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The main findings are that when such credit market frictions cause an economy's financial markets to be bank-oriented, a distinct, but not independent, "credit" channel imparts a supply-side aspect to monetary policy transmission dynamics, over and above the textbook demand-side yield and exchange rate mechanisms. This creates a distortion in such economies, in that they become less labour intensive than they otherwise would be. It also impacts on both the magnitude and convergence speeds of both nominal and real transitional dynamics by altering such economies' capacity level of employment: the transitional inflationary interest and exchange rate consequences of expansionary monetary policy are exaggerated and its positive effect on employment levels for a given level of output are magnified; correspondingly, a restrictive monetary policy shock that leads to expensive credit initiates a more deflationary transitional interest rate, a stronger transitional domestic currency and causes a lower employment level for a given level of output than would otherwise be the case without a supply-side bank lending "credit" channel. In short, it intensifies the potency of monetary policy interventions. These predictions, in turn, carry important implications for: judging how "loose" or how "tight" monetary policy regimes are in such economies; and determining how evolution in financial markets, due either to changes in regulations or to innovation, alters the nature of such economies' monetary transmission mechanisms over time.

The external dimension of EMU has rarely been afforded a role of central importance in academic or official work. This thesis investigates the impact of EMU on international monetary relations by examining exchange rate policy for the euro and EMU participation in international institutions such as the Group of Seven. As a theoretical background to the analysis of this question, a framework for understanding how industrial states choose which exchange rate policy to pursue is developed. In opposition to traditional 'power' based analyses of international monetary relations such as Hegemonic Stability Theory, a financial structural argument is developed in conjunction with domestic-level analysis to explain policy outcomes. The existence of a financial structure associated with high levels of capital mobility imposes common constraints on industrial states, forcing them to resolve a trade-off between domestic policy autonomy and exchange rate stability. This policy choice is determined by the economic characteristics of the state, the role and organisation of interest groups, policy perspectives of the monetary authorities, and the degree of independence of the central bank. Applying these considerations to the new case of EMU suggests that the exchange rate of the euro will be subject to 'benign neglect', primarily as a result of the high levels of independence of the European Central Bank, but also as a result of the relatively closed nature of the Euroland economy, limited scope for interest group pressure, and complex institutional structures. Concentration on domestic goals and limited interest in the exchange rate, as well as ineffective institutional arrangements for external representation, indicate that international monetary cooperation will not increase, despite the simplification of global monetary politics into an effective Group of Three.

Since the 1980s, a combination of forces, in particular financial liberalization and the IT revolution, have driven a new round of global banking consolidation. Since the 1990s, all the industrial countries including the US, Western European countries and Japan, have witnessed accelerated consolidation of their banking markets through mergers and acquisitions. As a consequence, the number of banks has dropped and the market has become increasingly concentrated. In some countries such as the Scandinavian and Benelux countries, the market, has become highly consolidated. Most importantly, a group of ‘national champion’ banks has emerged in each of the leading industrial countries. The American leading banks have emerged as the biggest in terms of scale and profitability among international banks. Cross-border mergers among banks in industrial countries have been relatively small in number but highly noteworthy in significance. By 2001 through large-scale cross-border acquisitions, international banks have bought out nearly all the bank assets in the CEE and today control the majority of bank assets in Latin America. International banks are advancing towards East Asia where currently they have less presence but with great growth potential. China is opening up one of the largest banking markets in the world and may become the decisive battlefield for the ‘global game’. The destiny of the Chinese banking industry will depend entirely upon the ongoing reform of the four state-owned banks. This reform focuses on NPL clearance, recapitization, reorganization of business processes, and improved corporate governance. The Chinese government’s stated strategy is to introduce foreign banks as minority strategic investors to help rehabilitate its ‘big four’ but without relinquishing overall ownership and management control. It is still uncertain whether Chinese banks will end up as subsidiaries of international banks or stand as competitors against them.

