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We use the regime-switching econometric models in Hamilton (1989) and Filardo (1994) to study business cycles in Mexico. In particular, we characterize the ups and downs of economic activity in Mexico. As a proxy for economic activity, we use the Mexican quarterly industrial production index from the second quarter of 1972 to the third quarter of 1999. We allow the transition probabilities driving changes in economic activity to be a function of fiscal, financial, and external sector indicators. Our results show that recessions in Mexico are deeper and shorter than expansions.

Banks and Banking --- Foreign Exchange --- Macroeconomics --- Industries: General --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Business Fluctuations --- Cycles --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Interest Rates: Determination, Term Structure, and Effects --- Macroeconomics: Production --- Economic growth --- Finance --- Currency --- Foreign exchange --- Business cycles --- Real interest rates --- Real exchange rates --- Cyclical indicators --- Industrial production --- Financial services --- Production --- Interest rates --- Industries --- Mexico

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This paper analyzes the capital structure of private asset managers in which the acquisition of nonperforming loans (NPLs) is funded with Contingent Convertibles (CoCos) placed with investors. The paper develops a model based on NPL transfer prices and residual recovery rates to assess capital structures consisting of CoCos and equity. The CoCos would contain put and call options to write down losses and write up profits, respectively, arising from liquidation and restructuring procedures. The paper concludes that the protection mechanism provided by debt write-downs embedded in CoCos and the incentives to investors provided by debt write-ups could help bridge the gap between Portuguese banks’ NPL bid prices and private equity firms’ ask prices.

Banking law. --- Banks and banking --- Law, Banking --- Financial institutions --- Law and legislation --- Banks and Banking --- Finance: General --- International Taxation --- Industries: Financial Services --- Investments: Stocks --- Contingent Pricing --- Futures Pricing --- option pricing --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Bankruptcy --- Liquidation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Taxation, Subsidies, and Revenue: General --- General Financial Markets: Government Policy and Regulation --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Finance --- Public finance & taxation --- Banking --- Investment & securities --- Nonperforming loans --- Loans --- Transfer pricing --- Contingent convertible capital --- Taxes --- Financial sector policy and analysis --- Stocks --- Taxation --- Financial services industry --- Portugal

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This paper analyzes the price stabilizing properties of puttable and extendible bonds, their potential to help develop interest-rate derivative markets, and their use by governments. Their stabilizing properties imply that, when bond prices fall, prices for puttable and extendible bonds fall by less. Their embedded options work as a cushion and replicate the trading gains from hedging long-term bonds with interest rate derivatives. These bonds can help develop interest-rate derivative markets in developing countries and eventually increase demand for long-term government bonds. Informal evidence from OECD countries suggests that these bonds were useful in the 1980s, when interest rates were volatile.

Interest rates. --- Interest rate futures --- Bonds --- Derivative securities. --- Derivative financial instruments --- Derivative financial products --- Derivative instruments --- Derivatives (Finance) --- Financial derivatives --- Securities --- Structured notes (Securities) --- Bond issues --- Debentures --- Negotiable instruments --- Debts, Public --- Stocks --- Futures, Interest rate --- Financial futures --- Money market rates --- Rate of interest --- Rates, Interest --- Interest --- Econometric models. --- Macroeconomics --- Economics: General --- International Economics --- Investments: Bonds --- Investments: Options --- Banks and Banking --- Foreign Exchange --- Informal Economy --- Underground Econom --- Contingent Pricing --- Futures Pricing --- option pricing --- International Financial Markets --- General Financial Markets: General (includes Measurement and Data) --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Price Level --- Inflation --- Deflation --- Interest Rates: Determination, Term Structure, and Effects --- Economic & financial crises & disasters --- Economics of specific sectors --- Investment & securities --- Finance --- Financial crises --- Economic sectors --- Financial institutions --- Options --- Asset prices --- Prices --- Sovereign bonds --- Short term interest rates --- Financial services --- Currency crises --- Informal sector --- Economics --- Derivative securities --- Interest rates --- Brazil

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This paper introduces the Asset and Liability Management (ALM) compound option model. The model builds on the observation that the public sector net worth in a multi-period setting corresponds to the value of an option on an option on total government assets. Hence, the ALM compound option model is better suited for analyzing and evaluating the risk profile of public debt than existing one-period models, and is especially useful for analyzing the soundness of exit strategies from the large fiscal expansions undertaken by G-20 countries in the wake of the recent financial crisis. As an illustration, the model is used to analyze the risk profile and sustainability of Australia's public debt under different policies.

Accounting --- Financial Risk Management --- Investments: General --- Public Finance --- Simulation Methods --- Fiscal Policy --- International Lending and Debt Problems --- Debt --- Debt Management --- Sovereign Debt --- International Financial Markets --- General Financial Markets: General (includes Measurement and Data) --- Public Administration --- Public Sector Accounting and Audits --- Public finance & taxation --- Finance --- Investment & securities --- Financial reporting, financial statements --- Asset and liability management --- Government securities --- Government debt management --- Public debt --- Financial statements --- Financial institutions --- Public financial management (PFM) --- Debts, Public --- Asset-liability management --- Finance, Public --- Australia

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This study assesses the overall impact on credit of the financial regulatory reforms in Europe, Japan, and the United States. Long-term cost estimates are provided for Basel III capital and liquidity requirements, derivatives reforms, and higher taxes and fees. Overall, average lending rates in the base case would rise by 18 bps in Europe, 8 bps in Japan, and 28 bps in the United States. These results are similar to the official BIS assessments of Basel III and an OECD analysis, but lower as a result of including expense cuts and reductions in the returns required by investors. As a result, they are markedly lower than those of the IIF.

Financial institutions --- Bank capital --- Bank loans. --- Commercial law --- Bank credit --- Loans --- Banking law --- Law and legislation. --- Banks and banking --- Capital market --- Capital markets --- Market, Capital --- Finance --- Money market --- Securities --- Crowding out (Economics) --- Efficient market theory --- State supervision --- Law and legislation --- E-books --- Banks and Banking --- Finance: General --- Money and Monetary Policy --- Financial Risk Management --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Investment Banking --- Venture Capital --- Brokerage --- Ratings and Ratings Agencies --- Financial Institutions and Services: Government Policy and Regulation --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- General Financial Markets: Government Policy and Regulation --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Financial Crises --- Financial services law & regulation --- Banking --- Monetary economics --- Economic & financial crises & disasters --- Liquidity requirements --- Basel III --- Credit --- Capital adequacy requirements --- Financial regulation and supervision --- Money --- Financial crises --- Asset requirements --- United States