This paper studies the market price of credit risk incorporated into one of the most important credit spreads in the financial markets: interestrate swap spreads. Our approach consists of jointly modeling the swap and Treasury term structures using a four-factor affine credit framework and...

We investigate the effects of information and diversification on cost of capital in a noisy rational expectations model. Assuming a factor structure for risky asset payoffs and two classes of investors, informed and uninformed, we show that in large economies the APT (Ross, 1976) holds and i)...

In this study, we examine the relation between implied cost of capital and expected returns under an assumption that expected returns are stochastic, a property supported by theory and empirical evidence. We demonstrate that implied cost of capital differs from expected return, on average, by a...

Regulation requiring insiders to publicly disclose their stock trades after the fact complicates the trading decisions of informed, rent-seeking insiders. Given this requirement, we present an insider's equilibrium trading strategy in a multiperiod rational expectations framework. Relative to...

This note extends earlier work on the effects of risk aversion on the preferences of duopolists to share information. It is shown that the common finding that Cournot duopolists prefer to share firm-specific information no longer obtains for some parameterizations. In particular, the greater the...