An important research question examined in the recent credit risk literature focuses on the proportion of corporate yield spreads which can be attributed to default risk. Past studies have verified that only a small fraction of the spreads can be explained by default risk. In this paper, we...

An important research area of the corporate yield spread literature seeks to measure the proportion of the spread explained by various factors such as the possibility of default, liquidity or tax differentials. We contribute to this literature by assessing the ability of observed macroeconomic...

We study regime switching features of liquidity risk in corporate bond premiums. Within a sample period ranging from July 2002 to April 2015, we first compute a liquidity risk index for BBB bonds, which considers various liquidity risk facets based on principal component analysis. Second, we...

We discuss the difficult question of measuring the effects of asymmetric information problems on resource allocation. Three problems are examined: moral hazard, adverse selection, and asymmetric learning. One theoretical conclusion, drawn by many authors, is that information problems may...

We discuss the difficult question of measuring the effects of asymmetric information problems on resource allocation. Three problems are examined: moral hazard, adverse selection, and asymmetric learning. One theoretical conclusion, drawn by many authors, is that information problems may...

We explore latency arbitrage activities with a new arbitrage strategy that we test with high-frequency data during the first six months of 2019. We study the profitability of mean-reverting arbitrage activities of 74 cross-listed stocks involving three exchanges in Canada and the United States....

This paper develops a high-frequency risk measure, the Liquidity-adjusted Intraday Value at Risk (LIVaR). Our objective is to explicitly consider the endogenous liquidity dimension associated with order size. Taking liquidity into consideration when using intraday data is important because...

In this paper, we analyze whether the state of the limit order book affects future price movements in line with what recent theoretical models predict. We do this in a linear vector autoregressive system which includes midquote return, trade direction and variables that are theoretically...

This article examines the performance of the junior tranche of a Collateralized Fund Obligation (CFO), i.e. the residual claim (equity) on a securitized portfolio of hedge funds. We use a polynomial goal programming model to create optimal portfolios of hedge funds, conditional to investor...

We examine the portfolio-choice puzzle posed by Canner, Mankiw, and Weil (1997). The idea is to test a conclusion reached by Elton and Gruber (2000), stating that a bonds/stocks ratio which decreases in relation to risk tolerance does not necessarily mean a contradiction of modern...