This paper characterizes the implications of risk-on/risk-off shocks for emerging market capital flows and returns. We document that these shocks have important implications not only for the median of emerging markets flows and returns but also for the left tail.
This chapter investigates the pricing of key contract provisions of Puerto Rican debt. In doing so, the chapter contributes to a body of research that asks the questions: do investors price contract provisions? Does the pricing of contract provisions vary with credit risk? To our knowledge, this is the first study to address these questions for the case of Puerto Rico or any municipal issuer. Puerto Rico’s unique status as a U.S. territory implies that its subsidiaries, such as municipalities, cannot file for bankruptcy under Chapter 9 of the U.S. Bankruptcy Code.
Although the non-financial corporate sector accounts for the lion’s share of the post-Global Financial Crisis surge in emerging-market leverage, there is little systematic research on factors that impact corporate distress risk in emerging markets. Existing bankruptcy risk models developed using US data have low predictive power when applied to emerging market firms. We suggest that these models do not account for emerging market vulnerabilities to global shocks such as advanced economy monetary policy changes, US dollar movements, or shifts in global liquidity and risk-aversion.