Most models of deposit insurance assume that the volatility of a bank's assets is exogenously provided. Although this framework allows the impact of volatility on bankruptcy costs and deposit insurance subsidies to be explored, it is static and does not incorporate the fact that equityholders...

A study that uses principal-agent theory to produce quantitative predictions about executive compensation, showing that observed incentives closely match optimal predicted incentives.

A development of a simple model in which interest rate claims are priced in the Heath-Jarrow-Morton paradigm and so incorporate full information on the term structure. The volatility structure for forward rates is humped and includes as a special case the exponentially dampened volatility...

The linkages between term structures separated by finite time periods can be complex. Indeed, in general, the dynamics of the term structure could depend on the entire set of information revealed since the earlier date. This path dependence, which causes difficulties in pricing interest rate...

Recent advances in asset pricing-the reduced-form approach to pricing risky debt and derivatives-are used to quantitatively evaluate several proposals for mandatory bank issue of subordinated debt. The authors find that credit spreads on both fixed- and floating-rate subordinated debt provide...