In this paper we decompose Turkish Lira interest rates into expected short rate and term premium components, using two well-established methods. Then we focus on the impact of the share of foreign investors on bond yields by instrumenting that share with VIX and Merry Lynch option volatility...

We develop the regime-switching default risk (RSDR) model as a generalization of Merton's default risk (MDR) model. The RSDR model supports an expanded range of asset probability density functions. First, we show using simulation that the RSDR model incorporates sudden changes in asset values...