We study product innovation and imitation in the market of corporate underwriting with a dynamic model where client switching costs and the bankers’ expertise in deal structuring characterize the life cycle of a security. While the clientele loyalty allows positive rent extraction, the superior...

This paper studies the impact of cash constraints on equilibrium research intensities in a patent race between a current owner of the “state of the art” technology (the incumbent) and entrants. We develop a simple model, where players need to raise funds from imperfectly informed creditors to...

We are interested in the macroeconomic implications of the separation of ownership and control. An alternative decentralized interpretation of the stochastic growth model is proposed, one where shareholders hire a self-interested manager who is in charge of the firm’s hiring and investment...

Two different probability measures are of importance when calculating the risk of a large portfolio: the risk-neutral measure for pricing, and the real measure to project true earnings. When using Monte Carlo, the natural method is to conduct two different simulations, one in each probability...

In this paper we develop a structural model of counterparty risk . In particular we provide closed form formulae for the price of risky debt and equity, which depend up on the lending/borrowing relationships in the economy. Our model applies to completely general lender/borrower relationships,...

This short paper establishes two conditions that allow to verify easily the strongquasi convexity of the objective function in a non linear least -squares problem, thereby the unicity of the minimum over a convex set.

When information is costly, a seller may wish to prevent prospective buyers from acquiring information, for the cost of information acquisition is ultimately borne by the seller. A seller can achieve the desired prevention of information acquisition through posted-price selling, by offering...

Have the euro and accompanying measures of financial integration had a discernable impact on the degree of diversification of European investors? This is an empirical question that this paper tries to answer by exploring four alternative avenues. First we focus on the final outcome: If European...

This paper reassesses, at the light of economic and financial theory, the well-documented recent evolution of the euro area public debt and equity markets. Doing so leads to associating the EMU and the single market with the changes in fundamentals and financial integration with convergence in...

Investment banks develop their own innovative derivatives to underwrite corporate issues but they cannot preclude other banks from imitating them. However, during the process of underwriting an innovator can learn more than its imitators about the potential clients. Moving first puts him ahead...