Working Papers
NEW
7. The US Treasury's Biggest Short: Duration in the Shadows - with Stefano Pegoraro and Anthony Saunders
Presentations: Tenth Annual Young Scholars Finance Consortium at A&M Mays Texas, Sovereign Bond Market Conference 2026 on Sovereign Bond Markets in Geopolitical Storms (upcoming), Midwest Finance Association, 2026 Consortium on Asset Management, Colorado Finance Summit (2025), ESADE Spring Workshop (2025), and BI Norwegian Business School Seminar (2024)
Abstract: We show the U.S. Treasury prioritizes nominal over market value of debt, at cost to taxpayers. The Treasury absorbs fiscal shocks through bills while maintaining predictable longer-term issuance, and does not adjust duration supply in response to market signals, instead tilting toward maturities with the highest intermediation margins. The 2024-2025 buyback program targeted below-par bonds, freeing $21 billion in nominal fiscal capacity with no market-value gain for taxpayers. Exploiting staggered ESA 2010 adoption, we find core European countries reduced term spreads by 0.28 to 0.37 percentage points by managing duration risk.
[Updated draft]
6. Model-Free Cross-Country Convenience Term Premia and the U.S. Dollar Reserve Currency Status
Abstract: We develop a parametric-model-free triangular no-arbitrage methodology that recovers cross-country convenience term premia, differentials in bilateral term premia at the long end of the term structure, for seven currencies from cross-currency basis swaps. First, U.S. Treasuries no longer command a long-horizon convenience term premium against major reserve sovereigns: the ten-year term premium of Bunds over Treasuries averaged +31 basis points pre-GFC, -39 during the GFC, and -67 post-GFC; for JGBs, +37, -25, and -81. Second, inelastic U.S. fiscal duration drives U.S. convenience term premia through a preferred-habitat channel. Third, the cross-sectional average predicts the equally-weighted dollar basket twelve months ahead orthogonally to interest rate differentials.
[Updated draft]
5. The "Hairy Premium": Market Hedging-Set Incompleteness and Frictions - with Anthony Saunders
Presentations: 2024 Annual Meetings of the American Finance Association (AFA), 2024 European Finance Association (EFA), 2024 Northern Finance Association Annual Conference (NFA), Midwest Finance Association Conference (MFA), Young Scholars Nordic Finance Network Workshop (NFN), Alpine Finance Summit, Finance and Accounting Annual Research Symposium, Financial Engineering and Banking Society, BI Workshop on Uncertainty, NYU Stern School of Business, Miami Herbert Business School, Frankfurt School of Finance and Management, and BI Norwegian Business School
Abstract: U.S. 10-year swap fixed-rate receivers earn 2.74 percent per annum since swap-market inception, with similar magnitudes across G10 markets. Standard theory treats swaps as redundant securities and predicts zero. We rationalise this through hedging-set incompleteness: long-dated riskless FRNs are absent and bond shorting is costly, so dealers cannot statically replicate the swap, leaving the term premium to fixed-rate receivers. The 2014 U.S. Treasury 2-year FRN alleviates this incompleteness, compressing the 2-year premium by 25–32 basis points. Gross transfers flow from pay-fixed (GSEs and corporates) to receive-fixed counterparties across the $540 trillion swap market, with welfare incidence depending on hedgers’ value.
