The Management of Greek Sovereign Risk

In 2010 the excessive public spending produced the first sovereign bond market crisis in Europe: Greece. The Hellenic crisis is the product of years of recession, of the sluggish economic environment and poor productivity – but above all it is the product of the mismanagement of the public finance, of unsatisfactory reporting, risk management and accounting practices. Information about Greece is scarce and fragmented, but the inability by European authorities to understand the incredible mismanagement strongly disappoints the taxpayer. The relevant exposure of European banks in the bond market toward the default risk of Greece supports the need for hedging tools, such as Credit Default Swaps. However, there is evidence that the CDS market on Greek sovereign bonds is segmented, and contracts are mis-priced. The lack of comprehensive data on CDS and other OTC contracts impedes any further investigation. European authorities should consider revising CDSs trading rules and requirements, until the risks produced are properly limitedGreek crisis, Credit Default Swap, sovereign risk management

An Overview of the Literature about Derivatives

A derivative is defined by the BIS (1995) as “a contract whose value depends on the price of underlying assets, but which does not require any investment of principal in those assets. As a contract between two counterparts to exchange payments based on underlying prices or yields, any transfer of ownership of the underlying asset and cash flows becomes unnecessary”. This definition is strictly related to the ability of derivatives of replicating financial instruments2. Derivatives can be divided into 5 types of contracts: Swap, Forward, Future, Option and Repo, the last being the forward contract used by the ECB to manage liquidity in the European inter-bank market. For a further definition of contracts, which should although be known by the reader, see Hull (2002). These 5 types of contracts can be combined with each other in order to create a synthetic asset/liability, which suits any kind of need; this extreme flexibility and freedom widely explain the incredible growth of these instruments on world financial markets. In section 2 I will look at some micro-economic results about derivatives; in section 3 the issue of risk is addressed; in section 4 monetary policy results about derivatives are shown, and in section 5 fiscal policy results are shortly presented. In a brief statistical appendix some relevant data are presented.

Derivatives, Fiscal Policy and Financial Stability

The massive use of derivatives and securitisation by sovereign States for public debt and deficit management is a growing phenomenon in financial markets. Financial innovation can modify risks effectively run and alter the stability of the public sector finance. The experience of some developed and developing countries is surveyed to look at main instruments used and aims of public finance. Financial stability of the public sector is analysed considering financial innovation use. The case of Italy and its scarce disclosure of information are presented. An IS-LM model is used to capture the effect of financial innovation on fiscal policy for high indebted (European) industrialised countries, with deficit constraints, starting from Blanchard (1981). The use of financial innovation can have various effects over debt and deficit management, given binding external burden (like the European criteria) as far as risks are properly considered, expectations of fiscal policy are coherent with that of markets, and no exogenous shock occurs.fiscal policy; financial stability; derivatives and securitisation

Souvlaki connection; reflections on the Greek crisis

After the subprime credit crisis of 2007, the world is no longer what we thought. An unprecedented crisis of confidence was combined with a credit crunch, and the G20 countries had to enact massive public spending programmes to save the economy and at least buffer the inevitable hard landing. In 2010 this excessive public spending produced the first public debt crisis in the wake of the subprime crisis: Greece reported that in 2009 it had run an unprecedented deficit of 15.4 per cent of GDP, and that its public debt had skyrocketed to 126.8 per cent. The Greek crisis is the product of years of recession, the sluggish economic environment and poor productivity – but above all it is the product of the mismanagement of the public finances and of unsatisfactory reporting practices. In this essay we analyse this crisis in the context of the era of financial derivatives and underscore a number of crucial effects that have been largely ignored in both academic discussion and public debate.Greek sovereign debt crisis; European financial crisis

Effects of options on financial stability

The lack of collateralized trading in the OTC derivatives market and the absence of any system for the resolution of cross exposures have been highlighted as major causes of the collapse of assets prices during the financial crisis. According to the perfect market hypothesis derivatives are a zero sum game (according to Black-Scholes pricing models) and do not add new risk to the market or modify existing risk. However, these virtues only apply in the real world in the presence of effective regulation, control, and supervision. The perverse effects of the financial crisis sug-gest that it is time to rethink the standard finance theory approach to derivatives

