In letzter Zeit häufen sich Zahlungsschwierigkeiten von Ländern gegenüber ihrenausländischen Geldgebern. Beim Ausbleiben dieser Zahlungen wird um die Stabilität des internationalen Finanzsystems gefürchtet. Um diese Gefahr abzuwenden, werden den zahlungsunfähigen Ländern unter der...

In this paper we show that reputation formation in endogenously formed relationships is a decisive determinant for the existence and performance of credit markets. In theabsence of any third party enforcement of debt repayment the contracting parties succeed in establishing stable bilateral...

This paper proposes a theory of investment fluctuations where the source of the oscillating dynamics is an agency problem between financiers and entrepreneurs. A central tenet of the theory is that investment decisions depend upon entrepreneurs’ initiative to select investment projects...

Deposit insurances schemes are increasingly being adopted around the world and yet our understanding of their design and consequences is in its infancy. In this paper we provide a new rationale for the provision of deposit insurance based around the idea that bankers have vuluable but costly...

This paper determines the value of asset tradeability in an option pricing framework.In our model, tradeability is valuable since it allows investors to exploit temporary mis-pricings of stocks. The model delivers several novel insights on the value of tradeability:The value of tradeability is...

We explore the pricing of variance risk by decomposing stocks' total variance into systematicand idiosyncratic return variances. While systematic variance risk exhibits a negative priceof risk, common shocks to the variances of idiosyncratic returns carry a large positive riskpremium. This...

With increasing appreciation of the fact that stock return variance is stochastic and variance risk is heavily priced, the industry has created a series of variance derivative products to span variance risk. The variance swap contract is the most actively traded of these products. It pays at...

The paper investigates how buyer-supplier firm-specific relationships affect security prices. Starting from the empirical inconsistencies associated with some standard structural models we propose a structural model of firm dependence in a vertically connected network of firms based on cash flow...

We show that a simple equilibrium model with uncertain growth is able to simultaneously generate patterns in implied volatility and risk aversion that are similar to the ones observed in the data. In addition, the model produces an implied pricing kernel that is increasing for particular levels...

In this paper we present a model to price and hedge basket credit derivatives andcollateralised loan obligation. Based upon the copula-approach by Schönbucher and Schubert (2001) the model allows a specification of the joint dynamics of credit spreads and default intensities, including a...