Found 403 article(s) for author 'Financial Services'

The Economics of Structured Finance

The Economics of Structured Finance. Joshua D. Coval, Erik Stafford, Winter 2009, Paper. “This paper investigates the spectacular rise and fall of structured finance. The essence of structured finance activities is the pooling of economic assets like loans, bonds, and mortgages, and the subsequent issuance of a prioritized capital structure of claims, known as tranches, against these collateral pools. As a result of the prioritization scheme used in structuring claims, many of the manufactured tranches are far safer than the average asset in the underlying pool…” May require purchase or user account. Link

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Banking Crises: An Equal Opportunity Menace

Banking Crises: An Equal Opportunity Menace. Kenneth Rogoff, Carmen Reinhart, December 2008, Paper. “The historical frequency of banking crises is quite similar in high- and middle-to-low-income countries, with quantitative and qualitative parallels in both the run-ups and the aftermath. We establish these regularities using a unique dataset spanning from Denmark’s financial panic during the Napoleonic War to the ongoing global financial crisis sparked by subprime mortgage defaults in the United States. Banking crises dramatically weaken fiscal positions in both groups, with government revenues invariably contracting, and fiscal…” Link

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In Search of Distress Risk

In Search of Distress Risk. John Campbell, December 2008, Paper. “This paper explores the determinants of corporate failure and the pricing of financially distressed stocks whose failure probability, estimated from a dynamic logit model using accounting and market variables, is high. Since 1981, financially distressed stocks have delivered anomalously low returns. They have lower returns but much higher standard deviations, market betas, and loadings on value and small-cap risk factors than stocks with low failure risk. These patterns are more pronounced for stocks with possible informational or arbitrage-related frictions. They are…” Link

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Crisis Governance in the Administrative State: 9/11 and the Financial Meltdown of 2008

Crisis Governance in the Administrative State: 9/11 and the Financial Meltdown of 2008. Adrian Vermeule, November 1, 2008, Paper. “On September 11, 2001, a massive terrorist attack on the World Trade Center in New York killed over 3,000 Americans. The markets plunged, and airline firms reeled towards bankruptcy. Executive action and legislation followed, both to stabilize the markets and to counter terrorism. One result was seven years of debate about inherent executive power, the nature and quality of emergency lawmaking by Congress, and the risks, benefits and harms of government action…” Link

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Disclosure Is the Best Kind Of Credit Regulation

Disclosure Is the Best Kind Of Credit Regulation. Cass Sunstein, August 13, 2008, Opinion. “The Federal Reserve Board recently issued proposed amendments to Regulation Z, which governs Truth in Lending. According to the Fed, the amendments ‘are intended to improve the effectiveness of the disclosures consumers receive in connection with credit card accounts and other revolving credit plans by ensuring that information is provided in a timely manner and in a form that is readily understandable.’ The Fed’s interest in this problem should be applauded, especially in light of the consumer credit crisis…” Link

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Can Exchange Rates Forecast Commodity Prices?

Can Exchange Rates Forecast Commodity Prices? Kenneth Rogoff, June 29, 2008, Paper. “We show that “commodity currency” exchange rates have remarkably robust power in predicting global commodity prices, both in-sample and out-of-sample, and against a variety of alternative benchmarks. This result is of particular interest to policymakers, given the lack of deep forward markets in many individual commodities, and broad aggregate commodity indices in particular. We also explore the reverse relationship (commodity prices forecasting exchange rates) but Önd it to be notably less robust…” Link

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The Continuing Puzzle of Short Horizon Exchange Rate Forecasting

The Continuing Puzzle of Short Horizon Exchange Rate Forecasting. Kenneth Rogoff, Vania Stavrakeva, June 2008, Paper. “Are structural models getting closer to being able to forecast exchange rates at short horizons? Here we argue that misinterpretation of some new out-of-sample tests for nested models, over-reliance on asymptotic test statistics, and failure to sufficiently check robustness to alternative time windows have led many studies to overstate even the relatively thin positive results that have been found. We find that by allowing for common cross-country shocks in our panel forecasting…” (May require user account or purchase) Link

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Bank Accounting Standards in Mexico: A Layman’s Guide to Changes 10 Years after the 1995 Bank Crisis

Bank Accounting Standards in Mexico: A Layman’s Guide to Changes 10 Years after the 1995 Bank Crisis Aldo Musacchio, April 2, 2008, Paper.  “After the 1995 crisis, the Mexican banking system experienced significant changes in bank accounting standards. Most of these changes took place between 1996 and 2001, and had a significant impact in the structure and interpretation of financial information of banks. This document explains the major changes on bank accounting, their purpose and structure, and discusses their impact on financial information reported by Mexican banks. It also provides the English equivalent of…” Link

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Do Hedge Funds Profit From Mutual-Fund Distress?

Do Hedge Funds Profit From Mutual-Fund Distress? Jeremy Stein, Samuel Hanson, February 2008, Paper. “This paper explores the question of whether hedge funds engage in front-running strategies that exploit the predictable trades of others. One potential opportunity for front-running arises when distressed mutual funds — those suffering large outflows of assets under management — are forced to sell stocks they own. We document two pieces of evidence that are consistent with hedge funds taking advantage of this opportunity. First, in the time series, the average returns of long/short equity hedge funds are significantly higher in those…” Link

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The Promise of Prediction Markets

The Promise of Prediction Markets. Cass Sunstein, January 1, 2008, Paper. “Prediction markets are markets for contracts that yield payments based on the outcome of an uncertain future event, such as a presidential election. Using these markets as forecasting tools could substantially improve decision making in the private and public sectors. We argue that U.S. regulators should lower barriers to the creation and design of prediction markets by creating a safe harbor for certain types of small stakes markets.We believe our proposed change has the potential to stimulate innovation in the design…” Link

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