International Financial Management 2nd Edition by Geert Bekaert ,Robert Hodrick

تمرين 17

Consider the numbers in the previous question. Assume that if the peso were to depreciate, investors figure it will depreciate by 25%. Also, assume that if the Argentine bank were to default on its dollar obligations, it would pay nothing to investors. Compute the probability that the peso will devalue and the probability that there will be a default.