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This paper explores the emergence of sustainability-linked bonds (SLBs) as an innovative instrument to finance sustainability objectives. SLBs are any type of bond instrument for which the financial characteristics vary depending on whether the issuer achieves predefined sustainability objectives. SLBs were launched in 2019, represent 7% of labeled bonds, and now exceed USD 250 billion. In the context of the growth of sustainable finance and concerns of greenwashing, this paper asks whether SLBs are an effective mechanism to attract sustainable finance. Drawing on a complete revision of the literature and interviews with practitioners, the findings highlight the potential of SLBs to contribute to sustainability financing, especially in hard-to-abate sectors. Recommendations include defining standardized KPIs based on a materiality assessment, requesting SPTs to be supported by science, and tailored step-up mechanisms. The academic literature and experts converge in their description of greenwashing risks posed by SLBs, their signaling effect, and the lack of sophistication in SLB pricing, in particular the optionality represented by step-ups. The literature differs from the practitioners' perception on the existence of an issuance premium. Enhancing the design of SLBs represents an opportunity to add rigor to sustainable finance and better price externalities, where material topics have an explicit impact on the cost of funding. [ABSTRACT FROM AUTHOR]

As the green bond market expands, an increasing number of Green Bond External Reviewers (hereafter 'GBER' or 'GBERs') have gained momentum among investors and financial regulators. A GBER enhances the credibility of green bonds and prevents greenwashing risk in the green bond market by reducing the information asymmetry between issuers and investors. China is the second largest issuer of green bonds in the world. The current Chinese GBER legal framework is insufficient to ensure green bond market sustainability. Our purpose in this paper is to analyze the inadequacies of the Chinese GBER regulatory framework and to provide suggestions for overcoming the potential challenges within it. A textual analysis of primary legal sources and secondary academic sources serves as the main research methodology in this study. This paper provides an in-depth analysis of China's GBER regulatory framework and addresses its shortcomings and weaknesses. Furthermore, given the evolving stage of the Chinese green bond market, this paper analyzes potential challenges for GBERs and proposes some suggestions to ensure high-quality reviews by GBERs. [ABSTRACT FROM AUTHOR]

This paper examines the determinants of bond issuance in the Chinese market and the influence of capital structure—in particular direct debt finance—on firm performance and the cost of debt. The results reveal that institutional factors in the Chinese market, in particular the involvement of the financial authority permission process during bond issuance, enhance the credibility of firms that are able to successfully issue bonds. Empirical analysis of Chinese listed manufacturing firms over the period from 2010 to 2021 demonstrates that firms with higher outstanding levels of bonds perform better and face lower costs of both bond and nonbond direct finance. We interpret this as bond issuance approval serving as a signal to markets of an implicit government guarantee on firms that are approved to issue bonds. The agency problem is analyzed using propensity-score matching and Logit analysis, revealing a trade-off between the principal–agent conflict and conflicts of interest among different shareholders when power is very concentrated through CEO duality: the CEO simultaneously serves as the chairman of the board. In large firms, as measured by total assets, the cost-reducing effect of the principal–agent problem being mitigated by CEO duality outweighs the agency costs arising from conflicts of interest between large and small shareholders, leading to an increased likelihood of successful bond issuance. However, in large firms, as measured by market capitalization, where share ownership is likely more diversified, this effect diminishes. In conclusion, this paper posits that policymakers ought to investigate strategies for granting preferential treatment to high-growth, small to mid-sized enterprises, enabling them to secure funding through direct debt financing. [ABSTRACT FROM AUTHOR]

The current study explores the problem of illiquidity in the corporate bond market globally and proposes a solution to enhance liquidity by studying various dimensions of liquidity. Purpose: The purpose of this paper is to propose a solution to the global issue of illiquidity in the corporate bond market. The problem has been identified by many researchers and this paper attempts to find a viable solution in the "fungibility route" as an alternative to the "liquidity route". Design/Methodology: An analysis of a sample size of 234,772 trade data of corporate bonds and a sample size of 2,00,607 trade data of G-securities is performed to identify the problem. Findings/Solution proposed: A mathematical model based on the credit risk differential and sensitivity differential is proposed to find out the fair value at which an illiquid bond can be exchanged with a liquid bond. To arrive at the fair value of the illiquid bond, we have calculated the risk-adjusted yield (RAY) using the modified duration and a credit risk differential. Originality: This research is a pioneering effort in addressing the worldwide issue of corporate bond illiquidity by proposing a novel solution. The proposed strategy aims to improve the liquidity of the bond indirectly, by utilizing the fungibility route. [ABSTRACT FROM AUTHOR]

The discussion on the necessity of a larger volume of very highly quality liquid assets (VHQLA) in the euro area has been very extensive. The debate on expanding the pool of comparable euro area assets focuses on "safe assets", often on various combinations of government bonds, most of which would not entail a strong increase in euro VHQLA. This paper explores a different option, complementary to the existing ones, based on the creation of a safe European asset backed by fully private assets. The paper proposes the issuance of supra-covered bonds by a central European institution. The latter are bonds issued by the central issuer and backed by covered bonds, which banks would have created using their mortgages as their cover pool. The aim is to increase substantially the outstanding amount of euro VHQLA. Such an asset would also be very beneficial during crisis periods, such as the current COVID19 crisis, by allowing banks to transform mortgages into very high quality liquid assets that can be used for funding and as a collateral in operations with the Eurosystem, thus enhancing the possible credit to sustain small and medium-sized enterprises (SMEs). This paper assesses the main effects of such a proposal on banks under different possible scenarios. [ABSTRACT FROM AUTHOR]

This paper assesses the extent to which carry trade operations affect the performance of equity and bond markets in a target country, South Africa, by considering the US and the euro area as the funding countries. A two- and three-factor capital asset pricing model (CAPM) is employed to assess whether the pricing of equity and bond markets in South Africa depends on the US dollar/rand and euro/rand carry trade returns. Moreover, the paper uses the quantile regression technique to assess whether this pricing varies with the distribution of the equity and bond returns. The findings support that the US- and euro-funded carry trade are essential factors for the pricing of equity and bond markets in South Africa. Moreover, the results of the two-factor model show a negative relationship between the equity excess return and the US-carry trade returns at lower quantiles of the equity market returns. The positive relationship is observed in the upper quantiles of the equity market. The negative relationship means that carry trade activities reduce equity market returns during a bear market as investors close out their position when conditions in the equity market become unfavourable. The results of the three-factor model, controlling for the global volatility or uncertainty, show that carry trade investors exit the equity market to invest in the bond market when global uncertainty rises. This finding shows that carry trade investors choose less risky assets during rising global uncertainty. [ABSTRACT FROM AUTHOR]

