The record number of fifty-point daily moves in the Dow Jones Industrial Average in 1996--forty-five in the first three quarters alone--has attracted considerable media attention. An analysis traces this phenomenon to two basic causes: the record level of the Dow and the return of price...

This paper develops a model of macroeconomic forecasting in which the wages firms pay their forecasters are a function of their accuracy as well as the publicity they generate for their employers by being correct. In the resulting Nash equilibrium, forecasters with identical models, information,...

Many theoretical bond pricing models predict that the slope of the credit yield curve facing highly leveraged firms is negative. Previous empirical research by Sarig and Warga (1989) and Fons (1994) confirms this view of high yield bonds. We show that these results largely owe to sample...

The rapid growth of the credit default swap (CDS) market and the increased number of defaults in recent years have led to major changes in the way CDS contracts are settled when default occurs. Auctions are increasingly the mechanism used to settle these contracts, replacing physical transfers...

This article describes the forces that drive financial innovation in the insurance industry, as it relates to the convergence between insurance and capital markets. The authors base their analysis on general principles of supply and demand underlying financial intermediation and innovation,...

The electronic purse, a new payments instrument offering advantages to both consumers and merchants, may soon replace currency in many routine transactions. Widespread use of the electronic purse could, however, raise concerns about consumer protection and the safety and soundness of the instrument.