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Guimaraes, Bernardo - London School of Economics (LSE) - 2008

This paper analyses whether sovereign default episodes can be seen as contingencies of optimal international lending contracts. The model considers a small open economy with capital accumulation and without commitment to repay debt. Taking first order approximations of Bellman equations, I...

Persistent link: https://www.econbiz.de/10010744981

Principal agent problems under loss aversion: an application to executive stock options

de Meza, David; Webb, David C. - London School of Economics (LSE) - 2004

Executive stock options reward success but do not penalise failure. In contrast, the standard principalagent model implies that pay is normally monotonically increasing in performance. This paper shows that, under loss aversion, the use of carrots but not sticks is a feature of an optimal...

Persistent link: https://www.econbiz.de/10010745716

Incentive design under loss aversion

de Meza, David; Webb, David C. - London School of Economics (LSE) - 2006

Compensation schemes often reward success but do not penalize failure. Fixed salaries with stock options or bonuses have this feature. Yet the standard principal–agent model implies that pay is normally monotonically increasing in performance. This paper shows that, under loss aversion, there...

Persistent link: https://www.econbiz.de/10010746407

The estimated effects of the euro on trade: why are they below historical effects of monetary unions among smaller countries?

Frankel, Jeffrey A. - London School of Economics (LSE) - 2009

others used the gravity model on a much smaller data set to estimate the effects of the euro on trade among its members. The … that were estimated in the euro's first four years hold up in the second four years? The answer is yes. Second, and more … explanations for the gap between 15% and 200%. First, lags. The euro is still very young. Second, size. The European countries are …

Persistent link: https://www.econbiz.de/10011071291

The impact of trade on aggregate productivity and welfare with heterogeneous firms and business cycle uncertainty

Thia, Jang Ping - London School of Economics (LSE) - 2008

This paper presents a model with monopolistic competition, productively heterogeneous firms, and business cycle aggregate shocks. With firm-specific productive heterogeneity, weaker firms quit when faced with a negative aggregate shock. Consequently, trade does not always increase firm-level...

Persistent link: https://www.econbiz.de/10010745558

On building the American and the European empires

Colomer, Josep M. - London School of Economics (LSE) - 2009

The processes of building the United States of America (USA) during the nineteenth century and the European Union (EU) since mid-twentieth century are among the major claims for the possibility of a vast, ‘imperial’-size political unit based on democratic principles. The crucial period for...

Persistent link: https://www.econbiz.de/10010745910

Can comparative advantage explain the growth of US trade?

Cunat, Alejandro; Maffezzoli, Marco - London School of Economics (LSE) - 2005

We present a dynamic comparative advantage model in which moderate reductions in trade costs can generate sizable increases in trade volumes over time. A fall in trade costs has two effects on the volume of trade. First, for given factor endowments, it raises the degree of specialization of...

Persistent link: https://www.econbiz.de/10010746417

Moral hazard and debt maturity

Huberman, Gur; Repullo, Rafael - London School of Economics (LSE) - 2014

We present a model of the maturity of a bank’s uninsured debt. The bank borrows funds and chooses afterwards the riskiness of its assets. This moral hazard problem leads to an excessive level of risk. Short-term debt may have a disciplining effect on the bank’s risk-shifting incentives, but...

Persistent link: https://www.econbiz.de/10011163493

Risk models–at–risk

Boucher, Christophe M.; Danielsson, Jon; Kouontchou, … - London School of Economics (LSE) - 2013

The experience from the global financial crisis has raised serious concerns about the accuracy of standard risk measures as tools for the quantification of extreme downward risk. A key reason for this is that risk measures are subject to model risk due, e.g., to specification and estimation...

Persistent link: https://www.econbiz.de/10011163494

A proposal for an open-source financial risk model

Ho Hwang, Jong - London School of Economics (LSE) - 2013

This paper presents a policy proposal for building a new framework for gathering, measuring and disclosing financial risk information in the global economy. The paper examines the current state of the financial risk framework, notes its advantages and disadvantages and proposes a new construct...

Persistent link: https://www.econbiz.de/10011163501