This paper expands traditional stochastic volatility models by allowing for time-varying skewness without imposing it. While dynamic asymmetry may capture the likely direction of future asset returns, it comes at the risk of leading to overparameterization. Our proposed approach mitigates this concern by leveraging sparsity-inducing priors to automatically select the skewness parameter as dynamic, static or zero in a data-driven framework. We consider two empirical applications. First, in a bond yield application, dynamic skewness captures interest rate cycles of monetary easing and tightening and is partially explained by central banks' mandates. In a currency modeling framework, our model indicates no skewness in the carry factor after accounting for stochastic volatility. This supports the idea of carry crashes resulting from volatility surges instead of dynamic skewness. [ABSTRACT FROM AUTHOR]

Could the European Union mitigate the negative effects of economic, pandemic and environmental crises using only one tool? The answer is positive, by implementing "green" fiscal expansion financed by "green" common debt, such as issuing green bonds. In this paper, we connect the independent responses to different crises into a single response that could end them. The European Union's theoretical background is based on new-classical models, but current research findings doubt new-classical orthodoxy, underling the importance of economic federalism for sustainable economic and green growth. We argue that the Economic and Monetary Union has to speed up fiscal federalism by establishing a powerful European Union common budget using green Eurobonds and implementing fiscal transfers as a mechanism to address the consequences of the triple crisis. [ABSTRACT FROM AUTHOR]

Financial markets have the potential to magnify the adverse impacts of carbon-intensive assets, mainly in the case of a swift and unforeseen shift toward a low-carbon economy. Given that green bonds are already in the process of standardization and actively support the funding of environmental goals, this paper aims to explore their relationship with the European banking system. To achieve this objective, we utilize a cross-quantilogram approach, analyzing daily data gathered from July 2014 to January 2021 and examining bi-directional dependence. Our unique contribution lies in revealing the relationships between the green bond index and the stock market dynamics of European banks compared to their relationships with conventional stock market indices, which is a novel endeavor to the best of our knowledge. The results are consistent with prior research findings regarding the relationships between the green bond index and various companies and financial assets. These results confirm that other financial instruments impact green bonds, whereas the influence exerted by green bonds on other assets is minimal. Additionally, our study provides evidence indicating that the COVID-19 pandemic has altered the connections between these financial assets. [ABSTRACT FROM AUTHOR]

The objective of this study is to establish a decision-making algorithm for issuing green bonds by municipalities in inter-municipal cooperation in Lithuania with a focus on zero-waste projects. The research methodology comprises four parts. The first part of the research methodology corresponds to a literature review that examines the concept of inter-municipal cooperation and its development in different countries. The second part of the research methodology is dedicated to the formulation of the valuation approach for the inter-municipal cooperation possibility and approbation of it in the selected municipalities. The third part of the research methodology covers the development of the decision-making algorithm for issuing green bonds by municipalities in inter-municipal cooperation in Lithuania. The last part of the research methodology summarizes the results of the survey and proposals for its further development. The findings suggest that the selected municipalities for the valuation of inter-municipal cooperation possibility could improve municipal performance for better inter-municipal cooperation results. The results also show that a smaller municipality corresponds to moderate municipal performance, which can be expected in comparison to a larger municipality. The findings of the construction of the decision-making algorithm suggest a 12-step process for the issuance of green bonds in Lithuania. The practical implications of the study are based on the notion that findings can be applied by municipalities willing to issue green bonds, smaller municipalities having challenges finding financial sources, and municipalities in inter-municipal cooperation sharing the same goals. An original aspect of this paper is its study focus on inter-municipal cooperation valuation and the issuance of green bonds in the municipalities of a smaller country which can serve as a reference point for considering the potential issuance of green bonds in municipalities of similar size. [ABSTRACT FROM AUTHOR]

This paper deals with a credit derivative pricing problem using the martingale approach. We generalize the conventional reduced-form credit risk model for a credit default swap market, assuming that the firms' default intensities depend on the default states of counterparty firms and that the stochastic interest rate follows a jump-diffusion Cox–Ingersoll–Ross process. First, we derive the joint Laplace transform of the distribution of the vector process (r t , R t) by applying piecewise deterministic Markov process theory and martingale theory. Then, using the joint Laplace transform, we obtain the explicit pricing of defaultable bonds and a credit default swap. Lastly, numerical examples are presented to illustrate the dynamic relationships between defaultable securities (defaultable bonds, credit default swap) and the maturity date. [ABSTRACT FROM AUTHOR]

In this study, the impact of arbitrage resulting from Covered Interest Parity (CIP) deviations on Korea's long-term interest rates was analyzed, utilizing Vector Error Correction (VEC) models for Granger Causality and Impulse Response Function analyses. This analysis covered the period from February 2002 to September 2023, with a comparative analysis of the periods before and after the Global Financial Crisis (GFC). The Granger Causality analysis indicated that changes in the swap basis reflecting CIP deviation presented a significant Granger causal relationship with the variations in domestic long-term interest rates. Notably, in the post-GFC period, when CIP deviations were relatively pronounced, the incentives for arbitrage trading exhibited a stronger leading effect in terms of inducing changes in domestic long-term interest rates. The Impulse Response Function analysis showed that domestic long-term interest rates significantly and negatively responded to the positive shocks in the swap basis. This response was even more pronounced during the period following the GFC. Additionally, foreign long-term interest rates and monetary policy variables also demonstrated a significant impact on domestic long-term interest rates. These findings imply that the adjustment path back to equilibrium from CIP deviations, driven by arbitrage, was developed more through changes in domestic interest rates rather than exchange rate fluctuations, especially after the GFC. [ABSTRACT FROM AUTHOR]

