The notion that an agent in a given market can infer from the market price the (non-price) information received by other agents, as embodied in the existing studies of revealing rational expectations equilibrium, requires that the agent know the correct functional relationship between the...

Intraday interest rates are zero. Consequently, a foreign exchange dealer can short a vulnerable currency in the morning, close this position in the afternoon, and never face an interest cost. This tactic might seem especially attractive in times of crisis, since it suggests an immunity to the...

This paper examines whether currency trading volume is informative, and under what circumstances. Specifically, we use transactions data to test whether trades occurring when trading intensity is high are more informative -- dollar for dollar -- than trades occurring when intensity is low....

This paper develops a costly state verification (CSV) model which describes how financial fluctuations affect real activity in a general equilibrium setting. In an economy with differentiated lenders, the most efficient will become intermediaries (e.g. banks). Intermediation generally creates...

A new class of options, double lookbacks, where the payoffs depend on the maximum and/or minimum prices of one or two traded assets is introduced and analyzed. This class of double lookbacks includes calls and puts with the underlying being the difference between the maximum and minimum prices...

We consider the question of how much cash should be held by an investment fund for transactions purposes. Cash is needed to meet redemptions and rights offerings; it is generated by dividends and contributions. It is assumed the cumulative cash flow follows a random walk, perhaps with a drift....

This study offers several new perspectives on the effects of competition in takeover contests on bidder returns. Using a more extensive database than existing studies and employing several different measures of success in a takeover, we find that success in competitive acquisitions decreases...