Many securities are, to a certain extent, subject to credit risk in one way or another. Both the financial institutions and regulators are keen to have their credit risk exposures well managed. In order to fulfill their needs, the market for credit derivatives has become one of the fast growing...

Financial institutions (FIs) suffered from non-performing loans when debt-ridden firms failed. Nonetheless, FIs in Korea increased loans to distressed firms in the 1990s. Possible explanations for these loans include FIs having better inside information on borrowing firms, firms' sharing...

We study legal restrictions on private contracting in the form of limitations on the severity of non-monetary punishments. We locate the rationale for such restrictions in externalities that parties impose on future relationships: punishments that lower an agent's future productivity may lower...

We provide maximum likelihood estimators of term structures of conditional probabilities of bankruptcy over relatively long time horizons, incorporating the dynamics of firm-specific and macroeconomic covariates. We find evidence in the U.S. industrial machinery and instruments sector, based on...

We provide maximum likelihood estimators of term structures of conditional probabilities of bankruptcy over relatively long time horizons, incorporating the dynamics of firm-specific and macroeconomic covariates. We find evidence in the U.S. industrial machinery and instruments sector, based on...

This paper presents both the time-series and cross-country evidence on the growth of global equity markets and attempts to shed some light on the sources of equity market growth. Using data on 33 countries, I find that development of financial intermediaries and openness to trade are positively...

This paper explores the quantitative impact of the Baby Boom on stock and bond returns. It constructs a neoclassical growth model with overlapping generations, in which agents make a portfolio decision over risky capital and safe bonds in zero net supply. The model has exogenous technology and...

We extend the standard specification of the market price of risk for affine yield models of the term structure of interest rates, and estimate several models using the extended specification. For most models, the extended specification fits US data better than standard specifications, often with...

This paper develops a search-theoretic model of the cross-sectional distribution of asset returns. It abstracts from risk premia and focuses exclusively on liquidity. A float-adjusted return model (FARM) is derived, explaining the pricing of liquidity with a simple linear formula: In...

In this article we construct a model in which agents exhibit preference for ownership with respect to a durable (house). Ownership is modeled as a continuous function of debt service normalized by the price of the house. We study the utility optimization problem of an investor not endowed with...