Discussion Papers

We propose a new theory of suboptimal risk-taking based on contractual externalities. We examine an industry with a continuum of firms. Each firm’s...

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...

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

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...

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...

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

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

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 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...

Recent studies show that single-quarter institutional herding positively predicts short-term returns. Motivated by the theoretical herding literature...