CEO compensation in U.S. public firms has attracted a great deal of empirical work. Yet our understanding of the contractual terms that govern CEO compensation and especially how the compensation committee ties CEO compensation to performance is still incomplete.
The main reason is that CEO compensation contracts are, in general, not observable. For the most part, firms are not required to disclose the terms of their CEO incentive contracts, only the realized amounts that their CEOs receive at the end of any given year.
This paper presents a model to study the dynamics of a currency crisis associated with a fiscal imbalance, defined as current or anticipated future decline in real primary surpluses. The model analyses the stock and maturity of nominal government liabilities as key determinants of the magnitude and predictability of the crisis. In our analysis, bond prices react to fiscal shocks, generating an unanticipated wealth transfer from the private to the public sector.
Provided the stock of long0term nominal liabilities is large enough, such transfer can guarantee, by itself, that the intertemporal government budget constraint holds with temporary price and exchange rate stability. Thus, a large stock of long0term nominal liabilities may help a government that, for any reason, does not want to let the currency depreciate immediately in the face of a destabilizing fiscal shock.
Over recent years, the ability to execute huge baskets of stocks with apparent ease has been a key factor in the growth of portfolio trading globally. This growth has in turn provided the climate in which a variety of algorithmic trading models have evolved.
