We study the effect of the predictability of an assets return on the prices of options on that asset, for models in which returns are serially uncorrelated, yet predictable on the basis of a larger information set. We show that return predictability may matter in a discrete time world,...

This paper develops a new estimation procedure for characteristic-based factor models of security returns. We treat the factor model as a weighted additive nonparametric regression model, with the factor returns serving as time-varying weights, and a set of univariate non-parametric functions...

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The model considered here is essentially that formulated in the authors previous paper Conditions for Optimality in the Infinite-Horizon Portfolio-cum Saving Problem with Semimartingale Investments, Stochastics 29 (1990) pp.133-171. In this model, the vector process representing returns to...

This paper considers unit root regressions in data having simultaneously extensive cross section and time-eries variation. The standard least squares estimators in such data structures turn out to have an asymptotic distribution that is neither Dickey-Fuller, nor normal and asymptotically...

Corporate finance theories suggest that problems of asymmetric information and moral hazard in credit markets can be addressed by choosing short-term maturities. Theories of debt renegotiation suggest that the credibility of the implicit commitment to not make concessions to insolvent borrowers,...

Much macroeconometric discussion has recently emphasised the economic significance of the size of the permanent component in GNP. Consequently, a large literature has developed that tries to estimate this magnitude - measured, essentially, as the spectral density of increments in GNP at...

This paper presents an approximated formula of the convexity adjustment of Constant Maturity Swap rates, using Wiener Chaos expansion, for multi-factor lognormal zero coupon models. We derive closed formulae for CMS bond and swap and apply results to various well-known one-factor models (Ho and...

This paper analyses how entry by an international bank into a developing economy a¤ects the credit market equilibrium. It opers a novel explanation of how a foreign entrant overcomes asymmetric information problems, and complements extant hard vs. soft information based theories of credit...