The paper shows how-in a Merton-type model with bankruptcy-the currency composition of debt changes the risk profile of a company raising a given amount of financing, and thus affects the cost of debt. Foreign currency borrowing is cheaper when the exchange rate is positively correlated with the...

It is shown that in any diffusive one-factor model of the term structure, the prices of bonds and of term structure puts decrease as the short-term interest rate increases. However, these prices need not be monotone in the short-term rate, if that rate can experience jumps.An important...

This paper proposes a new solution concept to three-player coalitional bargaining problems where the underlying economic opportunities are described by a partition function. This classic bargaining problem is modeled as a dynamic non-cooperative game in which players make conditional or...