Arindam Bandopadhyaya

An analysis of second time around bankruptcies using a split-population duration model

Abstract A significant proportion of firms that reorganize under Chapter 11 file for a second Chapter 11 protection or liquidate. We use a “split-population” duration model that provides useful information regarding factors that could lead to a second bankruptcy. We find that the probability (hazard) of a firm re-entering bankruptcy is lower for firms that take a long time to reorganize, reduce their debt-to-assets ratio, do not divest, belong to an industry that has low capacity utilization and low demand growth. We also find that the probability of an average firm re-entering bankruptcy increases for about 4 years before declining.

The determinants of the duration of commercial bank debt renegotiation for sovereigns

Abstract This paper examines the duration of commercial bank debt reschedulings for sovereigns. We show that the length of the first part of the rescheduling process, in which major creditor banks and the debtor country participate, is significantly affected by only the scale of rescheduling. However, the length of the second part of the process, where all the creditor banks in the syndicate are involved, is significantly affected by maturity, debt/GNP, debt/exports, GNP growth during the renegotiation process, and the presence of exit bonds and early participation fees. We also find that the time elapsed significantly increases the instantaneous probability of completion of the first part of the process.

A Survey of Demographics and Performance in the Hedge Fund Industry

We investigate hedge fund demographics using data from the Alternative Asset Center (AAC) and then hedge fund performance over the twelve years since inception of the Credit Suisse/Tremont Hedge Fund Indices (HFI, 1994–2005). We find that hedge funds are largely domiciled “offshore” while hedge-fund managers are located primarily in the United States, particularly New York, California, Illinois, Connecticut and Florida. We find that the annualized performance of hedge funds as an “asset class” is about the same as that of U.S. equities (S&P 500). That being said, the real benefit of hedge funds lies in risk management as the volatility of HFI is considerably lower than the stock market. We also find that most hedge-fund “styles” provide solid absolute and risk-adjusted returns and conclude that hedge funds have been a worthwhile investment vehicle for fund indexers and active investors.

Bond and Stock Market Linkages: The Case of Mexico and Brazil

Research on emerging market bonds has been growing quickly (see, for example, Min, 1998).1 This can be attributed to two main factors. First, while emerging market bond capitalization is relatively small compared to the size of the fixed-income market, it has still attracted the attention of investors. There have been times (for example, in the summer of 1997) when the average performance of the Emerging Market Bond Index is better than that of the S&P 500, and is considerably better than the US high-yield index. Among the debt instruments in the emerging markets, Brady bonds are the most important. Overall, there are about US

Determinants of market-assessed sovereign risk: Economic fundamentals or market risk appetite?

200bn of Brady bonds outstanding. According to the Emerging Market Traders Association, the secondary market turnover for Brady bonds represents the majority of all trading in emerging market debt instruments. Second, the sovereign bond yield spreads over the yield of similar issues from the US Treasury has become a market-based measure of sovereign credit worthiness. It has been argued that the credit worthiness of economies as measured by agencies such as Institutional Investor, Moody s and Standard and Poor’s are only ex post indicators and may not be useful measures for those who are more interested in the future performance of an economy. As a result, recent literature on sovereign credit worthiness has focused on market-determined indicators, such as the Brady bond stripped yield spread, as the purest form of market-based sovereign risk.