We test the theory of the term structure of indexed-bond prices due to Cox, Ingersoll, and Ross (CIR). The econometric method uses Hansen's generalized method of moments and exploits the probability distribution of the single-state variable in CIR's model, thus avoiding the use of aggregate...

We develop contingent claims valuation models for corporate bonds that are capable of generating yield spreads consistent with the levels observed in practice. We incorporate important features in the valuation related to the occurrence of and payoff upon bankruptcy and focus on the default risk...

A framework for valuing floating rate notes is developed and used to examine the effects of (1) lags in the coupon averaging formula, (2) special contractual features and (3) default risk. Evidence on a sample of U.S. floaters is presented and indicates that these notes sold at significant...

This study examines intraday transaction data for S&P 500 stock index futures prices and the intraday quotes for the underlying index. The data indicate that the futures price changes are uncorrelated, and that the variability of these price changes exceeds the variability of price changes in...

A binomial approximation to a diffusion is defined as computationally simple if the number of nodes grows at most linearly in the number of time intervals. This paper shows how to construct computationally simple binomial processes which converge weakly to commonly employed diffusions in...

We investigate banks' benefits and costs of having access to LOLR. Integrating novel data sets we estimate the borrowing capacities of euro area banks at the ECB. Controlling for ratings, we find that banks with more fragile funding are likely to borrow more from the ECB during the great...