This research evaluates the fundamental causes of the current financial crisis. Close financial analysis indicates that theoretical modeling based on unrealistic assumptions led to serious problems in mispricing in the massive unregulated market for credit default swaps that exploded upon...

This research develops a theoretical model of current account deficits that explains the effects of having to reverse such imbalances. The theory defines precise mathematical relationships which should exist between the balance of payments, exchange rates, interest rates, inflation, income, and...

This paper investigates the pricing and valuation of Shared Appreciation Mortgages (SAMs) issued in 1997 in the UK. The analysis indicates high expected returns to the lenders, that were clearly predictable ex-ante, with even higher upside potential and virtually no material risk of loss to the...

Within the context of fundamentally efficient markets, this paper demonstrates analytically how short sellers can put non-transitory downward pressure on the stock market prices and intrinsic values of companies that need to raise external capital because of insufficient internal liquidity. The...

This research shows how firms can issue put options on their own stock to insure against bankruptcy. The analysis demonstrates that equity put options are far cheaper than alternative methods of reducing the chance of bankruptcy. Potential agency problems associated with such puts are discussed...

This case study finds evidence that stricter state interference in the financial affairs of a distressed government (that increases the likely payoff to its own creditors) raises the default risk of nearby municipalities. Economically related municipalities are found to be adversely impacted by...

This paper evaluates the Absolute Priority Rule and a new legal means for its application by the Courts that creates enormous opportunities for profitable financial schemes. In particular, a 2016 case precedent effectively applying the APR dogma is explained that enables taking property away...

This paper develops a precise method of estimating the cost of debt to a firm that is based on standard financial theories and empirical evidence on default risk and financial distress costs. An analysis with current data on the S&P 500 demonstrates that the capital structures of large firms are...

This research develops a model of optimal political expenditures that is integrated with a theory of voters maximizing their personal utility at the ballot box and that shows how money inevitably controls government leaders. The paper also demonstrates theoretically why many businesses do not...

The recent stock market bubble of the late 1990s and subsequent crash has made people more aware of the need to conduct practical financial analysis. Practical financial economics, i.e., the application of financial theory to practical financial analysis, is explained here with respect to a...