The objective of this study is to establish understanding of the success factors in issuing green bonds including the corresponding benefits and challenges of their issuance in Lithuania. The research methodology is comprised of the three parts: (1) a literature review to examine the success factors, benefits, and challenges of issuing green bonds as identified by researchers in different countries; (2) use of the methodological potential of the analysed field to formulate an expert survey via the analytical hierarchy process method; (3) summary of the results of the survey and proposals for its further development. Findings suggest that the reputation, good credit rating, and the environmental, social, and governance score of the issuer are the key considerations in the success of green bonds issuance. On the benefits side, green bonds bear low investment risks with the ability to raise large investment amounts while providing quantifiable and measurable benefits. The challenges related to the issuance of green bonds include greenwashing, the questionable role of the green bond market in environmental protection, and insufficient financial and economic benefits of issuance. Practical implications of the study are based on the notion that findings can be applied as a reference point by potential issuers willing to issue green bonds, investors willing to invest in green bonds, and policy-makers willing to promote sustainable and green finance. An original aspect of this paper is its study focus on peculiarities of the issuance of green bonds in the region, in a smaller country which can serve as a reference point for considering potential issuance of green bonds. [ABSTRACT FROM AUTHOR]

The blue bond market has emerged as one of the latest additions in the sustainable debt market. Its goal is to channel funding toward sustainable blue economy projects related to the ocean and freshwater. While the protection of hydric resources has gained importance within the problem of climate change, Sustainable Development Goals linked to water remain the most underfunded. Since the issuance of the first blue bond in the Seychelles in 2018, multiple public and private organizations have turned to the blue bond market to raise funds. However, unlike the green bond market, no comprehensive market overview exists, preventing stakeholders from judging whether this label has been effective in protecting water resources and drawing conclusions on its future potential. This paper draws on an extensive review of academic research and complements it with a unique and comprehensive analysis of blue bonds issued to date, providing a contribution to the literature on sustainable finance. Between 2018 and 2022, 26 blue bond transactions took place, amounting to a total value of USD 5.0 billion, with a 92% CAGR between those years. Currently, blue bonds represent less than 0.5% of the sustainable debt market. The use of proceeds has mostly focused on waste management, biodiversity, and sustainable fisheries, but also ranges across other areas of the sustainable blue economy. Only two-thirds of blue bond issuers report on impact metrics, providing further opportunity to add detail and rigor. We draw comparisons to the more mature green bond market and conclude that a lack of standardized definitions, metrics, and expertise by issuers and investors are significant barriers to the blue bond market. Resolving these barriers is crucial to attract corporations and ensure continued growth of the blue bond market. [ABSTRACT FROM AUTHOR]

Geopolitical risks and shocks such as military conflicts, terrorist attacks, and war tensions are known to cause significant economic downturns. The main purpose of this paper is to determine the dynamics between Australian sovereign bond yields and geopolitical risk. This is achieved by employing a quantile regression analysis. The findings of this study indicate that the impact of geopolitical risk on Australian sovereign yield dynamics is asymmetrical. Furthermore, an increase in geopolitical risk only impacts short-term yields at extreme regimes. However, the impact is, by and large, insignificant. On the other hand, an increase in geopolitical risk does have a statistically significant positive impact on medium- and long-term yields across most quantiles. Lastly, an increase in geopolitical risk tends to result in a steeper yield curve at the belly of the curve but causes the yield curve to flatten at the long end. This study is the first study that holistically examines the dynamics between geopolitical risk and Australian sovereign bond yields. The study thereby contributes to the body of knowledge on Australian bond yields, specifically, and adds to the sparse body of knowledge on the dynamics between geopolitical risk and sovereign bond yields. The findings of this study have implications for monetary policy makers, given that shifts in sovereign bond yields could impact all three core mandates of the Australian Reserve Bank. Furthermore, changes in the slope of the yieldcurve could be used by monetary policy makers to pre-empt changes in future economic growth. The results of this study also relate to fiscal policy formulation, given that yields directly impact the cost of government borrowing. Lastly, portfolio managers could benefit from the results of this study, as these results provide information on the ability of Australian sovereign bonds to hedge against geopolitical risk. [ABSTRACT FROM AUTHOR]

The green bond market helps to mobilize financial sources toward sustainable investments. Green bonds are similar to conventional bonds but are specifically designed to raise money to finance environmental projects. The feature of green bonds is the existence of greenium, or the lower yield compared to "conventional" bonds of the same risk. The relevance of the paper is underpinned by the mixed evidence on the existence of 'greenium', especially in corporate green bond markets; there has been limited research on the topic and a narrow focus on global, US, or Chinese green bond markets. Instead, the greenium in European debt markets remains underexplored. The objective of this study is to investigate the existence of greenium and its key determinants in European corporate debt capital markets, including the local markets of the United Kingdom (UK), France, Netherlands, and Germany. The sample included 3851 corporate bonds, both green and conventional ones, between 2007 and 2021 from 33 European countries. Linear regression was applied for the analysis. The results show that the climate corporate bonds in Europe are priced at a discount to the same-risk conventional corporate bonds. The magnitude of greenium is around 3 bps. Determinants of greenium include the presence of an ESG rating and belonging to the utility and financial industry. The remaining drivers of bond yields in the European corporate debt market are the credit quality (expressed by the level of credit rating), the coupon size, the bond tenor, the market liquidity, and macroeconomic variables (growth of gross domestic product and consumer price index). For the local corporate debt markets, our results are controversial. In all markets under consideration except for the UK and the Netherlands, we did not find sustainable evidence of greenium. The results of the research lead to a better understanding of the green bond market for investors, researchers, regulators, and potential issuing companies. [ABSTRACT FROM AUTHOR]

By swapping out atoms for vertices and bonds for edges, a graph may be used to model any molecular structure. A graph G is considered to be a chemical graph in graph theory if no vertex of G has a degree of 5 or greater. The bond incident degree (BID) index for a chemical graph G is defined as the total of contributions f (d G (u) , d G (v)) from all edges u v of G, where d G (w) stands for the degree of a vertex w of G, E (G) is the set of edges of G, and f is a real-valued symmetric function. This paper addresses the problem of finding graphs with extremum BID indices over the class of all chemical graphs of a fixed number of edges and vertices. [ABSTRACT FROM AUTHOR]

