This dissertation consists of three essays, the first two on the foreign exchange market and the third on credit markets.
Chapter 2 examines empirically the exchange rateinterest differential relationship in a co-integration framework. We test and estimate an error correction model (ECM) for the currency pair US dollar and British pound at the daily frequency. The exchange rate and the interest differential are found to be co-integrated, and the parameters in the ECM exhibit signs that are consistent with market practitioners observation concerning the relationship. The interest differential can thus be viewed as a long-run anchor for the two currencies exchange rate.
In Chapter 3, we model the direct inter-dealer trading in the foreign exchange market as a two-stage, alternating-offer bilateral bargaining game in an asymmetric information environment. Under the naïve conjecture rule for updating the uninformed dealers beliefs, there exists a unique perfect Bayesian equilibrium (PBE) of the game. The PBE outcome depends on the informed dealers valuation of the future exchange rate. An alternative bargaining procedure is also considered which produces an identical PBE outcome.
In Chapter 4, we re-examine the problem of credit rationing by modeling the loan contracting problem between a monopolist lender and the borrowers as a two-stage screening game in which pre-contractural and post-contractural informational asymmetry are simultaneously present. The screening game has a unique subgame perfect equilibrium. Depending on the level of borrowers prior debts, credit rationing may or may not occur. In the pooling equilibrium, there is no credit rationing and all borrowers get a loan whose size is socially efficient. Credit rationing arises in the semi-separating equilibrium in which high-debt borrowers do not obtain a loan from the lender.
| Identifer | oai:union.ndltd.org:PITT/oai:PITTETD:etd-12062005-143330 |
| Date | 30 March 2006 |
| Creators | He, Xin |
| Contributors | Alexander Matros, Josephine Olson, Ted Temzelides, Steven Husted |
| Publisher | University of Pittsburgh |
| Source Sets | University of Pittsburgh |
| Language | English |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.library.pitt.edu/ETD/available/etd-12062005-143330/ |
| Rights | unrestricted, I hereby certify that, if appropriate, I have obtained and attached hereto a written permission statement from the owner(s) of each third party copyrighted matter to be included in my thesis, dissertation, or project report, allowing distribution as specified below. I certify that the version I submitted is the same as that approved by my advisory committee. I hereby grant to University of Pittsburgh or its agents the non-exclusive license to archive and make accessible, under the conditions specified below, my thesis, dissertation, or project report in whole or in part in all forms of media, now or hereafter known. I retain all other ownership rights to the copyright of the thesis, dissertation or project report. I also retain the right to use in future works (such as articles or books) all or part of this thesis, dissertation, or project report. |
Page generated in 0.0021 seconds