Puerto Rico's COFINA Bonds: Hold or Fold?

Adi   Sunderam; Luis M. Viceira; Aldo  Sesia

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Case | HBS Case Collection | September 2017 (Revised January 2018)

Puerto Rico's COFINA Bonds: Hold or Fold?

by Adi Sunderam, Luis M. Viceira and Aldo Sesia

Language: English

Format: Print

16 pages

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Citation:

Sunderam, Adi, Luis M. Viceira, and Aldo Sesia. "Puerto Rico's COFINA Bonds: Hold or Fold?" Harvard Business School Case 218-023, September 2017. (Revised January 2018.)

About the Authors

Adi Sunderam

Marvin Bower Associate Professor

Finance

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Luis M. Viceira

George E. Bates Professor
Senior Associate Dean, Executive Education

Finance

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Working Paper | 2018

Social Risk, Fiscal Risk, and the Portfolio of Government Programs

Samuel G. Hanson, David S. Scharfstein and Adi Sunderam

We develop a model of government portfolio choice in which a benevolent government chooses the scale of risky projects in the presence of market failures and tax distortions. These two frictions generate motives to manage social risk and fiscal risk. Social risk management makes attractive programs that ameliorate market failures in bad economic times. Fiscal risk management makes unattractive programs that entail large government outlays at times when other programs in the government's portfolio also require large outlays. We characterize the determinants of social and fiscal risk and argue that these two risk management motives often conflict. Using the model, we explore how the attractiveness of different financial stability programs varies with the government's fiscal burden and with characteristics of the economy.

Keywords: Risk Management; Programs; Government and Politics;

Citation:
Hanson, Samuel G., David S. Scharfstein, and Adi Sunderam. "Social Risk, Fiscal Risk, and the Portfolio of Government Programs." Working Paper, May 2018. (Internet Appendix Here.) View Details

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Working Paper | 2018

A Measure of Risk Appetite for the Macroeconomy

Carolin E. Pflueger, Emil Siriwardane and Adi Sunderam

We document a strong and robust positive relationship between real rates and the contemporaneous valuation of volatile stocks, which we contend measures the economy’s risk appetite. Our novel proxy for risk appetite explains 41% of the variation in the one-year real rate since 1970, while the valuation of the aggregate stock market explains just 1%. In addition, the real rate forecasts returns on volatile stocks, confirming our interpretation that changes in risk appetite drive the real rate. Increases in our measure of risk appetite are followed by a boom in investment and output.

Citation:
Pflueger, Carolin E., Emil Siriwardane, and Adi Sunderam. "A Measure of Risk Appetite for the Macroeconomy." NBER Working Paper Series, No. 24529, April 2018. View Details

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Teaching Note | HBS Case Collection | March 2018

Closed-End Funds at Saba Capital Management

Adi Sunderam and Shawn O'Brien

Citation:
Sunderam, Adi, and Shawn O'Brien. "Closed-End Funds at Saba Capital Management." Harvard Business School Teaching Note 218-105, March 2018. View Details

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Puerto Rico's COFINA Bonds: Hold or Fold?

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