Discussion Papers

An important recent theoretical literature argues that the threat of exit can represent an effective form of governance when the blockholder is a...

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...

We develop an optimal dynamic contracting theory of overpay for jobs in which moral hazard is a key concern, such as investment banking. Overpaying...

Mutual funds hold large blocks of shares in many major corporations. Practitioners and regulators alike have been concerned that mutual funds use...

This paper develops a dynamic model of financial institutions that borrow short-term and invest into long-term marketable assets. Because such...

We analyze credit default swap settlement auctions theoretically and evaluate them empirically. In our theoretical analysis, we show that the current...

We show that Treasury security prices in the secondary market decrease significantly before subsequent auctions and recover shortly after. This price...

Banks hold liquid and illiquid assets. An illiquid bank that receives a liquidity shock sells assets to liquid banks in exchange for cash. We...

We exploit a novel setting in which the same piece of information affects two sets of firms: one set of firms requires straightforward processing to...

In the short-run, bond risk premia exhibit pronounced spikes around major economic and financial crises. In contrast, long-term bond risk premia...

This paper provides an alternative real options framework to assess how firms' strategic interaction under imperfect competition affects the...

We develop a dynamic industry model where financing frictions affect the entry decisions of new firms in the home market, as well as the riskiness of...

Despite much work on hedging in incomplete markets, the literature still lacks tractable dynamic hedges in plausible environments. In this article, we...

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...