Consider the problem of a government that wants to reduce the debt-to-GDP (gross domestic product) ratio of a country. The government aims at choosing a debt reduction policy which minimises the total expected cost of having debt, plus the total expected cost of interventions on the debt ratio. We model this problem as…
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48 results for “debt ratios”
We present an elementary analysis of the dynamical aspects of the GDP / government surplus multiplier with relevance to the assessment of a country's debt repayment policy. We show the (at first) counter intuitive result that in order to reduce the Debt/GDP ratio, countries with high Debt to GDP should go into further …
The seniority of debt, which determines the order in which a bankrupt institution repays its debts, is an important and sometimes contentious feature of financial crises, yet its impact on system-wide stability is not well understood. We capture seniority of debt in a multiplex network, a graph of nodes connected by mu…
The major perspective of this paper is to provide more evidence into the empirical determinants of capital structure adjustment in different macroeconomics states by focusing and discussing the relative importance of firm-specific and macroeconomic characteristics from an alternative scope in U.S. This study extends th…
Current study aims to provide new empirical evidence on the impact of debt on corporate profitability. This impact can be explained by three essential theories: signaling theory, tax theory and the agency cost theory. Using panel data sample of 2240 French non listed companies of service sector during 1999-2006. By uti…
AI investors signal higher debt in ESG firms, boosting portfolio management.
problem Determining the value of ESG investing amid AI investment trends.
method Cross-sectional regressions of ESG scores and debt ratios of S&P 500 firms.
result ESG scores signal higher debt in firms, supporting ESG investing.
Public debt is one of the important economic variables that quantitatively describes a nation's economy. Because bankruptcy is a risk faced even by institutions as large as governments (e.g. Iceland), national debt should be strictly controlled with respect to national wealth. Also, the problem of eliminating extreme p…
This paper investigates the relevance of the No-Ponzi game condition for public debt (i.e. the public debt growth rate has to be lower than the real interest rate, a necessary assumption for Ricardian equivalence) and of the transversality condition for the GDP growth rate (i.e. the GDP growth rate has to be lower than…
Recently, there has been a growing interest in network research, especially in these fields of biology, computer science, and sociology. It is natural to address complex financial issues such as the European sovereign debt crisis from the perspective of network. In this article, we construct a network model according t…
The paper examines how CoCo bonds can enhance financial stability in interconnected banking systems.
problem Enhancing financial stability in interconnected banking systems.
method Financial network model with contingent convertible (CoCo) debt obligations.
result Replacing unsecured interbank debt with CoCo debt decreases systemic risk and increases bank shareholder value.
The paper analyzes debt recycling strategies for mortgage repayment, revealing complex phases of success and failure.
problem Evaluating the effectiveness of debt recycling strategies compared to standard mortgage repayment.
method Developed a dynamical model to study the time evolution of equity and mortgage balance under various conditions.
result The model identifies four phases: strongly successful, weakly successful, default, and permanent re-mortgaging, with sensitivity to initial conditions.
JFR-rg: A New Macroeconomic Framework for High-Debt, Low-Growth Economies under Financial Repressionecon.EM
JFR-rg model explains Japan's stable debt despite high interest rates and low growth.
problem Understanding Japan's stable government debt despite high interest rates and low growth.
method Formalizes financial repression channels through JFR-rg model, incorporating financial repression bias and exchange-rate channel.
result Identifies Normalization Trap and Captive Financial System Parameter, showing debt dynamics under financial repression.
Long-Run Sovereign Debt Composition: An Analytic Ergodic Framework with Explicit Maturity Structureq-fin.MF
The paper develops a model for sovereign debt dynamics with explicit maturity structure.
problem Analyzing the sustainability and risk of long-term sovereign debt issuance.
method Discrete-time model with explicit maturity structure, deterministic and stochastic extensions.
result The model identifies conditions for ergodic convergence and derives analytical formulas for key metrics.
Fitting a distribution to Value-at-Risk and Expected Shortfall, with an application to covered bondsq-fin.RM
Covered bonds are a specific example of senior secured debt. If the issuer of the bonds defaults the proceeds of the assets in the cover pool are used for their debt service. If in this situation the cover pool proceeds do not suffice for the debt service, the creditors of the bonds have recourse to the issuer's assets…
During the last two years, Europe has been facing a debt crisis, and Greece has been at its center. In response to the crisis, drastic actions have been taken, including the halving of Greek debt. Policy makers acted because interest rates for sovereign debt increased dramatically. High interest rates imply that defaul…
Credit Crunch: The Role of Household Lending Capacity in the Dutch Housing Boom and Bust 1995-2018stat.AP
New measure predicts Dutch housing market downturns.
problem Understanding causes of Dutch housing boom and bust.
method Modelled household lending capacity using bank formulas.
result New measure outperforms traditional measures in forecasting housing prices.