Sulfamates are widespread in numerous pharmacologically active molecules. In this paper, Silver/Bathophenanthroline catalyzed the intramolecular selective amination of primary C(sp3)−H bonds and secondary C(sp3)−H bonds of sulfamate esters, to produce cyclic sulfamates in good yields and with a high site-selectivity. DFT calculations revealed that the interaction between sulfamates and L10 makes the molecule more firmly attached to the catalyst, benefiting the catalysis reaction. The in vitro anticancer activity of the final products was evaluated in MCF-7 breast cancer cells. [ABSTRACT FROM AUTHOR]

This paper aims to examine the connectedness between green and conventional assets, particularly during the period of economic downturn. Specifically, we examine quantile-based time-varying connectedness between the green bond market and other financial assets using quantile vector autoregression (QVAR) from 9 March 2018 to 10 March 2021. We use daily prices of S&P U.S. Treasury Bond Index, S&P US Aggregate Bond Index, S&P US Treasury Bond Current 10Y Index, S&P 500 Bond Index, S&P 500 Financials index, S&P 500 Energy Bond Index and S&P 500, giving a total of 784 observations, and using Composite Index as a representative of conventional assets classes and S&P Green Bond Index to denote the green bond market. Results shows the connectedness between green bonds and the conventional asset classes intensified during the outbreak of the Coronavirus pandemic (COVID-19) as investors shifted their investment towards fixed income assets due to the plunge in the prices of stocks and commodities. The results also shows that green bonds are strongly connected with treasury bonds, aggregate bonds and bond index, as they share similarities with respect to issuance, risk and governance. Connectedness is weak in the case of composite index and energy bond index, as their prices do not have substantial influence on the green bond market. The study highlights the hedging and diversification benefits of green bonds. We have several implications for portfolio managers, policy makers and researchers. [ABSTRACT FROM AUTHOR]

This paper conducts an empirical study on the inclusion of uniform European Collective Action Clauses (CACs) in sovereign bond contracts issued from member states of the European Union, introduced as a regulatory result of the European sovereign debt crisis. The study focuses on the reaction of sovereign bond yields from European Union member states with the inclusion of the new regulation in the European Union. A two-stage least squares regression analysis is adopted in order to determine the extent of impact effects of CACs on member states sovereign bond yields. Evidence is found that CACs in the European Union are priced on financial markets and that sovereign bond yields do respond to the inclusion of uniform CACs in the European Union. [ABSTRACT FROM AUTHOR]

Green bonds are similar to conventional bonds but are specifically earmarked to raise money to finance climate or environmental projects. There have been anecdotes of green bonds being priced tighter than similar conventional bonds by the same issuers. Our survey of academic literature indicates that most papers show the yield of a green bond is lower than that of the equivalent conventional bond at issuance (also known as green premium or greenium). However, green bond pricing studies by Climate Bonds Initiative produce mixed results. The conflicting results are likely explained by differences in sample selections, time periods, methodologies, and the properties of the respective issuing entity and the bond. In addition, we examine investment returns from select green bond funds and green bond indexes. The assets under management of those funds are still small and they underperform their benchmark indexes. [ABSTRACT FROM AUTHOR]

This paper demonstrated a microwave-assisted solvent bonding method that uses organic solvent to seal the thermoplastic substrates with microwave assistance. This direct bonding is a simple and straightforward process that starts with solvent application followed by microwave irradiation without the need for expensive facilities or complex procedures. The organic solvent applied at the bonding interface is used in dissolving and dielectric heating of the thermoplastic surfaces to seal the thermoplastic substrates under microwave assistance. We evaluated acetone and ethanol to seal the polymethyl methacrylate (PMMA) microfluidic device. The bonding performance, such as bonding coverage, geometry stability, and bonding strength (tensile) were observed and compared with the oven-heating and non-heating control experiments under the same force applications. Results showed that the microwave-assisted solvent bonding method presents a high bonding yield (maximum > 99%) and bonding strength (maximum ~2.77 MPa) without microchannel distortion, which can be used for various microfluidic applications. [ABSTRACT FROM AUTHOR]

China's bond market has been ranked third globally; however, China's corporate bonds are significantly less liquid than its stocks. Liquidity risk is an important component in China's corporate bond spreads. In this paper, we propose a stochastic liquidity discount factor model to evaluate the liquidity risk premium and its term structure in China's corporate bond market. The Monte Carlo simulation technique is used to quantify the impact on the liquidity premium of various liquidity factors: the liquidity level, liquidity volatility, liquidity shock, and the liquidity elasticity. Our findings conclude that the liquidity level is the most significant component of a liquidity premium. The impact on the liquidity premium of other liquidity factors is all conditional on the liquidity level. In addition, the impact of liquidity shocks and volatility is also subject to the market's equilibrium mechanism. Further, the term of a bond affects the premium both directly and indirectly through its influence on a bond's liquidity. [ABSTRACT FROM AUTHOR]

The green bond market is attracting new issuers and a more diversified base of investors. However, the size of the green bond market remains small compared to the challenges it is meant to address and to the overall traditional bond market. This paper is based on a unique methodology combining an extensive literature review, market data analysis, and interviews with a large spectrum of green bond market participants. We identify the current barriers explaining the lack of scalability of the green bond market: a deficit of harmonized global standards; risks of greenwashing; the perception of higher costs for issuers; the lack of supply of green bonds for investors; and the overall infancy of the market. This paper makes several recommendations to overcome these obstacles and unlock the full potential of green bonds to finance sustainability goals. [ABSTRACT FROM AUTHOR]

