I show that the composition of the financial sector has important asset pricing implications beyond the health of the aggregate financial sector. To assess the impact of massive balance sheet adjustments within the intermediary sector during the Great Recession and resolve conflicting asset...

We provide evidence on how corporate bond investors react to a change in yields, and how this behaviour differs in times of market‐wide stress. We also investigate ‘reaching for yield' across investor types, as well as providing insights into the structure of the corporate bond market. Using...

We study how banks manage their default risk to optimally negotiate quantities and prices of contracts in over-the-counter markets. We show that costly actions exerted by banks to reduce their default probabilities are inefficient. Negative externalities due to counterparty concentration may...

This paper demonstrates that rating-based capital requirements, through their impact on insurers' investment demand, affect corporate bond prices. Consistent with insurers' low demand for investment-grade (IG) bonds with a rating close to non-investment-grade, these bonds are underpriced....

We examine the relation between bank risk management procedures and sales of mortgages during the financial crisis of 2007-2009. Research suggests that banks employing an originate-to-distribute strategy devoted little effort to screening, thereby diminishing their ability to sell loans during...

We propose a novel conceptual approach to transparently characterizing credit market outcomes in economies with multi-dimensional borrower heterogeneity. Based on characterizations of securities' implicit demand for bank equity capital, we obtain closed-form expressions for the composition of...

Closed-form formulas for Macaulay duration, as given by Babcock and Chua, provide the user with a less cumbersome and more efficient procedure for calculating duration. Recent developments, however, have suggested alternative measures of bond portfolio immunization designed to overcome the...

Are the managers of financial institutions ready for the small but increasingly significant risk of inflation in the near future, due to the unprecedented fiscal and monetary responses of the U.S. government to prevent an economic collapse? This paper addresses this important issue by reviewing...

The global financial crisis of the past decade has shaken the research and policy worlds out of their belief that housing markets are mostly benign and immaterial for understanding economic cycles. Instead, a growing consensus recognizes the central role that housing plays in shaping economic...