We propose a continuous-time stock-flow consistent model for inventory dynamics in an economy with firms, banks, and households. On the supply side, firms decide on production based on adaptive expectations for sales demand and a desired level of inventories. On the demand side, investment is determined as a function o…
The study tests a functional-form restriction on risk exposure dynamics using margin debt data.
problem Understanding risk exposure dynamics under capital constraints and slack.
method Testing a regime-conditional functional-form restriction on aggregate risk-exposure dynamics implied by VaR-constrained intermediary models.
result The contraction and growth of exposures under capital constraints and slack are observed and tested.
Changes in the capital structure before and after the global financial crisis for SMEs are studied, emphasizing their financing problems, distinguishing between internal financing and external financing determinants. The empirical research bears upon 158 small and medium-sized firms listed on Shenzhen and Shanghai Stoc…
A macroeconomic model based on the economic variables (i) assets, (ii) leverage (defined as debt over asset) and (iii) trust (defined as the maximum sustainable leverage) is proposed to investigate the role of credit in the dynamics of economic growth, and how credit may be associated with both economic performance and…
Quantitative easing is an incomplete strategy that must be accompanied by the nullification of debtq-fin.GN
Compound interest as well as inflation grows exponentially with time, whereas other means to repay debt grow polynomially. For this and other, mostly political, reasons, debt without inflation is unsustainable. We suggest a discontinuous way to eliminate debt by nullifying it. This scenario is preferable to current cen…
KLD token adjusts supply based on macroeconomic debt index, creating deflationary effect.
problem Managing deflationary pressures in digital assets.
method Debt-indexed supply adjustments linked to macroeconomic data.
result Deflationary mechanism strengthens as debt rises.
Towards a data-driven debt collection strategy based on an advanced machine learning frameworkq-fin.ST
This research improves debt collection strategies using advanced machine learning.
problem Accurate estimation of propensity to pay and cashflow for optimal debt collection.
method Developed a machine learning framework with pre-processing and model selection.
result The proposed model outperforms current industry strategies.
The Greek Public Debt Path: From Zero to Infinityphysics.data-an
The aim of the present article is to treat the Greek public debt issue strictly as a curve fitting problem. Thus, based on Eurostat data and using the Mathematica technical computing software, an exponential function that best fits the data is determined modelling how the Greek public debt expands with time. Exploring …
The European sovereign debt crisis has impaired many European banks. The distress on the European banks may transmit worldwide, and result in a large-scale knock-on default of financial institutions. This study presents a computer simulation model to analyze the risk of insolvency of banks and defaults in a bank credit…
Funding Liquidity, Debt Tenor Structure, and Creditor's Belief: An Exogenous Dynamic Debt Run Modelq-fin.RM
We propose a unified structural credit risk model incorporating both insolvency and illiquidity risks, in order to investigate how a firm's default probability depends on the liquidity risk associated with its financing structure. We assume the firm finances its risky assets by mainly issuing short- and long-term debt.…
Parastatistic distribution of a total debt owed to a large number of creditors considered in relation to the duration of these debts. The process of debt calculation depends on the fractal dimension of economic system in which this process takes place. Two actual variants of these dimensions are investigated. Critical …
In this paper we present formulas for the valuation of debt and equity of firms in a financial network under comonotonic endowments. We demonstrate that the comonotonic setting provides a lower bound and Jensen's inequality provides an upper bound to the price of debt under Eisenberg-Noe financial networks with bankrup…
Pricing defaultable debt: some exact resultscond-mat.stat-mech
In this letter, I consider the issue of pricing risky debt by following Merton's approach. I generalize Merton's results to the case where the interest rate is modeled by the CIR term structure. Exact closed forms are provided for the risky debt's price.
Debt-financed collateral in DeFi increases stability risks.
problem Financial stability risks in DeFi ecosystems due to debt-financed collateral.
method Categorization and classification algorithm to measure debt-financed collateral.
result Wide-spread use of stablecoins as debt-financed collateral increases financial stability risks.
We analyze the size dependence and temporal stability of firm bankruptcy risk in the US economy by applying Zipf scaling techniques. We focus on a single risk factor-the debt-to-asset ratio R-in order to study the stability of the Zipf distribution of R over time. We find that the Zipf exponent increases during market …
Article offers models for choosing sale-leaseback vs debt.
problem Choosing between sale-leaseback and debt for commercial real estate.
method Developed decision models for leasing.
result Models can be applied to various types of leasing.
