In this article we study different time-series processes that may describe EMS exchange rate patterns. We conclude that conditional heteroskedasticity and discontinuous time paths are prominent features of EMS exchange rates. A combined jump- diffusion-ARCH model can capture these features...

This paper investigates the financial recontracting of firms in workouts and Chapter 11 reorganizations. The terms of recontracting include the medium of exchange used to redeem defaulted securities, the writedown of creditors claims, and deviations from absolute priority experienced by...

We develop a model of banking competition for deposits based on modern financial intermediation theory and industrial organization analysis. The standard demand deposit contract makes banks vulnerable to failure and introduces (endogenous) expectations-based vertical differentiation. A...

We construct a dynamic competitive model with futures markets where price volatility comes from information arrival and noise trading. In this model, we address three issues: What does informational efficiency mean in a multi-period setting? How do information arrival and noise trading interact...

This paper analyses bidding behaviour in the Mexican Treasury debt auction for the period 1986-9. Auction rules closely resemble those of the US Treasury auction: bidders submit multiple bids for multiple units. The majority of purchased quantities are immediately resold. Results suggest...

Creditors often share their information about their customers' credit record, directly or via information brokers such as credit bureaus and rating agencies. Besides helping them to spot bad risks, this informational exchange acts as a disciplinary device. If creditors are known to exchange data...

This paper studies a dynamic model of an imperfectly competitive bid- ask market with a few large and many small traders. Large traders are risk- averse and exchange a risky asset for hedging purposes. The only private information in the model concerns their hedging demands. We find that large...

This paper examines the formation of option transaction prices in an imperfect market where risk-averse dealers face liquidity and informed traders. Because of market imperfections, trading is costly and arbitrage pricing does not apply. Rather, the transaction prices are related to the dealers'...

Within an optimal contracting framework we analyse some important aspects of debt structure: the number of creditors a company borrows from; the allocation of security interests among creditors; and inter-creditor covenants that govern renegotiation of debt contracts. The key to our analysis is...

In this paper, the relationship between excess returns on foreign exchange investment and inflation differentials and a measure of volatility is investigated for the European Monetary System. A high inflation rate relative to Germany leads to a real appreciation relative to the D-mark, which...