We study the endogenous determination of corporate debt maturity in a setting with default risk. We assume that firms … must access the bond market and they issue debt with a flexible structure (coupon, face value, and maturity). Initially … risk. The technology is such that earnings can switch to a higher (but riskier) level. In this second phase firms have …

Expected returns vary when investors face time-varying investment opportunities. In theory, structural long-run risk … models (Bansal and Yaron, 2004) and no-arbitrage affine models (Duffie, Pan, and Singleton, 2000) emphasize sources of risk … that are not observable to the econometrician. We show that the term structure of risk implicit in option prices can reveal …

This research note examines the conditions which will induce a prospect theory type investor, whose reference level is … equity premium to invest in risky assets. However, once she does invest because of a large risk premium, she becomes … aggressive and buys/sells till an externally imposed upper/lower bound is reached. -- prospect theory ; loss aversion ; reference …

between consumption losses in a disaster and the risk premium, a small amount of risk sharing can significantly attenuate the … effect that disaster risk has on the equity premium. We characterize the sensitivity of risk premium to wealth distribution … lead to significant variation in disaster risk premium. It also highlights the conditions under which disaster risk premium …

between consumption losses in a disaster and the risk premium, a small amount of risk sharing can significantly attenuate the … effect that disaster risk has on the equity premium. We characterize the sensitivity of risk premium to wealth distribution … lead to significant variation in disaster risk premium. It also highlights the conditions under which disaster risk premium …

disagreements among investors about disaster risk. We show that such disagreements generate strong risk sharing motives, such that … just a small amount of optimists in the economy can significantly reduce the disaster risk premium. Our model highlights … the "latent" nature of disaster risk: the disaster risk premium will likely be low and smooth during normal times, but can …