The green bond market is emerging as an impactful financing mechanism in climate change mitigation efforts. The effectiveness of the financial market for this transition to a low-carbon economy depends on attracting investors and removing financial market roadblocks. This paper investigates the differential bond performance of green vs non-green bonds with (1) a dynamic portfolio model that integrates negative as well as positive externality effects and via (2) econometric analyses of aggregate green bond and corporate energy time-series indices; as well as a cross-sectional set of individual bonds issued between 1 January 2017, and 1 October 2020. The asset pricing model demonstrates that, in the long-run, the positive externalities of green bonds benefit the economy through positive social returns. We use a deterministic and a stochastic version of the dynamic portfolio approach to obtain model-driven results and evaluate those through our empirical evidence using harmonic estimations. The econometric analysis of this study focuses on volatility and the risk–return performance (Sharpe ratio) of green and non-green bonds, and extends recent econometric studies that focused on yield differentials of green and non-green bonds. A modified Sharpe ratio analysis, cross-sectional methods, harmonic estimations, bond pairing estimations, as well as regression tree methodology, indicate that green bonds tend to show lower volatility and deliver superior Sharpe ratios (while the evidence for green premia is mixed). As a result, green bond investment can protect investors and portfolios from oil price and business cycle fluctuations, and stabilize portfolio returns and volatility. Policymakers are encouraged to make use of the financial benefits of green instruments and increase the financial flows towards sustainable economic activities to accelerate a low-carbon transition. [ABSTRACT FROM AUTHOR]

The paper is an investigation on the impact of financial markets on the volatility of the green bonds credit risk component, measured by the option-adjusted spread/swap curve (OAS) before and during the pandemic period. To this purpose, after observing the dynamic joint correlations between all the variables, we adopt Exponential and Generalized AutoRegressive Conditional Heteroskedasticity models, putting the OAS as dependent variable. Our main results show that the conditional variance parameters are significant and persistent in both times, testifying the overall impact of the other markets on the OAS. In more detail, we highlight that the gamma in the two Exponential models is positive: so, the "green" credit risk volatility is more sensitive to positive shocks than to negative ones. With reference to the conditional mean, we note that if during the non-pandemic period only the stock market is significant, during the pandemic also conventional bonds and gold are impacting. To the best of our knowledge this is the first study that analyzes the specific credit risk component of the green bond yields: we deem our findings useful to observe the change of green bonds creditworthiness in a complex market context and interesting in terms of policy implications. [ABSTRACT FROM AUTHOR]

Researchers who estimate affine term structure models often impose overidentifying restrictions (restrictions on parameters beyond those necessary for identification) for a variety of reasons. While some of those restrictions seem to have minor effects on the extracted factors and some measures of risk premia, such as the forward risk premium, they may have a large impact on other measures of risk premia that is often ignored. In this paper, we analyze how apparently innocuous overidentifying restrictions imposed on affine term structure models can lead to large differences in several measures of risk premiums. [ABSTRACT FROM AUTHOR]

Green bonds (or climate bonds) are one of the most used sustainable investment instruments, and under the Paris Climate Agreement of 2015, the climate bond market is expected to thrive in the near future. Green bonds are gaining increasing popularity between environmentally responsible investors, as well as investors who "simply" attempt to benefit from portfolio diversification, including green issuances, that are close to other fixed bonds. This paper aims to take advantage of previous literature contributions on the green bond market to indicate the way forward for future research. Herein, through a systematic literature review on the green bond market, our ultimate goal is to provide investors, main markets actors, and policymakers with some helpful insight on the role of environmental investments in reshaping the financial markets and fostering the sustainability of the economy. [ABSTRACT FROM AUTHOR]

Using an international sample of corporate Green bond issuances over the recent period, this paper highlights the potential consequences of the issuance of a Green bond on the issuer's financial performance. Starting with a first sample of 2079 Green bond issuances of 190 unique issuers from 2009 to 2018, we investigate only corporate green bond issuances. Our final sample contains 475 green bonds issued by 145 unique firms. We find that the market reacts negatively to the announcement of green bond issuances. In particular, results show that the stock market reacts on the day of the green bond announcement date and the day after, and that the cumulative abnormal return is between -0.5% and -0.2%, depending on the asset pricing model (CAPM, the 3-factor Fama and French models, and the 4-factor Carhart models). This effect is mainly noticeable at the first Green Bond issuance and in developed markets. Our results provide evidence that the investors react in the same manner for Green bonds as for conventional or convertible bonds. This evidence suggests that green debt offerings convey unfavorable information about the issuing firms. [ABSTRACT FROM AUTHOR]

For a sample of public bond issues by U.S. firms between 2000 and 2019, sourced from the Securities Data Corporation (SDC) New Issues database, we examine the relationship between CEO-friendly boards and the cost of debt. To explore this relationship, we construct proxies for board friendliness based on social connections sourced from the BoardEx database, classifying a board as friendly if it includes at least one outside director who has a social connection with the CEO. Our regression analysis reveals a negative association between CEO-friendly boards and yield spreads and a positive association between CEO-friendly boards and credit ratings. These effects exist after controlling for firm and bond characteristics based on prior literature. The results are robust to an alternative measure of board friendliness and potential endogeneity. These findings imply that firms with a CEO-friendly board experience a lower cost of bond financing. This supports the argument that effective communication between CEOs and directors contributes to the enhancement of creditor interests. Our results carry a practical implication that firms heavily reliant on debt should actively employ CEO-friendly boards. Despite the burgeoning literature on CEO-friendly boards, there is a lack of research on the relationship between CEO-friendly boards and the cost of debt. Our results fill this gap in the extant literature on CEO-friendly boards. [ABSTRACT FROM AUTHOR]

We studied the relationship between sustainable investment indexes and examine whether this relationship varies in bullish, bearish, and stable financial markets. To understand this issue more deeply, we analyzed the connectedness between three indexes—the Sustainable Impact investments, Paris-aligned stocks, and green bonds indexes—using the daily closing prices from 1 June 2017 to 15 April 2024, encompassing 1793 observations. We used a quantile vector autoregressive (QVAR) model to understand the dynamic relationship among the considered indices. The findings indicate that sustainable investments are strongly interconnected in both high and low quantiles, but this connection weakens significantly during periods of market stability. The Sustainable Impact investments and Paris-aligned stocks indexes are net transmitters of impacts to other sustainable alternatives, while the green bonds index is a net receiver. We also observed an increase in interconnectedness across all quantiles during the pandemic, the Russia–Ukraine military conflict, and changes in the European Union and the United States' monetary policies. [ABSTRACT FROM AUTHOR]

