Dividing the total portfolio (parent) into non-overlapping sub-portfolios (children), and assuming homogeneity for both the parent and the children, we use a top-down dynamic default intensity model for the parent, and specify the conditional probability of default in the children given imminent default in the parent. We consider two fundamental cases which are building blocks of more complex a...

We study the interaction between (a) inefficiencies in the post-default debtor-creditor bargaining game and (b) ex ante debtor moral hazard and excessive lending in sovereign debt markets. Conditional on default, selffulfilling debt crisis driven by creditor coordination failure exists and crisis risk is inefficiently high. Strengthening collective action clauses (CACs) has an ambiguous impact ...

Optimal powerand bit-loading in a multitone system requires prohibitive nonlinear programming. A useful nearoptimal solution has previously been proposed which imposes a uniform error probability distribution across the tones. In this paper, we examine two alternative nearoptimal solutions and offer a comparison with the existing solutions. The first imposes uniform power across the used tones ...

A credit default swap (CDS) contract provides insurance against default. After a country defaults, the country and its lenders usually negotiate over the share of the defaulted debt to be repaid. This paper incorporates CDS contracts into a sovereign default model and demonstrates that the existence of a CDS market results in lower default probability, higher debt levels, and lower nancing cost...

We study a probabilistic logic based on the coherence principle of de Finetti and a related notion of generalized coherence (g-coherence). We examine probabilistic conditional knowledge bases associated with imprecise probability assessments defined on arbitrary families of conditional events. We introduce a notion of conditional interpretation defined directly in terms of precise probability a...