Designing Unstable Landscapes

The concept of «unstable landscapes» refers to sections of territory produced by the contact/crash between different and conflicting morphological conditions. Contexts irrevocably exposed to the dynamics of the world, natural events and use way; processed, rejected, forgotten and recycled over the centuries; in-between lands grew up without a permanent order that however can be recovered. This condition is typical of the rivers, whose untamed nature, combined with the necessity to exploit their resources, has produced a particular condition of instability related to different conditions: the urgent requirement of infrastructural intervention due to a constant and increasing risk both for urban and rural areas; the request to reduce the marginality of these spaces whose landscape is impossible to recognize because fragmentary and dominated by the disorder; the necessity to find solution useful to readdress unsustainable ecological conditions. The urgency of intervention, combined with the lost potentialities and the latent richness of these spaces requires an integrated approach within which the role of architectural and landscape design is crucial. The purpose to minimize the risk, to return a sense to these territories, especially working on the public space, and to re-establish sustainable ecological conditions are singular objectives to express through a plural vision. In this sense the ability of the architect to address each problem from the point of view of the space (shape, values, relations) is fundamental. Thinking to the design process as a “therapy” or “treatment” implies an “anamnesis” process (collection of data related to the conditions of the landscape), the formulation of a “diagnosis” (development of a strategic view) and the identification of possible solutions (proposals of construction, maintenance and care). Those are indispensable preconditions to the formulation of operative strategies oriented to clear, to protect, to connect and to restore order within different the parts and to the disposition of architectural works characterized by technical and formal rigor, relationship with the spaces, multi- functionality and open possibilities of completion over time

The Management of Greek Sovereign Risk

In 2010 the excessive public spending produced the first sovereign bond market crisis in Europe: Greece. The Hellenic crisis is the product of years of recession, of the sluggish economic environment and poor productivity – but above all it is the product of the mismanagement of the public finance, of unsatisfactory reporting, risk management and accounting practices. Information about Greece is scarce and fragmented, but the inability by European authorities to understand the incredible mismanagement strongly disappoints the taxpayer. The relevant exposure of European banks in the bond market toward the default risk of Greece supports the need for hedging tools, such as Credit Default Swaps. However, there is evidence that the CDS market on Greek sovereign bonds is segmented, and contracts are mis-priced. The lack of comprehensive data on CDS and other OTC contracts impedes any further investigation. European authorities should consider revising CDSs trading rules and requirements, until the risks produced are properly limited

Variaciones de la abundancia de peces del valle del rio Parana (Argentina)

L'abondance et la répartition des poissons dans le Parana sont influencées par les facteurs de l'environnement comme la géomorphologie et les crues exceptionnelles. En aval de la confluence du Parana et du Paraguay, de même que dans la basse vallée de ce dernier, une grande variété de milieux sont représentés, entre le cours principal et les cours secondaires comme la San Javier et la Coronda. Ces biefs de plus de 300 km peuvent être considérés comme indépendants, parce que les levées de berge du cours principal, limitent les points de contact avec les rivières. Les caractéristiques principales de ces systèmes sont régies par les variations du niveau de l'eau, qui sont également liées à la température. Des variations moins régulières se superposent, qui sont définies par les crues exceptionnelles en hauteur et en durée, et qui résultent du phénomène El Nino en été-automne, ou de l'extension du front froid en hiver. Durant ces crues exceptionnelles, tout le bassin est inondé, les frontières entre sous-systèmes disparaissent, les matériaux organiques sont déplacés, le phytoplancton diminue, et la phase critique pour les larves de poissons est augmentée par faute de nourriture et d'abr

Crisi greca

La crisi greca è il risultato della congiuntura negativa, dell’ambiente economico debole e della scarsa produttività ma soprattutto è il risultato della cattiva gestione dei fondi pubblici e insufficienti pratiche di reporting