"This paper presents a dynamic model of a public pension fund's choice of portfolio risk. Optimal portfolio allocations are derived when pension fund management maximize the utility of wealth of a representative taxpayer or when pension fund management maximize their own utility of compensation....

Most banks are subject to corporate income taxes while special purpose vehicles that hold securitized loans are corporate tax-exempt. We present a model that shows how this tax asymmetry creates an incentive for banks to sell loans. However, because moral hazard costs arise when banks...