Discussion Papers

In this paper I propose a regime-switching approach to explain why the U.S. nominal yield curve on average has been steeper since the mid-1980s than...

We analyze one frequent clause in bonds, covenant defeasance. Covenant defeasance allows the issuer to remove the bond’s covenants by placing the...

Because of limited liability, insolvent banks have an incentive to roll over bad loans, in order to hide losses and gamble for resurrection, even...

Bailing out banks requires overcoming debt overhang as well as dealing with adverse selection with respect to the quality of banks’ balance sheets, in...

We estimate structurally a model of the term structure of interest rates that is consistent with no arbitrage but allows for demand pressures. The...

This paper provides first and second-order approximation methods for the solution of non-linear dynamic stochastic models in which the exogenous state...

Bailing out banks requires overcoming debt overhang as well as dealing with adverse selection with respect to the quality of banks’ balance sheets, in...

We investigate the effect of the ability of “non-traditional” funds to short-sell the equity of their debtors. This enables the funds to vote on the...

We study a model where a capital provider learns from the price of a firm’s security in deciding how much capital to provide for new investment. This...

We use asset pricing insights to study importance of micro-level frictions for aggregate quantities. In our model, the relevant stochastic variable is...

We show that the level of interest rates determines the magnitude of mispricing at the turn of the tax year, as investors face the trade-off between...

We propose a clientele-based model of the yield curve and optimal maturity structure of government debt. Clienteles are generations of agents at...

We study flows between investment funds and their effects on asset prices in a simple twoperiod version of Vayanos and Woolley (2010, VW). As in VW...

We propose a rational theory of momentum and reversal based on delegated portfolio management. Flows between investment funds are triggered by changes...

Banks operating under Value-at-Risk constraints give rise to a well-defined aggregate balance sheet capacity for the banking sector as a whole that...

We show that country characteristics explain most of the cross-sectional variation in bank board independence. In contrast, country characteristics...