In this paper we use the Clark (1991) methodology to estimate the macroeconomic financial risk premium from 1985 to 1997 for Argentina, Brazil, Chile, Colombia, Mexico and Venezuela, the 6 Latin American countries with the largest stock markets, and test whether and to what extent it affects...

In this paper we look at capital budgeting techniques when the abandonment value is stochastic. We investigate how these techniques can be exploited as management tools to aid not only in the invest/abandon decision but also in ongoing project management, financial forecasting and the timing of...

This paper measures how the risk associated with foreign direct investment in the prosperous, liberal economies of Hong Kong and Taiwan is affected by the prospect of reunification with the poor, politically and economically backward mainland. This China factor is modeled as a jump to a higher...

In this paper, I develop a model that measures the effects of political risk on the outcome of a foreign direct investment project as the value of an insurance policy that reimburses all losses resulting from the political event or events in question. The evolutionary process of political risk...

We use the performance of Indian Eurobonds over the period 1990-1992 to examine the sensitivity of India's creditworthiness to the Iraqi invasion of Kuwait on August 2, 1990. We also explore the related question of whether the changes in creditworthiness, measured as the effect of changes in...

In this paper we look at the Indian financial crisis of 1990-1992 that included three credit rating downgrades of two notches each in the short space of 9 months. We measure to what extent India's financial difficulties were the result of conditions prevailing on the international capital...

This paper compares the effect on firm value of different foreign currency (FC) financial hedging strategies identified by type of exposure (short or long term) and type of instrument (forwards, options, swaps and foreign currency debt). We find that hedging instruments depend on the type of...

The concept of efficient portfolios plays an important role in modern financial theory and practice. Although there is an extensive and growing literature that focuses on testing portfolio efficiency, outside of mean-variance optimization, which has several serious shortcomings, no systematic...

This paper uses the expected utility framework to examine the optimal hedging decision for commodities with mean reverting price processes. The derived results show that when commodity prices follow a mean reverting process, the optimal hedge ratio differs significantly from the classical...

This paper develops a model for evaluating the cost of expropriation risk, which is determined with respect to the government's incentive to expropriate. The model includes the positions of both government and firm. The government's decision to expropriate is modeled as an American style call...