Abstract - We ask whether a standard structural model (Black and Cox (1976)) is able to explain credit spreads on corporate bonds and, in contrast to much of the literature, we find that the model matches the level of investment grade spreads well. Model spreads for speculative grade debt are too low and we find that bond illiquidity contributes to this underpricing. Our analysis makes use of a new approach for calibrating the model to average historical default rates and we show via simulation that this leads to much more precise estimates of investment grade default probabilities.

Abstract - We construct credit risk indicators for euro area banks and non?financial corporations. These indicators reveal that the financial crisis of 2008 dramatically increased the cost of market funding for both banks and non?financial firms. In contrast, the prior recession following the 2000 US dot?com bust led to widening credit spreads of non?financial firms but had no effect on the credit spreads of financial firms. The 2008 financial crisis also led to a systematic divergence in credit spreads for financial firms across national boundaries.

Abstract - The liquidity premium on corporate bonds has been high on the agenda of Solvency regulators owing to its potential relationship to an additional discount factor on long-dated insurance liabilities. We analyse components of the credit spread as a function of standard bond characteristics during 2003–2014 on a daily basis by regression analyses, after introducing a new liquidity proxy. We derive daily distributions of illiquidity contributions to the credit spread at the individual bond level and find that liquidity premia were close to zero just before the financial crisis.

Abstract - Euro-area sovereign bond and interbank interest rate spreads rose by more than an order of magnitude in the 2007-2009 Financial Crisis, sharply increasing financing costs. Such rate volatility could represent concerns over asset liquidity or issuer solvency. To precisely identify the relative contribution of these two effects in interest rate spreads, this paper uses a model-free measure of euro-area bond market liquidity. Liquidity accounts for 36% of the average trough-to-peak sovereign spread widening during the Crisis, after controlling for default risk.

Abstract - In the framework of this study, we have obtained a mathematical model for maintaining the financial sustainability of PAYG pension systems. We introduce the term financial soundness, by which we understand the maintenance of a balance between the contributions to the pension system and the costs of pension payments. We have proved that the financial sustainability of PAYG systems depends on the growth rates of wages, the growth rate of contribution rates. And demographic factors such as the ratio of the number of pensioners and the working population.

Due to low fertility rates, rising life expectancies and the aging of the baby boom, Canada’s Old Age Dependency Ratio is rising. This will strain the sustainability of our Social Security systems and healthcare. Other countries with aging populations are raising the Age of Eligibility (AOE) for social security benefits. This paper was inspired by work done in the UK for the Institute and Faculty of Actuaries State Pension Age Working Party. Our study applies their methodology onto the Canadian context.

With increasing longevity and decreasing fertility rates, governments and policy makers are increasingly engaged in the question of long term retirement planning. In many cases this has included emphasising the need for individuals to take more responsibility for their own retirement planning through tax incentives, compulsion and changes to the age at which state retirement benefits become available. In the case of Australia, as is considered here, long term retirement planning has been focused around the development of a compulsory defined contribution (DC) superannuation system.

Abstract - The world is entering a period in which the West’s postwar social welfare system is under growing threat as the global demographic structure is being turned upside down. And it is not just the West, but also China and other middle-income powers who will have to deal with an aging workforce and unsustainable health and pension costs in the next decade. For sub-Saharan African countries whose birthrates remain high, overpopulation carries big costs not only for them, but for the rest of the world, which will depend on them for a growing proportion of the world’s workforce.

Abstract - Weather and climate extremes cause huge economic damages and harm many lives each year (?35000/year). There is evidence that some types of weather and climate extremes, like heat waves and flooding, have already increased or intensified over the last few decades, and climate projections reveal a further intensification for many types of weather and climate extremes in many regions though the uncertainties still remain large.

Abstract - Climate change is a slow-moving process relative to many other public policy issues. Nonetheless, the future of the world’s climate system is likely to be heavily dependent on actions over the next few decades. Central banks across the globe are tasked with promoting monetary and financial stability and are quite used to thinking about the lags between policy action and effect.