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Batchimeg Sambalaibat - Indiana University, Kelley School of Business. Bloomington, IN, US

Batchimeg Sambalaibat Batchimeg Sambalaibat

Assistant Professor of Finance | Indiana University, Kelley School of Business

Bloomington, IN, UNITED STATES

Batchimeg Sambalaibat researches over-the-counter markets and search theory

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Industry Expertise (1)

Education/Learning

Areas of Expertise (6)

Sovereign Debt

Market Microstructure

Search Theory

Over-the-counter Markets

Networks

Derivatives

Accomplishments (3)

The Alexander Henderson Award for Excellence in Economic Theory

2014

William Larimer Mellon Fellowship

2008-2011

Marc Vellrath Fellowship

2008

Education (4)

Carnegie Mellon University, Tepper School of Business: Ph.D., Economics 2014

Carnegie Mellon University, Tepper School of Business: M.S., Economics 2010

Indiana University, Bloomington: B.A., Economics 2006

Indiana University, Bloomington: B.S., Mathematics 2006

Articles (4)

Endogenous Specialization and Dealer Networks Social Science Research Network

Artem Neklyudov, Batchimeg Sambalaibat

2015

OTC markets exhibit a core-periphery network: 10-30 central dealers trade frequently and with many dealers, while hundreds of peripheral dealers trade sparsely and with few dealers. Existing work rationalize this phenomenon with exogenous dealer heterogeneity. We build a search-based model of network formation and propose that a core-periphery network arises from specialization. Dealers endogenously specialize in different clients with different liquidity needs. The clientele difference across dealers, in turn, generates dealer heterogeneity and the core-periphery network: The dealers specializing in clients who trade frequently form the core, while the dealers specializing in buy-and-hold investors form the periphery.

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A Theory of Liquidity Spillover Between Bond and CDS Markets Social Science Research Network

Batchimeg Sambalaibat

2014

I build a dynamic search model of bond and CDS markets and show that allowing short positions through CDS contracts increases liquidity of the underlying bond market. This result contrasts with existing theories on derivatives, which show that derivatives fragment traders across the derivative and underlying markets and thereby decrease liquidity in the underlying cash market. I reach the opposite conclusion by endogenizing the aggregate number of investors. My results help explain how sovereign bond markets reacted to a naked CDS ban.

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Currency Risk and Pricing Kernel Volatility INSEAD Working Paper No. 2013/91/FIN

Federico Gavazzoni, Batchimeg Sambalaibat, Chris Telmer

2012

A basic tenet of lognormal asset pricing models is that a risky currency is associated with low pricing kernel volatility. Empirical evidence indicates that a risky currency is associated with a relatively high interest rate. Taken together, these two statements associate high-interest-rate currencies with low pricing kernel volatility. We document evidence suggesting that the opposite is true, thus contradicting a fundamental empirical restriction of lognormal models. Our identification strategy revolves around using interest rate volatility differentials to make inferences about pricing kernel volatility differentials. In most lognormal models the two are monotonic functions of one another. A risky currency, therefore, is one with relatively low pricing kernel volatility and relatively low interest rate volatility. In the data, however, we see the opposite. High interest rates are associated with high interest rate volatility. This indicates that lognormal models of currency risk are inadequate and that future work should emphasize distributions in which higher moments play an important role. Our results apply to a fairly broad class of models, including Gaussian affine term structure models and many recent consumption-based models.

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Credit Default Swaps as Sovereign Debt Collateral Social Science Research Network

Batchimeg Sambalaibat

2011

A defining friction of sovereign debt is the lack of collateral that can back sovereign borrowing. This paper shows that credit default swaps (CDS) can serve as collateral and thereby support more sovereign borrowing. By giving more bargaining power to lenders in ex-post debt renegotiations, CDS becomes a commitment device for lenders to extract more repayment from the debtor country. This ex-post disciplining effect during debt renegotiations better aligns the sovereign's ex-ante incentives with that of the lender. CDS alleviates agency frictions that are present in any lending contracts but are particularly difficult to mitigate in sovereign debt context. As a result, CDS enables the borrower to raise more external capital.

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