In this paper we study the implications of general-purpose technological growth for asset prices. The model features two types of shocks: quot;smallquot;, frequent, and disembodied shocks to productivity and quot;largequot; technological innovations, which are embodied into new vintages of the...

We study asset-pricing implications of innovation in a general-equilibrium overlapping generations economy. Innovation increases the competitive pressure on existing firms and workers, reducing the profits of existing firms and eroding the human capital of older workers. Due to the lack of...

We propose a unied model of limited market integration, asset-price determination, leveraging, and contagion. Investors and firms are located on a circle, and access to markets involves participation costs that increase with distance. Despite the exante symmetry of investors, their strategies...

We study an overlapping-generations economy in which new agents innovate and introduce new products and firms. Innovation is stochastic. The new firms increase overall productivity, but also steal business from pre-existing firms and act as depreciation shocks for the human capital of existing...

and Cochrane (1999), and is therefore successful at addressing a number of stylized facts about asset prices.

We model the demand-pressure effect on prices when options cannot be perfectly hedged. The model shows that demand pressure in one option contract increases its price by an amount proportional to the variance of the unhedgeable part of the option. Similarly, the demand pressure increases the...

We analyze the design and renegotiation of covenants in debt contracts as a particular example of the contractual assignment of property rights under asymmetric information. In particular, we consider a setting where future firm investments are efficient in some states, but also involve a...

This paper provides a model of the interaction between risk-management practices and market liquidity. On one hand, tighter risk management reduces the maximum position an institution can take, thus the amount of liquidity it can offer to the market. On the other hand, risk managers can take...

We present a model of asset valuation in which short-selling is achieved by searching for security lenders and by bargaining over the terms of the lending fee. If lendable securities are difficult to locate, then the price of the security is initially elevated, and expected to decline over time....

In this discussion of risk analysis and market valuation of collateralized debt obligations, we illustrate the effects of correlation and prioritization on valuation and discuss the quot;diversity scorequot; (a measure of the risk of the CDO collateral pool that has been used for CDO risk...