The mission of Treasury debt management is to meet the financing needs of the federal government at the lowest cost over time. To achieve this objective, the U.S. Treasury Department follows a principle of “regular and predictable” issuance of Treasury securities. But how effective is such...

We study information and portfolio choices when securities' dividends depend on an aggregate (macro) risk factor and idiosyncratic (micro) shocks, and when investors can acquire costly dividend information. We establish a general result under which investors endogeneously specialize in either...

Recent work has documented roughness in the time series of stock market volatility and investigated its implications for option pricing. We study a strategy for trading stocks based on measures of their implied and realized roughness. A strategy that goes long the roughest-volatility stocks and...

The Capital Assistance Program (CAP) was created by the U.S. government in February 2009 to provide backup capital to large financial institutions unable to raise sufficient capital from private investors. Under the terms of the CAP, a participating bank receives contingent capital by issuing...

The number of crossings of the implied volatility function with a fixed level is bounded above by the number of crossings of the risk-neutral density with the density of a log-normal distribution with the same mean as the forward price. It is bounded below by the number of convex payoffs priced...

Interconnections among financial institutions create potential channels for contagion and amplification of shocks to the financial system. We estimate the extent to which interconnections increase expected losses, with minimal information about network topology, under a wide range of shock...

Contingent capital in the form of debt that converts to equity as a bank approaches financial distress offers a potential solution to the problem of banks that are too big to fail. This paper studies the design of contingent convertible bonds and their incentive effects in a structural model...

Banking regulations set minimum levels of capital for banks. These requirements are generally formulated through a ratio of capital to risk-weighted assets. A risk-weighting scheme assigns a weight to each asset or category of assets and effectively functions as a linear constraint on a bank's...