This paper uses Duffie and Singleton (1999) discount model for defaultable bonds to infer the presence of a preferential credit treatment (PCT) for Multilateral Development Banks (MDBs) in loss given default (LGD) space. The main inferences from the paper are twofold. -1- Lower lending fees in...

This article explores factors that explain the coexistence of public and private banks in the debt market. Starting from the objective function that underpins each institution type, the article identifies the sources of growth in a public bank relative to a private bank under the constraint that...

We derive optimal hedging ratios for interest rate risk under different assumptions that underpin the relationship between the forward rate and the expected future spot rate. In some instances, full hedging is optimal, and the conditions for the optimality of a partial hedge are identified. Less...

This paper shows analytically the optimal allocation of public debt between local and foreign currency denominated debt. The stark differences in optimal behavior between developed and developing countries are accounted in terms of larger sensitivity of local interest rates to fiscal deficits in...