This paper provides a formal model that characterizes conflicts of interest between bondholders and shareholders and that derives the perverse incentive effect of debt financing. A two person non-cooperative game is utilized. The Rational Expectation Nash Equilibrium (RENE) concept is applied to...

This paper traces the evolution of the concept of "mortgage yield", starting with the yield to prepayment which held sway until the mid-seventies, to the cash flow yield which dominated until the late eighties, to the option adjusted yield which is intellectually dominant today. It is argued...

This paper reexamines evidence on the monotonicity of the term premium. Using a recently developed approach for testing inequality constraints, we propose and conduct tests for whether the term premium is monotonic and reach different conclusions from those implied by individual t-statistics on...

This paper presents a general equilibrium model with logarithmic preferences and technology. If the non-negativity constraint on bequests is strictly binding, then the bequest motive is characterized as inoperative. After determining the conditions for operative and inoperative bequest motives,...