Modelling the Dependency between Currency and Debt Crises: An Option Based Approach
6 Pages Posted: 19 Feb 2009
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Modelling the Dependency between Currency and Debt Crises: An Option Based Approach
Date Written: February 15, 2009
Abstract
The interrelation between currency and debt crises is considered in a model relying on option pricing theory. By capturing uncertainty and time aspects in this stochastic and dynamic framework we analyze parameters that determine the probabilities and dependencies of these crises.
Keywords: Financial crisis, Sovereign risk, Option pricing theory, Crisis probability
JEL Classification: G15, F34, F47
Suggested Citation: Suggested Citation
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