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Collateral Constraints, Debt Management, and Investment Incentives

In: Advances In Quantitative Analysis Of Finance And Accounting

Author

Listed:
  • Elettra Agliardi

    (University of Bologna, Italy)

  • Rainer Andergassen

    (University of Bologna, Italy)

Abstract

This chapter analyses the hedging decisions of an emerging economy which is exposed to market risks and whose debt contract is subject to collateral constraints. Within a sovereign debt model with default risk and endogenous collateral, the optimal choice of hedging instruments are studied when both futures and nonlinear derivatives are available. It is examined in which way the hedging policy is affected by the cost of default and the financial constraints of the economy and some implications are provided in terms of resource allocation.

Suggested Citation

  • Elettra Agliardi & Rainer Andergassen, 2008. "Collateral Constraints, Debt Management, and Investment Incentives," World Scientific Book Chapters, in: Cheng-Few Lee (ed.), Advances In Quantitative Analysis Of Finance And Accounting, chapter 1, pages 1-13, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812791696_0001
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    More about this item

    Keywords

    Hedging Strategies; Expense Mismatching; Stock Split; Trading Volume; Portfolio Optimization; Intraday Patterns; Earnings Management; International Winner-Loser Effect;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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