This in vitro study assessed the effect of different primers on the shear bond strength (SBS) and adhesive remnant index (ARI) of orthodontic brackets bonded to reinforced polyetheretherketone (PEEK) substrate. A total of 40 specimens were randomly distributed to two groups based on the primer used for orthodontic bonding: group 1 (control)—Transbond XT adhesive with Visio.link primer and group 2 (test)—orthodontic adhesive (Transbond XT) with traditional orthodontic primer. After bonding, specimens were thermocycled followed by SBS testing and ARI scoring of debonded specimens. Data were analyzed using the unpaired independent t-test and the Chi-square test. Group 1 specimens showed significantly higher SBS values (21.38 ± 1.48 MPa) compared to group 2 specimens (18.63 ± 1.29 MPa) (p < 0.0001). Adhesive remnant index scores showed no significant variations in bond failure modes and distributions between groups. The SBS obtained by the tested primers exceeded the clinically recommended value. Consequently, there is a comparable clinical application for both tested primers in orthodontic bonding, especially the traditional orthodontic primer, where the availability of Visio.link in clinical practice is not ensured. [ABSTRACT FROM AUTHOR]

The aim of this study is to analyse and assess the yields and liquidity of sovereign green bonds in selected countries and to compare the yields between sovereign green bonds and conventional bonds. Sovereign green bonds are issued by governments to finance environmental and social projects and represent a relatively new and growing asset class. This study seeks to analyse the financial performance of sovereign green bonds by examining yields and liquidity metrics, such as bid–ask spreads. The findings of this research suggest that the yield to maturity (YTM) of sovereign green bonds is influenced by conventional bond return, while conventional sovereign bonds are affected by the financial market return. Furthermore, the results confirm that the liquidity of sovereign green bonds can be explained by bond maturity. [ABSTRACT FROM AUTHOR]

The green bond market develops rapidly and aims to contribute to climate mitigation and adaptation significantly. Green bonds as any asset are subject to transition climate risk, namely, regulatory risk. This paper investigates the impact of unexpected political events on the risk and returns of green bonds and their correlation with other assets. We apply a traditional and regression-based event study and find that events related to climate change policy impact green bonds indices. Green bonds indices anticipated the 2015 Paris Agreement on climate change as a favorable event, whereas the 2016 US Presidential Election had a significant negative impact. The negative impact of the US withdrawal from the Paris agreement is more prominent for municipal but not corporate green bonds. All three events also have a similar effect on green bonds performance in the long term. The results imply that, despite the benefits of issuing green bonds, there are substantial risks that are difficult to hedge. This additional risk to green bonds might cause a time-varying premium for green bonds found in previous literature. [ABSTRACT FROM AUTHOR]

This study investigates the determinants of trading activity in the U.S. corporate bond market, focusing on the effects of Seasonal Affective Disorder (SAD) and macroeconomic announcements. Employing the General-to-Specific (Gets) Autometrics methodology, we identify distinct behavioral responses between retail and institutional investors to SAD, noting a significant impact on retail trading volumes but not on institutional trading or bond returns. This discovery extends the understanding of behavioral finance within the context of bond markets, diverging from established findings in equity and Treasury markets. Additionally, our analysis delineates the influence of macroeconomic announcements on trading activities, offering new insights into the market's reaction to economic news. This study's findings contribute to the broader literature on market microstructure and behavioral finance, providing empirical evidence on the interplay between psychological factors and macroeconomic information flow within corporate bond markets. By addressing these specific aspects with rigorous econometric techniques, our research enhances the comprehension of trading dynamics in less transparent markets, offering valuable perspectives for academics, investors, risk managers, and policymakers. [ABSTRACT FROM AUTHOR]

Building on recent work incorporating recovery risk into structural models by Cohen & Costanzino (2015), we consider the Black-Cox model with an added recovery risk driver. The recovery risk driver arises naturally in the context of imperfect information implicit in the structural framework. This leads to a two-factor structural model we call the Stochastic Recovery Black-Cox model, whereby the asset risk driver At defines the default trigger and the recovery risk driver Rt defines the amount recovered in the event of default. We then price zero-coupon bonds and credit default swaps under the Stochastic Recovery Black-Cox model. Finally, we compare our results with the classic Black-Cox model, give explicit expressions for the recovery risk premium in the Stochastic Recovery Black-Cox model, and detail how the introduction of separate but correlated risk drivers leads to a decoupling of the default and recovery risk premiums in the credit spread. We conclude this work by computing the effect of adding coupons that are paid continuously until default, and price perpetual (consol bonds) in our two-factor firm value model, extending calculations in the seminal paper by Leland (1994). [ABSTRACT FROM AUTHOR]

The purpose of this paper is to determine the liquidity spillover effects of trades executed in European sovereign bond markets and to assess the driving factors behind the magnitude of the spill-overs between different markets. The one minute-frequency limit order-book dataset is constructed from mid-2011 until end-2017 for sovereign bonds from the six largest euro area countries. It is used for the event study and panel regression model. The event study results revealed that liquidity spill-over effects of trades exist and vary highly across different order types, direction and size of the trade, the maturity of traded bonds, and various markets. The panel regression model showed that less liquid bonds and bonds whose issuer is closer by distance to the country of the traded bond have more substantial spillover effects and, at the same time, are also more affected by trades executed in another market. These results should be of interest to bond market participants who want to limit the exposure to the liquidity spillover risk in bond markets. [ABSTRACT FROM AUTHOR]

The presence of risk premium is an issue that weakens the rational expectation hypothesis. This paper investigates changing behavior of time varying risk premium for holding 10 year maturity bond using a bivariate VARMA-DBEKK-AGARCH-M model. The model allows for asymmetric risk premia, causality and co-volatility spillovers jointly in the global bond markets. Empirical results show significant asymmetric partial co-volatility spillovers and risk premium exist in the bond markets. The estimates of the bivariate risk premia show bi-directional causality exist between the Australia and France Bond markets. Overall results suggest nonexistence of pure rational expectation theory in the risk premium model. This information is useful for the agents' strategic policy decision making in global bond markets. [ABSTRACT FROM AUTHOR]

