This paper presents a competitive rational expectations model of spot and forward prices for multiple commodities that can be stored and/or converted. As a result of the conversion option, an equilibrium theory of basis spreads across commodities is derived. This extends the "theory of storage"...

Extreme market outcomes are often followed by a lack of liquidity and a lack of trade. This market collapse seems particularly acute for markets where traders rely heavily on a specific empirical model such as in derivative markets like the market for mortgage backed securities or credit...

Recent developments in intertemporal asset pricing theory focus on two sets of fundamental determinants of asset returns. Models with complete markets emphasize aggregate variables such as per capita consumption. Such models have not performed well empirically. Models with incomplete markets...