this book I will argue that certain types of financial crises—like the crises that have affected many Latin American and Asian countries in recent years—are problems of sovereign balance sheet mismanagement and not economic mismanagement.

One problem with most LDC securities markets is that there is a very poor balance of investors.

It is enough to summarize the key liquidity events that preceded the booms.

a market collapse is nearly always implicit in the structure of the market itself.

Since that is the case, any sovereign borrowing strategy that does not implicitly assume a fairly neutral position about the direction of credit spreads can involve a significant increase in volatility—and hence in the probability of distress.

The second, less obvious, way is to reduce directly the mismatch between revenues and expenses by lining up debt servicing costs with operating revenues.

I will distinguish between economic policy and the transmission of volatility, and I will argue that policy-making must be constructed in an environment in which excess volatility is kept to a minimum.

The Eurodollar market was the name given to the market surrounding the dollar accumulation in the banking system outside the United States during the “dollar glut” period of low U.S. interest rates in the 1960s.

When volatility increases, the negative effect on the already low intrinsic value is less than the positive effect on time value. As volatility increases, consequently, equity value increases.