We develop a simple integrated model for the term structure of swap spreads. We begin with a model for explaining the dynamics of the riskless treasury curve in terms of two factors. We add to the basic model additional inputs that describe the evolution of the implied hazard rate intensity for...

Social Security and other public policies can be viewed as a series of cash in and outflows that depend on parameters such as the age distribution of the population and the retirement age. Given forecasts of these parameters, policies can be designed to be financially stable, i.e., to terminate...

Social Security and other public policies can be viewed as a series of cash in and outflows that depend on parameters such as the age distribution of the population and the retirement age. Given forecasts of these parameters, policies can be designed to be financially stable, i.e., to terminate...

The capital structure of a firm is composed of equity and debt. In the Merton approach, equity holders hold a call option on the firm value, while bond holders are short a put on the firm value. Dividends paid to holders of equity provide them with current cash flow. The pay out of dividends to...

We investigate the optimal stop-loss on the alpha investment for a portable alpha vehicle. The optimal stop-loss maximizes investors utility of wealth for a portfolio consisting of a portable alpha fund and risk-free assets. We model the dynamics of the assets as a combination of a normal era...

We discuss the Taylor rule near low inflation and interest rates. Using an additional option-like term in the Federal Reserve’s loss function (i.e., the ‘‘deflation put’’) we extend the classic Taylor rule to one with an asymmetric response that is more accommodative when the inflation...