Manufacturers often face a choice of whether to recover the value in their end-of-life productsthrough remanufacturing. In many cases, firms choose not to remanufacture, as they are(rightly) concerned that the remanufactured product will cannibalize sales of the higher-marginnew product....

False failure returns are products that are returned by consumers to retailers with no functional orcosmetic defect. The cost of a false failure return includes the processing actions of testing,refurbishing if necessary, repackaging, the loss in value during the time the product spends in...

Firms selling goods whose quality level deteriorates over time often face difficultdecisions when unsold inventory remains. Since the leftover product is often perceivedto be of lower quality than the new product, carrying it over offers the firm a secondselling opportunity and an ability to...

We study the role of mortgage brokers in the subprime crisis using a detailed sample of loans originated by, formerly, one of the largest subprime loan originators, New Century Financial Corporation. Prior to the subprime crisis, mortgage brokerage firms originated about 65% of all subprime...

Over the last two decades, bank credit has evolved from the traditional relationship banking model to an originate-to-distribute model where banks can originate loans, earn their fee, and then sell them off to investors who desire such exposures. We show that the borrowers whose loans are sold...

This paper employs non-parametric specification tests developed in Hong and Li (2005) to evaluate several one-factor reduced-form credit risk models for actual default intensities. Using estimates for actual default probabilities provided by Moody’s KMV from 1994 to 2005 for 106 U.S. firms in...

We develop a method for measuring the amount of insurance the portfolio of government liabilities provides against scal shocks, and apply it to postwar US data. We dene scal shocks as surprises in defense spending. Our results indicate that the US federal government is partially hedged against...

This paper estimates the price for restructuring risk in the U.S. corporate bond market during 1999-2005. Comparing quotes from default swap (CDS) contracts with a restructuring event and without, we find that the average premium for restructuring risk represents 6% to 8% of the swap rate...

We consider a variation of the economic order quantity (EOQ) model where cumulative holding cost is a nonlinear function of time. This problem has been studied by Weiss (1982), and we here show how it is an approximation of the optimal order quantity for perishable goods, such as milk, and...