Green bonds represent a compelling financial innovation that presents a financial perspective solution to address climate change and promote sustainable development. On the other hand, the recent process of financialisation of commodities disrupts the dynamics of the commodity market, increasing its correlation with financial markets and raising the risks associated with commodities. In this context, understanding the dynamics of the interconnectivity between green bonds and commodity markets is crucial for risk management and portfolio diversification. This study aims to reveal the multifractal cross-correlations between green bonds and commodities by employing methods from statistical physics. We apply multifractal detrended cross-correlation analysis (MFDCCA) to both return and volatility series, demonstrating that green bonds and commodities exhibit multifractal characteristics. The analysis reveals long-range power-law cross-correlations between these two markets. Specifically, volatility cross-correlations persist across various fluctuations, while return series display persistence in small fluctuations and antipersistence in large fluctuations. These findings carry significant practical implications for hedging and risk diversification purposes. [ABSTRACT FROM AUTHOR]

Green bonds are an increasingly important area not only in the financing of investments important to the environment, but recently also as an object of investment. From the investors point of view, the key aspect still remains the efficiency of the investment and its profitability. The subject of this research is to evaluate changes in the efficiency of green bonds issued in the selected CEE countries (Poland, Slovakia, Czech Republic, and Hungary), in the short and long term. Poland is the largest issuer of green bonds in this group, followed by the Czech Republic, Hungary, and Slovakia. Individual green bonds in these group of countries are characterized by varying levels of green bond yields, duration of the investment, issue size and counterparty risk. These factors greatly hinder their comparability, especially in terms of investment efficiency. This manuscript fits into this area, as the main purpose of the manuscript is to show similarities in the yields of green bonds issued in Poland and green bonds issued in CEE countries. The hypothesis that will be tested is that changes in the effectiveness of green bonds issued in Poland are strongly correlated with changes in the effectiveness of green bonds issued in CEE countries. The results of the research positively verified the hypothesis, and the objectives of the research were achieved. It was shown that green bonds issued in the Czech Republic and Slovakia demonstrate a high similarity in terms of effectiveness to green bonds issued in Poland. At the same time, the results confirmed that of all the bonds analysed, the one bond issued by the Hungarian government is the least related to green bonds issued in Poland in terms of effectiveness for investors. The study used multiresolution analysis and Dynamic Time Warping. The Dynamic Time Warping algorithm measures the similarity between two sequences that can change over time. The analysis was carried out over a wide temporal cross-section, analysing the similarity between the effectiveness in both the short and long term. [ABSTRACT FROM AUTHOR]

Nowadays, European countries, while implementing the goals of sustainable development, are trying to be energy secure by reducing energy consumption and switching to renewable energy sources; the issue of green bonds is essential in the financing of these projects. This study aims to investigate the current situation and trends in green finance, identifies its problems and challenges, as well as determines the importance of green bonds in sustainability in general and renewable energy supply in particular. The authors conducted a bibliometric analysis of green finance and renewable energy, followed by an extensive literature review identifying the benefits and challenges of green bond investments, continued with an empirical study that included hypothesis testing and the creation and analysis of the EU countries clusters, which have not been sufficiently studied to date. A study examining trends in green finance, identifying its benefits and challenges, found that green bond investments have a positive impact on carbon reduction and renewable energy supply in the EU OECD countries, and cluster analysis of the European OECD countries indicated a positive relationship between economic performance and overall ESG risk. [ABSTRACT FROM AUTHOR]

This study examines the impacts of the US inflation rate on the bond prices of G7 countries across different maturities using inflation-induced equity market volatility (EMV) to better account for bond price determinants. The regression model, a GED-GARCH (1,1) procedure, is adopted to deal with the volatility clustering and fat tail features in bond return estimation. The testing results indicate that the inflation rate has a negative effect on bond returns across different maturities, although an exception occurs for longer maturities in Japan. Evidence shows that US inflation has a significant impact on bond returns for the non-US G7 countries. The negative effects from US inflation are more profound than those from the domestic market (expect in Japan). This study introduces the equity market volatility arising from inflation or the Fed's interest rate change; this variable produces market volatility that has a positive effect on bond returns, offsetting part of the original negative effect from a rise in inflation. [ABSTRACT FROM AUTHOR]

Timor-Leste is a new country still in the process of economic development and does not yet have a capital market for stock and bond investments. These two asset classes have been invested in international capital markets such as the US, the UK, Japan, and Europe. We examine the performance of the capital asset pricing model (CAPM) and the Fama–French three-factor and five-factor models on the excess returns of Timor-Leste's equity and bond investments in the international market over the period 2006 to 2019. Our empirical results show that the market factor (MKT) is positively and significantly associated with the excess returns of the CAPM and the Fama–French three-factor and five-factor models. Moreover, the two variables Small Minus Big (SMB) as a size factor and High Minus Low (HML) as a value factor have a negative and significant effect on the excess returns in the Fama–French three-factor model and five-factor model. Further analysis revealed that the explanatory power of the Fama–French five-factor model is that the Robust Minus Weak (RMW) factor as a profitability factor is positively and significantly associated with excess returns, while the Conservative Minus Aggressive (CMA) factor as an investment factor is insignificant. [ABSTRACT FROM AUTHOR]

As climate change impacts energy consumption, investments in clean energy are now associated with increased levels of risk and uncertainty. Consequently, the management of risk for clean energy investors has garnered significant academic attention. This study was designed to explore the risk transfers among clean energy markets, how they respond to market volatility, and how exceptional events impact the risk spillover. This was performed by examining the risk spillover of and asymmetric connectedness between clean energy markets, green bonds, and other financial markets in China, in line with the connectedness framework and minimum spanning tree technique. The findings revealed that clean energy markets exhibit heterogeneity in terms of the direction and magnitude of net risk spillover, the types of hedging assets involved, and their response to market volatility. Exceptional events, such as the Russian–Ukrainian conflict and COVID-19 pandemic, have an impact on the spillover relationships. During stable market conditions, green bonds experience fewer spillovers from clean energy markets, whereas, in times of volatility, gold markets are subjected to fewer spillovers. In the time domain, the overall long-term spillover is stronger compared to the short and medium terms. In the frequency domain, there is a significant risk of low-frequency transmission. These findings hold practical implications for energy investors in portfolio construction and for policymakers in pursuing sustainability objectives. [ABSTRACT FROM AUTHOR]

