Corporate finance theories suggest that problems of asymmetric information and moral hazard in credit markets can be addressed by choosing short-term maturities. Theories of debt renegotiation suggest that the credibility of the implicit commitment to not make concessions to insolvent borrowers,...

A prevalent feature in rating markets is the possibility for the client to hide the outcome of the rating process, after learning that outcome. This paper identifies the optimal contracting arrangement and the circumstances under which simple ownership contracts over ratings implement this...

This paper proposes an approach to estimating the relation between risk (conditional variance) and expected returns in the aggregate stock market that allows us to escape some of the limitations of existing empirical analyses. First, we focus on a nonparametric volatility measure that is void of...

We study the evolution of prices in a symmetric duopoly where firms are uncertain about the degree of product differentiation. Customers sometimes perceive the products as close substitutes, sometimes as highly differentiated. Firms learn about their competitive environment from the quantities...

This paper solves for a firm's optimal cash holding policy within a continuous time, contingent claims framework that has been extended to incorporate most of the significant contracting frictions that have been identified in the corporate finance literature. Under the optimal policy the firm...

When a spot market monopolist participates in the futures market, he has an incentive to adjust spot prices to make his futures market position more pro…table. Rational futures market makers take this into account when they set prices. Spot market power thus creates a moral hazard problem...

One possible explanation for the unsatisfactory implementation of IMF conditionality has been attributed to the lack of credibility of the IMF threat of interrupting financial assistance in case of non compliance with the negotiated conditions. In this paper we suggest that such lack of...

Theory suggests that reputations, developed in repeated face-to-face interactions, allow nonanonymous, floor-based trading venues to attenuate adverse selection in the trading process. We identify instances when stocks listed on the New York Stock Exchange (NYSE) experience a non-trivial...

In an environment in which both buyers and sellers can undertake match specific investments, the presence of market competition for matches may solve hold-up and coordination problems generated by the absence of complete contingent contracts. In particular, this paper shows that when matching is...

A two-sided, pair-wise matching model is developed to analyse the strategic interaction between two information intermediaries who compete in commission rates and network size, giving rise to a fragmented duopoly market structure. The model suggests that network competition between information...