We develop a convenient structural framework for the joint model-ing of credit spreads, stock prices, stock options and basket creditderivatives, using a multivariate structural ¯rm value model withskewed asset returns. We show that our setting successfully addressesseveral empirical facts,...

We develop a new completely affine model of the term structure of interest rates, in which the statevariables evolve as a matrix-valued process of stochastically correlated factors. This setting grants a newelement of flexibility in the simultaneous modeling of stochastic volatilities and...

We develop infinitesimally robust statistical procedures for general diffusion pro-cesses. We first prove existence and uniqueness of the times series influence functionof conditionally unbiased M{estimators for ergodic and stationary diffusions, underweak conditions on the (martingale)...

This article studies the e¤ect of limited commitment on stock return volatility in a dynamicgeneral equilibrium economy populated by investors with heterogeneous beliefs. Due to het-erogeneity of beliefs investors disagree about the fundamentals, introducing an additional riskfactor denoted...

We study how the interaction of agents with different beliefs about a firm’s future cash flows determines the jointbehavior of credit spreads, option implied volatilities, and stock returns. Beliefs heterogeneity influences the pricing kernelin a way that supports more realistic credit spreads...

In this article, we study the effect of liquidity risk on the performanceof various hedge fund portfolio strategies. The portfolio strategies in eachhedge fund style are formed by incorporating predictability in: (i) managerialskills, (ii) fund risk loadings, and (iii) benchmark returns. As...

We present a parsimonious and tractable general equilibrium model featuring acontinuum of overlapping generations, as in Blanchard (1985). In addition, we assumethat agents have standard utilities exhibiting constant relative risk aversion and canbe born with differing risk aversions and...

Our paper examines the impact of heterogeneous trading technologies for households onasset prices and the distribution of wealth. We distinguish between passive traders whohold fixed portfolios of stocks and bonds, and active traders who adjust their portfolios tochanges in the investment...

We present a model for the equilibrium movement of capital between markets.Two markets with symmetrically distributed risks are distinguished only by the levelsof capital invested in the two markets. That market with the greater amount of capitalearns lower conditional mean returns....

This paper provides, and empirically estimates, a model of sovereign default risk on external debt,in which the sovereign endogenously determines the timing of defaulting. The paper o¤ers theoreticalpredictions of the relationship between credit spreads and related macro-variables that are...