[Updated draft]
NEW
4. Triangular Currency Pure Parity Deviations - with Benjamin Karner and Olav Syrstad
Presentations: Midwest Finance Association
[Updated draft]
3. Time-varying Market Segmentation: The Twin D’s and a Tale of Two Tails - with Sven Klingler and Lukas Kremens
(This paper subsumes the previous paper "Currency Crashes and Sovereign Defaults: Two Markets and One Tail Risk")
Presentations: AFA Annual Meeting, EEA Annual Meeting, Bank of England: 8th International Conference on Sovereign Bond Markets, Anderson School of Management Brownbag Seminar, and SDU
Abstract: This paper documents striking market segmentation between sovereign credit default swaps (CDS) and far out-of-the-money (FOM) foreign exchange (FX) options markets. Despite pricing exposure to the same fundamental tail risks - sovereign default and currency crash, the "Twin Ds" - these markets exhibit persistent pricing discrepancies that cannot be explained by differences in contract specifications or risk exposures. We propose that this segmentation reflects institutional separation between market participants: credit specialists and FX traders operate in distinct spheres with limited information sharing during normal times. Using two cross-market trading strategies - one exploiting USD-denominated CDS versus FOM FX options spreads, and another using quanto CDS versus FOM FX options - we show that these pricing discrepancies yield substantial abnormal returns with Sharpe ratios exceeding 7.2. Crucially, both strategies generate consistent results despite differing in their treatment of depreciation size upon default, confirming that our findings reflect genuine market segmentation rather than risk compensation for variable depreciation magnitude. The abnormal returns collapse to zero during sovereign crises, when information sharing intensifies and pricing converges across previously segmented markets. Our analysis further reveals that information flows unidirectionally from CDS to FX options markets, supporting our institutional explanation. We exploit regulatory changes and cross-country variation in market structure to strengthen identification and rule out alternative explanations based on rational risk pricing. These findings have implications for understanding market structure effects on tail risk pricing and for detecting potentially destabilizing market fragmentation.
[Updated draft] [Internet Appendix]
2. Collateral-adjusted CIP Arbitrages
Presentations: EEA Annual Meeting, AFA Annual Meeting (Poster), Auckland Center’s Derivative Markets Conference, International Risk Management Conference, Virtual Derivatives Workshop, and Anderson School of Management Brownbag Seminar
Abstract: I show that a no-arbitrage consistent but costly collateral rental yield explains about two-thirds of the apparent standard Covered Interest Rate (CIP) violations. I proxy this yield with the difference between the risk-free and overnight index swap rates between the cross bilateral currencies and apply it to both short and long-term CIP violations. Further, the results suggest an important direct collateral channel through which costly collateralization explains CIP violations, independent of previously documented global risks and intermediary frictions.
[Updated draft] [Internet Appendix] [Virtual Derivatives Workshop 2020 Presentation]
1. Constraints of Collateralization and Regulation and the Law of One Price
Awards: Macro Financial Modeling Project Fellowship Award from the Becker Friedman Institute at the University of Chicago
Summary: I research collateralisation and bank regulatory changes in the post-2008 crisis period and their ability to explain large and persistent deviations from the law of one price observed in a number of arbitrage opportunities measured by cash-derivative bases across asset classes. The study attributes the inability to narrow these arbitrage opportunites to costs of participation which arise due to intermediaries facing a collateral, leverage and liquidity constraints, resulting in limits-to-arbitrage. These constraints inhibit regulated dealers/investors’ ability to arbitrage bases across various asset classes and over time. Moreover, I go a step further and measure the magnitude of the effects of each binding constraint on the deviations from law of one price across time and in the cross section across several asset classes. This allows me to classify asset classes by the magnitude of impact received from the binding constraints. The asset class bases I look at are: Bonds-CDS, Treasuries-Interest Rate Swaps, Covered interest rate parity, Inflation rate swaps-TIPS, and Stock Index - Stock index swaps bases.
[Updated draft]
Publication of Master Thesis
Georgievska A., Georgievska, Lj, Stojanovic, A. and Todorovic, N. (2011), “Country Debt Default Probabilities in Emerging Markets: Were Credit Rating Agencies Wrong?” in Robert W.Kolb (ed.), Sovereign Debt: From Safety to Default (by invitation), Wiley, ISBN 978-0-470-92239-2
Georgievska A, Georgievska, Lj., Stojanovic, A. and N. Todorovic (2008), “Sovereign rescheduling probabilities in emerging markets: a comparison with credit rating agencies’ ratings”, Journal of Applied Statistics, 35(9), p.1031-1051
