This paper develops an intertemporal model of international capital market segmentation. Within the model, under various forms of segmentation/integration, the equilibrium asset prices and allocations, the risk-free interest rate, and the intertemporal consumption behavior and welfares of two...

There is often a reliability problem when information is sold since anyone can claim to have superior knowledge. Optimal strategies which allow the seller to overcome this problem are considered in the context of a standard one-period two-asset model. It is shown that when the seller’s risk...

This paper derives exact pricing equations for American and European puts and calls on foreign exchange and discusses hedging strategy. Because every call option on foreign currency is simultaneously a put option on the domestic currency, an equivalence relation exists that allows the immediate...

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...

In this paper a theory of capital structure based on imperfections in firms' product markets is illustrated with numerical examples. In the model used there is a corporate tax advantage to debt but there are no direct bankruptcy costs. The effect of bankruptcy rather is to delay investment...

With incomplete financial markets government debt may be non-neutral even if individuals perceive that the value of the debt is the discounted value of future taxes and there are no opportunities for individuals to shift the tax burden among themselves. Non-neutrality arises because of the...

A recent paper (Benninga-Protopapadakis 1994) considered a Lucas asset pricing model and showed that the pricing of forward and futures contracts was expressible as a simple matrix function. In this paper we derive limiting conditions for these differences and relate them to the eigenvectors of...