The basic question regarding sovereign debt is why sovereign borrowers ever repay, provided that creditors have no power to foreclose on any of their assets. In this paper we suggest an answer: sovereign debt will be served as long as the median voter is a net loser from default. Default...

We examine the shareholder wealth effects of takeover defenses by developing a model in which takeovers facilitate the implementation of technological innovations. In the rational expectations equilibrium of the model with explicit contracts, we show that takeover defenses are deployed to insure...

Securitisations usually involve creating multiple tranches of a single issue with different characteristics, placed on the market as separate securities. Various theoretical explanations have been advanced to explain such tranching. This paper provides the first systematic testing of such...

We will review the econometrics of non-parametric estimation of the components of the variation of asset prices. This very active literature has been stimulated by the recent advent of complete records of transaction prices, quote data and order books. In our view the interaction of the new data...

We discuss the `continuity correction' that should be applied to connect the prices of discretely sampled American put options (i.e.Bermudan options) and their continuously-sampled equivalents. Using a matched asymptotic expansions approach we compute the correction and relate it to that...

We discuss the `continuity correction' that should be applied to relate the prices of discretely sampled barrier options and their continuously-sampled equivalents. Using a matched asymptotic expansions approach we show that the correction of Broadie, Glasserman \& Kou (\emph{Mathematical...

In this paper we provide a systematic study of the robustness of probability limits and central limit theory for realised multipower variation when we add finite activity and infinite activity jump processes to an underlying Brownian semimartingale.

In this paper we provide an asymptotic analysis of generalised bipower measures of the variation of price processes in financial economics. These measures encompass the usual quadratic variation, power variation and bipower variations which have been highlighted in recent years in financial...

Modern financial practice depends heavily on mathematics and a correspondingly large theory has grown up to meet this demand. This paper focuses on the use of matched asymptotic expansions in option pricing; it presents illustrations of the approach in `plain vanilla' option valuation, in...

This paper extends the model proposed by Goodhart, Sunirand, and Tsomocos (2003,2004a, b) to an infinite horizon setting. Thus, we are able to assess how the model conforms with the time series data of the U.K. banking system. We conclude that, since the model performs satisfactorily, it can be...