Holding companies legally separate the assets and owners of a company creating a layer of liability protection. Theoretically, this feature lowers the risk attributable to holding companies, enabling them to offer lower-cost debts compared to stand-alone alternatives. However, no study has ever tested this hypothesis due to its technical and practical difficulties. Testing this hypothesis requires a separate classification of holding and stand-alone companies' outstanding debts to compare their risk spreads, controlling the bonds' risk ranking, maturities, and issue sizes. Further, a model is needed to make the callable bond spreads with unknown maturity dates comparable to non-callable bonds. This work is the first attempt to evaluate the risk spreads of stand-alone banks and bank holding companies in Spain by including all outstanding rated bonds offered by Spanish banks. In order to make callable bond spreads comparable with noncallable bond spreads, we obtained the option-adjusted spreads for the bonds using a lattice option-pricing model that treats the callable bonds as a bond with embedded options. We then regressed to option-adjusted spreads on control variables and ownership structure dummy to see if there exists a statistically and economically significant coefficient for the introduced dummy variable. We found that bank-holding company bonds have higher risk spreads compared to the stand-alone alternatives in Spain. This may be attributable to the characteristics of holding companies that introduce other risks that offset the gains obtained from the added layer of liability protection. [ABSTRACT FROM AUTHOR]

Anchorage force comprises bond force and bearing pressure when headed bars are used. Pull-out tests were conducted on 120 concrete specimens to derive a method for calculating the bond force for reinforcement in straight anchor sections at the yield moment. The parameters include the diameter d, embedded length lae, and yield strength fy of the reinforcement, as well as the strength grade of the concrete fcg. The experimental results indicated that the specimens underwent three failure modes depending primarily on the embedded length lae. The nominal average bond stress τu concept was proposed and the difference between τu and the actual average bond stress τ caused by the headed bars was observed. To reduce the difference between the τu and τ values, the correction coefficient γ was proposed. Analysis indicated that γ increased with an increase in the lae/d (on average, 146% higher than the initial value) and decreased with an increase in the fy/ft (on average, 33% less than the initial value). A formula was developed to calculate γ, and the bond force in the straight anchor sections at the yield moment for the reinforcement was determined. Thus, a distributive relationship was established for the anchorage force, the bond force, and the bearing pressure. [ABSTRACT FROM AUTHOR]

Pandemic bonds can be used as an effective tool to mitigate the economic losses that governments face during pandemics and transfer them to the global capital market. Once considered as an "uninsurable" event, pandemic bonds caught the attention of the world with the issuance of pandemic bonds by the World Bank in 2017. Compared to other CAT bonds, pandemic bonds received less attention from actuaries, industry professionals, and academic researchers. Existing research focused mainly on how to bring epidemiological parameters to the pricing mechanism through compartmental models. In this study, we introduce the stochastic logistic growth model-based pandemic bond pricing framework. We demonstrate the proposed model with two numerical examples. First, we calculate what investor is willing to pay for the World Bank issued pandemic bond while accounting for possible future pandemic, but require to have the same yield to maturity when no pandemic is there, and without using COVID-19 data. In the second example, we calculate the fair value of a pandemic bond with characteristics similar to the World Bank issued pandemic bond, but using COVID-19 data. The model can be used as an alternative to epidemic compartmental model-based pandemic bond pricing mechanisms. [ABSTRACT FROM AUTHOR]

In this paper, we consider a new corporate bond-pricing model with credit-rating migration risks and a stochastic interest rate. In the new model, the criterion for rating change is based on a predetermined ratio of the corporation's total asset and debt. Moreover, the rating changes are allowed to happen a finite number of times during the life-span of the bond. The volatility of a corporate bond price may have a jump when a credit rating for the bond is changed. Moreover, the volatility of the bond is also assumed to depend on the interest rate. This new model improves the previous existing bond models in which the rating change is only allowed to occur once with an interest-dependent volatility or multi-ratings with constant interest rate. By using a Feynman-Kac formula, we obtain a free boundary problem. Global existence and uniqueness are established when the interest rate follows a Vasicek's stochastic process. Calibration of the model parameters and some numerical calculations are shown. [ABSTRACT FROM AUTHOR]

Green bonds have increasingly been utilized around the world as a source of financing for renewable energy development, designed with compliance requirements and measurable economic returns to investors, while mitigating climate change. However, the efficacy of green bond arranged in the emerging economies for financing renewable energy assets and how the underlying risks are managed have remained to be explored. The paper aims to examine the evolving green financial system sponsored by both public and private institutions in managing such risks within China's emerging economy. A case study of green financing for a bundle of wind power assets led by a state-owned enterprise (SOE) reveals an alternative approach by structuring public–private collaboration while stipulating market-based financial incentives to institutional stakeholders under a political economy. This institutional consortium is composed of a state development bank, a commercial bank, credit rating agencies, institutional and private investors, regional power purchasers, and carbon trading entities. Financial stakeholders' risk in such emerging sustainable investment is moderated by these participating institutions and structured "upsides" from carbon trading aligned with the framework of green finance and standards for green bond development. The results reveal the potentials of scaling up the development of renewable energy by adequately managing and sharing key risks, while allocating substantial funding into renewable energy projects under such a green financial system that is to be complementary with a scalable post COVID-19 economic recovery. [ABSTRACT FROM AUTHOR]

Cochrane (2014) shows that high-powered money balances and short-term government bonds can be considered as perfect substitutes for the U.S economy during the past twenty years. We build on this claim and consider a variant of the standard cashless new-Keynesian model with two types of government bonds, which can be thought of as short- and long-term bonds. The first one has a macroeconomic role in the sense that it provides transaction services in addition to generating a yield. The other type of government bond pays only an interest rate. Consistent with previous findings, the Taylor principle is not a panacea for equilibrium determinacy in a model without money. When the government bond market matters beyond the need for fiscal solvency, monetary policy rules do not need to comply with the Taylor principle for unique equilibria to exist. [ABSTRACT FROM AUTHOR]