This paper investigates the short to medium-term empirical relationships between the current account balances and a broad set of macroeconomic determinants in Serbia and selected CEE countries. Using novel model averaging techniques we focus the analysis to individual country’s data only. The...

Periods of high uncertainty bring liquidity concerns to the forefront for sovereign bond investors. Arguably the most liquid and cost-effective way for retail and small institutional investors to gain diversified sovereign bond exposure is through an exchange traded fund (ETF). In this paper we...

In order to reduce the exchange-rate risk, banks in emerging markets are typically denominating their loans in foreign currencies. However, in the event of a substantial depreciation of the local currency, the payment ability of a foreign-currency borrower may be reduced significantly, exposing...

The paper develops a comprehensive framework for market risk stress testing in internationally active financial institutions. We begin by defining the scope and type of the stress test and explaining how to select risk factors and the stress time horizon. We then address challenges related to...

The objective of this paper is to estimate Serbian benchmark spot curves using the Svensson parametric model. The main challenges that we tackle are: sparse data, different currency denominations of short and longer term maturities, and infrequent transactions in the short-term market segment vs...

This paper studies the drivers of the daily dynamics of the nominal dinar-euro exchange rate from September 2006 to June 2010. Using a novel semiparametric approach we are able to incorporate the evidence of nonlinearities under very weak assumptions on the underlying data generating process. We...

We study the relation between noise (liquidity traders, endowment shocks) and the aggregation of information in financial markets with large number of agents. We show that as long as noise increases with the number of agents, the limiting equilibrium is well-defined and leads to non-trivial...

We develop a new option-based method for the valuation of mortgage insurance contracts in closed form in an economy where agents are risk neutral. While the proposed valuation method is general and can be used in any market, it may be particularly useful in emerging market economies where other...

This paper studies the effects that benefits of control and moral hazard have on the evolution of large stakes in REITs. A large risk-averse shareholder trades off the net benefits of REIT business monitoring and control with the cost of bearing risk beyond the level compensated by the REIT...