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Stavros A. Zenios
Bruegel
197Publications
40H-index
6,315Citations
Publications 197
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#1Ioannis Kyriakou (City University London)H-Index: 8
#2Athanasios A. Pantelous (Monash University)H-Index: 9
Last.Stavros A. Zenios (Bruegel)H-Index: 40
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#1Nikolas Topaloglou (OPA: Athens University of Economics and Business)H-Index: 8
#2Hercules Vladimirou (UCY: University of Cyprus)H-Index: 13
Last.Stavros A. Zenios (UCY: University of Cyprus)H-Index: 40
view all 3 authors...
Abstract We develop scenario-based stochastic programming models for hedging the risks of international portfolios using options. The models provide increasing level of integration in managing market and foreign exchange (FX) risks. We start with a single-stage model with currency options for selective hedging of FX risks, while market risk is addressed through diversification, we add stock options to hedge market risks, and add quantos and currency options to develop an integrated model, using ...
Source
#1Andrea Consiglio (University of Palermo)H-Index: 11
#2Michele Tumminello (University of Palermo)H-Index: 19
Last.Stavros A. Zenios (Bruegel)H-Index: 40
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We develop a pricing model for sovereign contingent convertible bonds (S-CoCo) with payment standstills triggered by a sovereign's credit default swap CDS spread. One innovation is the modeling of CDS spread regime switching which is prevalent during crises. Regime switching is modeled as a hidden Markov process and is integrated with a stochastic process of spread levels to obtain S-CoCo prices through simulation. The paper goes a step further and uses the pricing model in a Longsta-Schwartz. A...
2 CitationsSource
#1Andrea Consiglio (University of Palermo)H-Index: 11
#2Somayyeh Lotfi (UCY: University of Cyprus)H-Index: 2
Last.Stavros A. Zenios (UCY: University of Cyprus)H-Index: 40
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We develop models for portfolio diversification in the sovereign credit default swaps (CDS) markets and show that, despite literature findings that sovereign CDS spreads are affected by global factors, there is sufficient idiosyncratic risk to be diversified. However, we identify regime switching in the times series of CDS spreads and spread returns, and the optimal diversified strategies can be regime dependent. The developed models trade off the CVaR risk measure against expected return, consi...
5 CitationsSource
#1Andrea Consiglio (University of Palermo)H-Index: 11
#2Stavros A. Zenios (UCY: University of Cyprus)H-Index: 40
This papers makes the case for sovereigns to issue state-contingent convertible bonds(abbreviated S-CoCo) as a means to forestall debt crises. This is a financial innovation response to the lack of sovereign debt restructuring mechanisms. These instruments contractually stipulate payment standstill, contingent on a sovereign's credit default swap spread breaching a distress threshold. They have the advantage of ex ante limiting the likelihood of debt crises, and ex post risk sharing between cred...
1 CitationsSource
#1Somayyeh Lotfi (UCY: University of Cyprus)H-Index: 2
#2Stavros A. Zenios (UCY: University of Cyprus)H-Index: 40
Abstract We develop robust models for optimization of the VaR (value at risk) and CVaR (conditional value at risk) risk measures with a minimum expected return constraint under joint ambiguity in distribution, mean returns, and covariance matrix. We formulate models for ellipsoidal, polytopic, and interval ambiguity sets of the means and covariances. The models unify and/or extend several existing models. We also show how to overcome the well-known conservativeness of robust optimization models ...
7 CitationsSource
#1Andrea Consiglio (University of Palermo)H-Index: 11
#2Stavros A. Zenios (UCY: University of Cyprus)H-Index: 40
Abstract We model the super-replication of payoffs linked to a country’s GDP as a stochastic linear program on a discrete time and state-space scenario tree to price GDP-linked bonds. As a byproduct of the model we obtain a hedging portfolio. Using linear programming duality we compute also the risk premium. The model applies to coupon-indexed and principal-indexed bonds, and allows the analysis of bonds with different design parameters (coupon, target GDP growth rate, and maturity). We calibrat...
2 CitationsSource
1 CitationsSource
#1Andrea Consiglio (University of Palermo)H-Index: 11
#2Stavros A. Zenios (UCY: University of Cyprus)H-Index: 40
We argue that sovereign debt sustainability analysis must be augmented by stochastic correlated risk factors and a risk measure to capture tail effects. Crisis situations can thus be adequately specified and analyzed with sufficient accuracy to warrant the relevance of policy decisions. In this context there is significant scope for optimization modeling for both strategic planning and operational management. We discuss diverse aspects of the problem of debt sustainability and highlight modeling...
Source
#1Stavros A. Zenios (UCY: University of Cyprus)H-Index: 40
The Cyprus debt crisis provides some unique lessons. By the time an assistance program was agreed with the Troika of international lenders, the problem had become so complex that a depositor bail-in was implemented to safeguard financial stability. The bail-in was an ad hoc solution applied for the first time in the eurozone but is now the blueprint for dealing with future banking crises. This paper examines the events for the 18-month period before the two eurogroup meetings on Cyprus in March ...
14 CitationsSource
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