The paper addresses dynamic capital structure models with defaultable debt, proving existence and uniqueness.
problem Dynamic capital structure models with an investor break-even condition may not generate a contraction mapping.
method Provided an example and used a dual problem and change of measure to prove existence and uniqueness.
result A unique Markov-perfect equilibrium exists where firm decisions reflect state-dependent targets.
Debt swaps improve financial networks by optimizing clearing payments and stability.
problem Improving financial network stability and efficiency through debt swaps.
method Analyzing computational complexity of debt swaps, focusing on semi-positive swaps and v-improving swaps.
result Polynomial length of sequences of semi-positive v-improving swaps for ranking-based clearing, but NP-hard for arbitrary v-improving swaps.
The study examines how climate risk influences sovereign debt default decisions.
problem The relationship between climate risk and sovereign debt default decisions.
method Calibration of a model to analyze the credit spreads of sovereign bonds and the impact of climate vulnerability on bond spreads.
result Climate risk does not significantly influence the decision to default on sovereign debt.
Time Reversal and Last Passage Time of Diffusions with Applications to Credit Risk Managementq-fin.MF
We study time reversal, last passage time, and -transform of linear diffusions. For general diffusions with killing, we obtain the probability density of the last passage time to an arbitrary level and analyze the distribution of the time left until killing after the last passage time. With these tools, we develop a…
We consider here a Fokker--Planck equation with variable coefficient of diffusion which appears in the modeling of the wealth distribution in a multi-agent society. At difference with previous studies, to describe a society in which agents can have debts, we allow the wealth variable to be negative. It is shown that, e…
The paper analyzes bank decisions in a three-step model, focusing on equity and debt raising.
problem Bank decision-making in a three-time-step model with equity and debt raising.
method Theoretical analysis of raising new equity and debt, considering capital requirements and equity holders constraints.
result Raising equity and debt can increase or decrease return on equity, depending on specific cases.
We deal with the problem of outsourcing the debt for a big investment, according two situations: either the firm outsources both the investment (and the associated debt) and the exploitation to a private consortium, or the firm supports the debt and the investment but outsources the exploitation. We prove the existence…
Analysis of the 2007-8 credit crisis has concentrated on issues of relaxed lending standards, and the perception of irrational behaviour by speculative investors in real estate and other assets. Asset backed securities have been extensively criticised for creating a moral hazard in loan issuance and an associated incre…
This paper tackles hidden technical debts in fair ML systems for Fintech.
problem Building fair machine learning systems in financial services.
method Examining key stages of ML system development and deployment.
result Technical debts exist in deploying fair ML systems in Fintech.
I sketch a program for a microeconomic theory of the main component of the business cycle as a recurring disequilibrium, driven by incompleteness of the financial market and by information asymmetries between borrowers and lenders. This proposal seeks to incorporate five distinct but connected processes that have been …
Possible solution of problem of sovereign debts is suggested. At the current moment this solution still can be provided only by methods of the world monetary policy.
Study examines impact of capital structure on Indian auto companies' profitability.
problem Understanding the impact of capital structure on profitability of Indian auto companies.
method Used fixed and random effect models with 10 years of data from 17 companies.
result Optimal capital structure improves company performance and maintains capital adequacy.
In this work, I generalize Merton's approach of pricing risky debt to the case where the interest rate risk is modeled by the CIR term structure. Closed form result for pricing the debt is given for the case where the firm value has non-zero correlation with the interest rate. This extends previous closed form pricing …
The definition of deposit substitutes in Philippine tax law fails to consider the maturity of a debt instrument. This makes it possible for long-term bonds to be considered as deposit substitutes if they meet the 20-lender rule, taxable at 20% final tax. However, long-term debt instruments cannot realistically function…
Study shows long-term debt impacts financial growth of non-financial firms listed at Nairobi Securities Exchange.
problem Declining financial performance and reluctance to lend to non-financial firms listed at Nairobi Securities Exchange.
method Descriptive and panel data analysis of 45 non-financial firms over 10 years.
result Long-term debt positively and significantly influences financial growth measured by earnings per share and market capitalization.
We investigate hierarchical structures of the European countries by using debt as a percentage of Gross Domestic Product (GDP) of the countries as they change over a certain period of time. We obtain the topological properties among the countries based on debt as a percentage of GDP of European countries over the perio…