Understanding aggregate default rates of high yield bonds

The New York-New Jersey region's hard-earned recovery in employment is being overshadowed by ongoing job losses in certain sectors and the prospect of moderating growth in the United States as a whole. Fortunately, several positive trends are bolstering the region's employment picture. Strength in the services sector, a falloff in restructuring, and gains in income point to continuing--though modest--regional job growth in 1996.Bonds

Why Do Firms Become Widely Held? An Analysis of the ynamics of Corporate Ownership

We consider IPO firms from 1970 to 2001 and examine the evolution of their insider ownership over time to understand better why and how U.S. firms that become widely held do so. In our sample, a majority of firms has insider ownership below 20% after ten years. We find that a firm's stock market performance and trading play an extremely important role in its insider ownership dynamics. Firms that experience large decreases in insider ownership and/or become widely held are firms with high valuations, good recent stock market performance, and liquid markets for their stocks. In contrast and surprisingly, variables suggested by agency theory have limited success in explaining the evolution of insider ownership.

Solid waste management and social inclusion of waste pickers: opportunities and challenges

This repository item contains a working paper from the Boston University Global Economic Governance Initiative. The Global Economic Governance Initiative (GEGI) is a research program of the Center for Finance, Law & Policy, the Frederick S. Pardee Center for the Study of the Longer-Range Future, and the Frederick S. Pardee School of Global Studies. It was founded in 2008 to advance policy-relevant knowledge about governance for financial stability, human development, and the environment.In this paper we explore the opportunities and challenges inherent in the model of cooperation between municipal solid waste systems (MWSs) and waste picker cooperatives (WPCs). There is growing enthusiasm about waste picker inclusion, often as part of ‘integrated solid waste management.’ The World Bank and the InterAmerican Development Bank, for example, have both funded projects to support waste picker integration into formal sector recycling. Advocacy organizations such as WIEGO have called for an intensification of such efforts through access to credit and technology, as well as through partnerships to collect recyclables in underserved communities. These measures have given many waste pickers higher standards of living, economic security and a sense of inclusion in society. [TRUNCATED

Is Credit Event Risk Priced? Modeling Contagion via the Updating of Beliefs.

Empirical tests of reduced form models of default attribute a large fraction of observed credit spreads to compensation for jump-to-default risk. However, these models preclude a "contagion-risk'' channel, where the aggregate corporate bond index reacts adversely to a credit event. In this paper, we propose a tractable model for pricing corporate bonds subject to contagion-risk. We show that when investors have fragile beliefs (Hansen and Sargent (2009)), contagion premia may be sizable even if P-measure contagion across defaults is small. We find empirical support for contagion in bond returns in response to large credit events. Model calibrations suggest that while contagion risk premia may be sizable, jump-to-default risk premia have an upper bound of a few basis points.

Latin America 2060: consolidation or crisis?

This repository item contains a single issue of the Pardee Center Task Force Reports, a publication series that began publishing in 2009 by the Boston University Frederick S. Pardee Center for the Study of the Longer-Range Future.Latin America has produced vigorous ideas throughout its history, expressed in narratives about its struggles and successes, or its weaknesses and failures. Together, these have shaped a multi-faceted vision of the region and its peoples. Some of its expositors, finding the story to be neither complete nor precise, work toward reformulations, some quite radical. Such generation of knowledge in different fields seems destined to yield a variety of distinct outcomes, at least in part because some of the emerging social and cultural movements are not yet very well structured. This Task Force Report project seeks to harness ideas about the region’s future into a coherent and policy useful discourse. A Workshop and a Task Force meeting was held at Boston University on November 18-19, 2010. A select group of invited experts – a mix of academic scholars and practitioners – were asked to turn their ideas into short ‘Think Pieces’ essays. Each Think Piece focuses on a specific topical issue for the region as a whole, instead of looking only at particular countries. These Think Piece essays are compiled and edited by the Task Force coordinator and published by the Pardee Center as a Task Force Report

Foreign Currency Exposure and Hedging: Evidence from Foreign Acquisitions

Previous research on the impact of currency risk on stock returns has failed to find a significant role for foreign exchange rates. This paper addresses several explanations of this finding with a unique dataset of U.S. firms that acquire targets in other countries. The dataset allows estimation of the impact of exchange rates using firm-specific bilateral exchange rates and a time period over which underlying exposure is known to significantly change. We also relate the change in exposure from before to after the acquisition to various characteristics of the acquirer, such as its presence in the target country prior to the deal and its hedging activities, and characteristics of the target, such as the exposure of the target prior to the deal. The results suggest that identifying a relevant exchange rate can be an important consideration in studying the impact of exchange rate risk on stock returns, but identifying financial hedging information is not. Further, foreign targets often provide operational hedging benefits to the U.S. acquirers, as exposure estimates are significantly affected by the acquisition

Credit Default Swap Auctions

Examines all of the CDS auctions conducted to date and evaluate their efficacy by comparing the auction outcomes to prices of the underlying bonds in the secondary market