The behaviour of building societies is investigated to identify how and why it changed between 1975 and 1986. The period under study is one in which considerable changes occurred in the structure and operation of the industry and in societies' product markets. The research concentrates on three key aspects of building society behaviour: objectives, branching and merger. Objectives are a central theme because they not only form the foundation for building society policy, but also reflect the managers' perceptions of their own society's position within the industry, and of the industry's position within the savings and mortgage markets. Branching and merger are studied in detail because of their impact on the financial performance and operation of individual societies, and because of the importance attached to them by observers of the industry and indeed by managers themselves. The investigation of objectives, branching and merger brings together qualitative and quantitative information. This is used to describe industry-wide trends and to analyse the behaviour of individual societies. Hypotheses on the geographic and economic aspects of societies' behaviour are also tested and evaluated. The main conclusions of the research are summarised below. 1. Objectives. Building society objectives are shown to be directly affected by the environment in which they operate. The intensification of competition in the societies' traditional product markets after 1980 is found to be the principal factor which caused societies to alter their objectives from growth to growth at reasonable cost ('profitable growth'). It is also found that societies generally pursued secondary goals under both the cartel and under competition, though these varied from one society to the next. A further development associated with the intensification of competition is found to be the introduction of corporate plans after 1980. These plans included targets for growth rates, profitability and reserve ratios. 2. Branching. For individual societies the efficacy of using branching to meet changing goals is found to depend on three main factors: the maturity of their network, the degree of saturation in the area in which they are prepared to branch and the strength of external constraints. Also, evidence of over-branching across the industry is found, and the managers' claim that branches were located in order to tap the savings market receives only limited support. 3. Merger. The role of merger in meeting societies' goals is found to vary from one group of societies to the next. For the very largest and smallest societies, merger is found to have been of no real significance. Differences are also found between the behaviour of societies under the cartel and under competition. No quantitative evidence is found that merger increased a society's capacity to grow organically. Instead the mere addition of assets is concluded to have been the only real gain. At the same time, it is shown that only a relatively small number of societies made significant asset gains from merger. However, evidence is presented to show that acquisitions were often made for geographical reasons rather than purely economic ones. Economies of scale are not found to have existed for the period of the cartel. However, evidence is presented which indicates that the larger societies were becoming more efficient than the smaller ones after the break-up of the cartel. The apparent absence of economies of scale during the cartel is considered to have reflected the lack of pressure on managers to realise them, rather than the fact that they were not available.

In this thesis, I propose that, given the opportunities for default-triggered acquisition (DTA), it is <i>liquidation risk</i> rather than just <i>default risk</i> that should really concern creditors, particularly senior debt investors. DTA is an important market phenomenon with significant implications for credit risk, but is under-researched in the credit risk modelling literature. This thesis attempts to bridge the gap. It developed three diffusion –based models, one for risky bond pricing (Chapter 3), and two for the potential acquirers’ positions, i.e. the <i>European</i> type of option-to-acquire (Chapter 6), and the <i>Quasi-American</i> type (Chapter 7). Far from being three unrelated models, these models are developed to serve one common theme – credit risk modelling. My research will pursue the establishment of a risky bond pricing model under the assumption that DTA is a wise decision, as opposed to pre-default acquisition. This assumption is justified through an analysis of the <i>Quasi-American-European spread. </i> All models are implemented numerically in this thesis. The numerical results derived are intuitive. The following summarises the key models developed in this thesis: The risky bond pricing model. Chapter 3 develops a structural model of the defaultable bond, taking into account the possibility that the borrowing firm might be acquired following a default. In this model, post-default acquisition is treated as an event triggered where the alternative valuation of the firm’s assets exceeds the failing firm’s value, and covers the acquisition costs (which are essentially the conceded debt liability). Analytical results are derived for situations where default time is assumed to be either fixed (as in Merton (1974)) or random (as in Black and Cox (1976)) and there are one or more alternative valuations. The implementation and numerical analysis of the model are presented in Chapters 4 and 5 respectively. The European option-to-acquire model. Instead of modelling from the bond investors’ point of view, Chapter 6 analyses the DTA problem from the perspective of potential acquirers, and develops a structural model of their position, i.e. the European option-to-acquire, with analytical results. A comprehensive numerical comparative static analysis is also undertaken, which provides some insights for the <i>Greeks</i> of the real option. The Quasi-American option-to-acquire model. The risky bond pricing model addresses the DTA issue under the assumption that acquisitions only take place at default. Chapter 7 aims to examine whether this assumption is viable or not. It considers pre-default acquisition opportunities leading from the extension of the European option to the corresponding Quasi-American option-to-acquire. Numerical results are derived for a comprehensive numerical comparative static analysis.  The comparison of the European and Quasi-American positions sheds some light on the circumstances in which DTAs become important.

