This paper develops a contracting framework in order to explore the effects of credit derivatives on banks’ incentives to monitor loans, their incentives to intervene, and, ultimately, borrowers’ incentives to perform. We show that (i) credit derivatives with short term maturity strengthen...

We develop a model in order to explore how a bank’s equity stake in a competitor of a borrower affects the financing relationship with the borrower and product market outcomes. The bank’s affiliation with the competitor can give rise to antior pro–competitive effects. Large equity stakes...

We investigate the influence of various fundamental variables on a cross-section of credit default swap transaction data. Credit default swap rates can be seen as a superior proxy to credit risk than bond spreads are. Because we have transaction prices rather than quotes, we have thus...

This paper presents the Sale Price Appraisal Ratio (SPAR) method for constructing house price indexes. The method, which uses ratios of transaction prices and previous appraised values to build up an index, has been applied since the early 1960s to produce semi-annual price indexes for regions...

Morck, Yeung and Yu (MYY, 2000) show that R2 and other measures of stock market synchronicity are higher in countries with less developed financial systems and poorer corporate governance. MYY and Campbell, Lettau, Malkiel and Xu (2001) also find a secular decline in R2 in the United States over...

This paper develops a continuous-time model of liquidity provision by banks, in which customers can deposit and withdraw their funds strategically. The strategic withdrawal option introduces an incentive-compatibility problem that turns the problem of designing deposit contracts into a...

We present a model in which a sovereign country optimally decides on its consumption and investment policies as well as on the optimal time to default. In the paper we allow the sovereign borrower to keep the fraction of its augmented wealth in so-called international reserves. We further assume...

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...

This paper tests for the existence of contagion during the 1997/98 Asian crisis. We interpret contagion as a significant change in the way that country-specific shocks are transmitted across international stock markets. Using the full-information framework of Favero and Giavazzi (2002) we find...

This paper proposes a novel methodology, based on the Common Principal Component analysis, allowing one to estimate the factors driving the term structure of interest rates, in the presence of time-varying covariance structure. The advantages of this method are first, that, unlike classical...