Search results for "Securities"
showing 3 items of 13 documents
Money creation and the state : A critical assessment ofchartalism
2004
International audience; The article discusses various issues related to money creation and the state. Chartalists believe that attempts at separating the central bank's and the treasury's functions is merely confused discussion. Indeed, as economist L. Wray clearly states in response to previous critiques, it should be obvious, but it usually does not appear to be so that central bank liabilities do not differ in any significant degree from treasury liabilities; in other words, they can treat both as essentially high powered money or liabilities of the state. In this sense, Wray proposes to simply consolidate the central bank and the treasury, calling the conglomerate the State, and combine…
A Reconsideration of the Role of Forward-Market Arbitrage in Keynes’s and Hicks’s Theories of the Term Structure of Interest Rates
2014
International audience; This paper develops the relationship between Hicks’s and Keynes’s writings on the theory of the term structure of interest rates, and shows in detail how Hicks built on and extended Keynes’s account. According to this theory, the level of the long-term interest rate is determined by expectations of future short-term rates. Keynes’s thinking contained several notions – such as the preferred habitat of lenders, the theory of forward markets, and risk-premiums – which Hicks used to give a more complete theory of the term structure of interest rates. Besides implementing these notions in his own theory, Hicks introduced the concepts of the preferred habitat of borrowers,…
PRICING A CALLABLE CONVERTIBLE BOND: A CASE STUDY
2013
In this note I use a simple method to value a complex hybrid security. I evaluate a convertible callable bond issue, adopting an incremental approach where the different features of the hybrid security are added sequentially. In this setting, I solve backwards the game played at each node between the firm and the investors to understand how the price of the callable convertible bond is determined on the basis of the equilibrium behaviour of the players. I show how the different features affect the price of the security, analyzing the security’s characteristics with an optimal capital structure perspective. I provide a simple intuition of why the callable convertible bond value does not nece…