Spread options are derivatives securities with payoffs dependent on the difference of two underlying market variables. Though the importance and wide applicability of this class of instruments have long been recognised, the theoretical problem of valuing them beyond the simple Geometric Brownian motion assumption has not been successfully tackled. This thesis proposes several new methods to solve the option pricing problem under multi-factor stochastic volatility models. The correlation structure between the stochastic components generated by these models is a function of time, the diffusion parameters and the volatility state variable, and thus permits greater degrees of freedom for calibrating to the observed market data or traders' forward views on the market. The numerical methods developed generalise the fast Fourier transform technique in the single-asset framework and can be applied so long as the characteristic function of the underlying process is available in closed-form. This includes a large set of existing diffusion models, giving the approach great flexibility in switching the underlying model assumptions. The thesis also documents the implementation of the transform methods proposed, as well as the industry standard Monte Carlo simulation and explicit finite differences schemes. Their numerical performance was compared, specifically, for a two-factor Geometric Brownian motion model and a three factor Stochastic Volatility model. The ability of the latter in generating a rich spread option pricing structure different from the two-factor model is demonstrated. Finally, a calibration procedure for the model to market data is proposed.

This thesis presents a theoretical analysis of the impact of herding on the sustainability of pegged exchange rates. The first chapter outlines the motivations for this analysis and provides a comprehensive review of existing literature, relating both to currency crises and herding. It also highlights the following questions left unanswered by existing research: i. How is the likelihood of a currency crisis affected by the timing of traders’ moves? In other words, is the likelihood of coordination among traders on an attack strategy higher if traders move simultaneously or if past actions are observable and traders either move sequentially or can choose when to move? ii. How does the presence of a visible large trader affect the probability of coordination among smaller traders on an attack strategy when these smaller traders are heterogeneous and are able to take discrete rather than infinitesimal positions against the currency? iii. In a currency crisis scenario, how are the predictions of sequential move herding models, characterised by information updating over time, affected if gains to coordination exist and these gains are incurred given a majority rather than unanimity requirement? iv. Given the existence of many different sources of information on the underlying fundamentals in currency markets, in a sequential move setting in which this information is costly to collect and evaluate but past actions are freely observable, how large must the cost of information acquisition be in order that traders are dissuaded from investing in information and choose instead simply to follow the actions of preceding traders? Each of these questions forms the basis of the theoretical models presented in chapters 2 - 5. Chapter 2 presents an analysis of the bandwagon behaviour possible when traders take their actions over time and compares this with the outcome when actions are taken simultaneously. Chapter 3 presents an analysis of the coordinating effects of a large trader and the associated impact his presence has on the likelihood of currency crises. Chapter 4 presents a model closer in spirit to traditional herding models, but incorporating both information updating and gains to coordinated actions, and compares the predictions of this model with those from seminal herding research and chapter 5 presents an analysis of the effects of costs of information acquisition on traders’ incentives to herd. All references referred to in the text and footnotes of chapters 1- 5 of the thesis are provided in the bibliography in chapter 6.

The empirical research is concentrated at two scales: national and local. At the national level, questions about the widespread, but geographically uneven, nature of mortgage debt are understood in relation to restructuring of housing and labour markets. On the one hand the promotion of owner occupation, sale of council sector stock and deregulation of the financial services sector allowed more people to buy their own homes. On the other hand, however, the growth of new forms of work, including part-time jobs and temporary contracts, coupled with high unemployment, made difficult the maintenance of monthly mortgage payments. Re-reading these debates through a feminist lens shows that questions about access to the private market, maintenance of shelter and threats to that shelter are questions about gender relations and about the significant of women's employment to household budgets. In untangling the specificities of these processes the research moves to the local level, drawing on material with interviews conducted with twenty households living in Swindon. In investigating gendered dimensions to the accumulation of arrears, and to the management and recovery processes, the case study part of the research concentrates on three areas: first, the extent to which the ability of households to enter, and stay in, owner occupation is related to income generated by women; secondly, to analyse the environment in which households move into default and to outline the connections this has to gendered changes in the labour market and the operation of the benefits system; and thirdly, to reflect upon decision making processes, and the development of gender-specific coping strategies, whether designed to maintain existing shelter or to move to new accommodation. Through this local case study the value of a feminist perspective in the analysis of labour and housing markets, in combination, is demonstrated.