We investigate the long-standing puzzle on the underpricings of convertible bonds. We hypothesize that the observed underpricing is induced by the possibility that a convertible bond might renegotiate on some of its covenants, e.g., an imbedded put option in financial difficulties. Consistent...

Currency boards are subject to runs if the foreign currency reserve is insufficient to back the convertible money supply. We construct a simple model capturing the main features of a currency board to analyze a government's decision to maintain or abandon a currency board based on the costs and...

The authors find that value stocks are riskier because they are usually firms under distress, have high financial leverages, and face substantial uncertainty in future earnings. These risk characteristics are as powerful as are size and book-to-market in explaining cross-sectional differences in...

We investigate the long-standing puzzle on the underpricings of convertible bonds. We hypothesize that the observed underpricing is induced by the possibility that a convertible bond might renegotiate on some of its covenants, e.g., an imbedded put option, in financial difficulties. Consistent...

Although bank loans themselves are illiquid because of inside information, most of their cashflows are not. Recent financial innovations allow most bank loans to be liquefied via credit derivatives and actual and synthetic securitizations. The loan originating-monitoring bank holds the remaining...

Although bank loans themselves are somewhat illiquid because of private information, most of their cashflows are not. Recent financial innovations allow commercial loans to be liquefied via credit derivatives and actual and synthetic securitizations. The loan originating bank holds the remaining...