Many theoretical bond pricing models predict that the slope of the credit yield curve facing highly leveraged firms is negative. Previous empirical research by Sarig and Warga (1989) and Fons (1994) confirms this view of high yield bonds. We show that these results largely owe to sample...

Risk premia in the stock market are assumed to move with time varying risk. We present a model in which the variance of time excess return of a portfolio depends on a state variable generated by a first-order Markov process. A model in which the realization of the state is known to economic...

Risk premia in the stock market are assumed to move with time varying risk. We present a model in which the variance of time excess return of a portfolio depends on a state variable generated by a first-order Markov process. A model in which the realization of the state is known to economic...

Previous research on the impact of currency risk on stock returns has failed to find a significant role for foreign exchange rates. This paper addresses several explanations of this finding with a unique dataset of U.S. firms that acquire targets in other countries. The dataset allows estimation...

Why do private firms stay private? Empirical evidence on this issue is sparse, as most private firms in the US do not report their financial results. We investigate why private status matters by taking advantage of a unique dataset of large, leveraged private firms with SEC filings. Unlike a...

We propose a tractable equilibrium model for pricing defaultable bonds that are subject to contagion risk. Contagion arises because agents with 'fragile beliefs' are uncertain about both the underlying state of the economy and the posterior probabilities associated with these states. As such,...

Reduced-form models of default that attribute a large fraction of credit spreads to compensation for credit event risk typically preclude the most plausible economic justification for such risk to be priced - namely, a contagious response of the market portfolio during the credit event. When...

The rapid growth of the credit default swap (CDS) market and the increased number of defaults in recent years have led to major changes in the way CDS contracts are settled when default occurs. Auctions are increasingly the mechanism used to settle these contracts, replacing physical transfers...

Previous research on the impact of currency risk on stock returns has failed to find a significant role for foreign exchange rates. This paper addresses several explanations of this finding with a unique dataset of U.S. firms that acquire targets in other countries. The dataset allows estimation...

The New York-New Jersey region's hard-earned recovery in employment is being overshadowed by ongoing job losses in certain sectors and the prospect of moderating growth in the United States as a whole. Fortunately, several positive trends are bolstering the region's employment picture. Strength...