The effect of risk preferences on the valuation and incentives of compensation contracts
We use a comparative approach to study the incentives provided by different types of compensation contracts, and their valuation by risk averse...
Bond Variance Risk Premia
Using data from 1983 to 2010, we propose a new fear measure for Treasury markets, akin to the VIX for equities, labeled TIV. We show that TIV explains...
On the drivers of commodity co-movement: Evidence from biofuels
We use the recent introduction of biofuels to study the effect of industry factors on the relationships between wholesale commodity prices...
Performance Pay, CEO Dismissal, and the Dual Role of Takeovers
We propose that an active takeover market provides incentives by offering acquisition opportunities to successful managers. This allows firms to...
Explaining the Structure of CEO Incentive Pay with Decreasing Relative RiskAversion
It is established that the standard principal-agent model cannot explain the structure of commonly used CEO compensation contracts if CRRA preferences...
Investment banking careers: An equilibrium theory of overpaid jobs
We develop an optimal dynamic contracting theory of overpay for jobs in which moral hazard is a key concern, such as investment banking. Overpaying...
The Wall Street Walk when Blockholders Compete for Flows
An important recent theoretical literature argues that the threat of exit can represent an effective form of governance when the blockholder is a...
What is the Consumption-CAPM missing? An Information-Theoretic Framework for the Analysis of Asset Pricing Models
We study a broad class of asset pricing models in which the stochastic discount factor (SDF) can be factorized into an observable component and a...
Making Europe Safer
Open letter by the international Euro-nomics academic group (www.euro-nomics.com), composed of Markus Brunnermeier, Luis Garicano, Philip R. Lane...
Minsky's Financial Instability Hypothesis and the Leverage Cycle
Busts after periods of prolonged prosperity have been found to be catastrophic. Financial institutions increase their leverage and shift their...
Repo Runs
This paper develops a dynamic model of financial institutions that borrow short-term and invest into long-term marketable assets. Because such...
Delegated Activism and Disclosure
Mutual funds hold large blocks of shares in many major corporations. Practitioners and regulators alike have been concerned that mutual funds use...
CDS Auctions
We analyze credit default swap settlement auctions theoretically and evaluate them empirically. In our theoretical analysis, we show that the current...
