This paper studies a strategic role of debt restructuring under an optimal debt contract. It explores an infinite-horizon costly-monitoring model under Markov income shocks. It shows that, if (1) a borrower's project is expected to be profitable, (2) a lender's outside options are positively...

This paper presents a new approach for modeling continuous-time defaultable debt contracts. It studies an optimal competitive debt contract in continuous time by exploring a dynamic costly monitoring model under asymmetric information in a common-agency setting. It shows that, under an optimal...

The purpose of this paper is to examine narrow banking proposals. First, we survey the narrow banking proposals presented in the United States and Japan, and categorize them by means of two standards: (1) whether safe assets that a narrow bank is allowed to hold are limited to short-term assets,...

This paper focuses on the recently developing financial derivatives markets, and examines the usefulness of option prices as an information variable for monetary policy implementation. A set of option prices provides us with information on the entire probability distribution of the future values...

This paper presents a new approach for modeling an optimal debt contract in continuous time. It examines a competing contract design in a continuous-time environment with Markov income shocks and costly veri able information. It shows that an optimal contract has the form of a long-term debt...

This paper studies a strategic role of debt restructuring under an optimal debt contract. It explores an infinite-horizon costly-monitoring model under Markov income shocks. It shows that, if (1) a borrower's project is expected to be profitable, (2) a lender's outside options are positively...

This paper presents a new approach for modeling continuous-time defaultable debt contracts. It studies an optimal competitive debt contract in continuous time by exploring a dynamic costly monitoring model under asymmetric information in a common-agency setting. It shows that, under an optimal...

This paper focuses on the recently developing financial derivatives markets, and examines the usefulness of option prices as an information variable for monetary policy implementation. A set of option prices provides us with information on the whole probability distribution of the future values...

This paper presents a new approach for modeling an optimal debt contract. It examines a competitive contract design in a continuous-time environment with Markov income shocks and costly verifiable information. It shows that an ex ante optimal contract has the form of a debt contract that...