Secondary loan participations, or loan "stripping," is a recent innovation in banking. In a secondary loan participation, or loan sale, a bank makes a loan and then sells the loan, without recourse, to a third party. Bank loans hitherto were nonmarketable securities which could only be removed...

Secondary loan participations, or loan sales, are a recent innovation in banking. In a secondary loan participation, or loan sale, a bank makes a loan and then sells the cash stream from the loan without explicit contractual recourse, guarantee, insurance, or other credit enhancement, to a third...

We model the demand for transactions services and liquidity in an economy with asymmetrically informed agents. It is shown that informed agents can systematically take advantage of agents who are relatively uninformed but who have unexpected needs to trade. This causes certain financial...

There has been a long-running debate whether stock market prices are determined by fundamentals. To date no consensus has been reached. An important issue in this debate concerns the circumstances in which deviations from fundamentals are consistent with rational behavior. A continuous-time...

The dynamic behavior of security prices is studied in a setting where two agents trade strategically and learn from market prices. Each trader receives a private signal about fundamentals, the significance of which depends on the signal received by the other trader. In trading, each agent wants...

The usual approach to determine if market prices of uninsured bank liabilities reflect the risk of default is to regress the yield spread of bank debt against accounting measures of bank risk. To date these results have been mixed. Here we argue that this is because previous investigations lack...