambiguities that either side can exploit. We ask whether the expectation that a counterparty is likely to act aggressively in its use of contract language impacts the price that market participants attach to that contract. To do our analysis, we look at how markets price contract terms for the perennial “bad boy” of the sovereign debt markets, the Republic of Argentina. The results are consistent with a market penalty for cheeky contracting
Firms save from bonds but not from loans
No full textWe empirically study the corporate propensity to save from bonds versus loans. Our findings indicate that firms save approximately 14 cents of every dollar borrowed through bonds, while they do not exhibit similar savings behavior with loans. Saving from bonds is pervasive over time, and in the cross-section pledgeability is a key driver of this behavior. Specifically, we find that lower asset tangibility and shorter asset maturities are linked to substantial increases in saving rates from bond borrowings. We show that our results align with a model that incorporates external financing frictions and costly default
A portfolio-based evaluation of affine term structure models
No full textWe focus on affine term structure models as tools for active bond portfolio management. Our financial exercise comprises the following steps: 1) forecast the future values of the state variables implied by several multi-factor models; 2) approximate the conditional moments of the state vector to come up with discrete scenarios for the future state variables; 3) compute bond returns for various maturities at future dates from the theoretical asset pricing relations; 4) solve the portfolio problem faced by an investor with a six month horizon who takes into account the possibility to rebalance after one quarter. The sequence of optimal portfolios is evaluated in terms of financial properties. We show that a financial based evaluation of term structure models may yield results conflicting with those obtained from a statistical evaluation
Technology adoption: hysteresis and absence of lock-in
No full textWe introduce a simple model of technology adoption with overlapping generations of players. Technologies generate network effects, and players are both backward- and forward-looking. We use results from the supermodular games literature to guarantee equilibrium existence and uniqueness. In line with the empirical literature, the equilibrium adoption path exhibits hysteresis and technologies cannot lock-in. We characterize the expected time of adoption, which can be seen as a measure of technology dominance
The Puzzle of PDVSA Bond Prices
Full text linkMarket reports in the summer of 2016 suggest that Venezuela is on the brink of default on upwards of $65 billion in debt. That debt comprises of bonds issued directly by the sovereign and those issued by the state-owned oil company PDVSA. Based on the bond contracts and other legal factors, it is not clear which of these two categories of bonds would fare better in the event of a restructuring. However, market observers are convinced — and we agree — that legal and contractual differences would likely impact the payouts on the bonds if Venezuela defaults. Using a comparison of recent weekly yields for roughly similar PDVSA and pure sovereign bonds, we attempt to gain some insights into the value investors assign to the legal differences between these two categories of bonds
Information Linkages and Correlated Trading
No full textIn a market with informationally connected traders, the dynamics of volume, price informativeness, price volatility, and liquidity are severely affected by the information linkages every trader experiences with his peers. We show that in the presence of information linkages among traders, volume and price informativeness increase. Moreover, we find that information linkages improve or damage market depth, and lower or boost the Traders' profits, according to whether these linkages convey positively or negatively correlated signals. Finally, our model predicts patterns of trade correlation consistent with those identified in the empirical literature: trades generated by "neighbor" traders are positively correlated and trades generated by "distant" traders are negatively correlated. The Author 2009. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: [email protected]., Oxford University Press.
Evaluating the 2013 Euro CAC experiment
Full text linkOn January 1, 2013, it became mandatory that every new sovereign bond issued by a member of the European Monetary Union include a new contract clause called a Collective Action Clause or CAC. This, we believe, constituted the biggest one-time change to the terms of sovereign debt contracts in history, impacting a market of many trillions of euros. And it was not just that the change was big in terms of the size of the market it impacted; it was big in terms of its impact on the documentation of each individual Euro area sovereign bond contract. To illustrate, prior to January 1, 2013, all of the terms of a local-law Irish sovereign bond fitted on about a page and a half; the full document was about three pages long. After January 1, 2013, the document was twenty pages long; almost all of that space taken by the new CAC term. In terms of words on the page, it was a big change. But did it do anything meaningful? And, more importantly, did it do what it was intended to do
Syndication and Secondary Loan Sales
No full textSecondary loan sales give originating banks the opportunity to diversify part of their credit risk by selling loans to other market participants. However, as originating banks are less exposed to risk after secondary loan sales, their incentives to monitor borrowers diminish. Secondary loan sales therefore involve a trade-off between diversification benefits and sub-optimal monitoring. We explore this trade-off within a theoretical model. The results show that in equilibrium loans trade at a discount because monitoring effort is sub-optimally low. We illustrate how this inefficiency is related to lack of transparency in the secondary loan market, and provide policy implications to address this problem
Application of two mathematical methods for optimizing the macrocation proportions of hydroponically-grown tomatoes
No full textPreparation of substituted 6-benzyl-4-oxopyrimidines for prevention and treatment of HIV infection
No full textThe invention concerns novel substituted 6-benzyl-4-oxopyrimidines of general formula (A). These compounds inhibit reverse transcriptase encoded by human immunodeficiency virus (HIV) or pharmaceutically acceptable salts thereof, and find their application in the prevention and treatment of HIV infection and the treatment of the resulting acquired immune deficiency syndrome (AIDS). Pharmaceutical compositions containing the compounds and a method of use of the present compounds and other agents for the treatment of AIDS and viral infection by HIV are also envisaged
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