We model an exchange economy where a finite number of standard identical agents interact locally and analyse the time-series properties of the simulated dividend--price ratio <italic>dp</italic> _{<italic>t</italic>}. Our results document that a sufficient degree of social dynamics induces high persistence in <italic>dp</italic> _{<italic>t</italic>} which leads...

A recent proposal to enhance banking stability recommends the use of contingent convertibles (CoCos). Since these hybrid securities are mandatorily converted into equity when banks are in need of a recapitalization, they are credited for reducing banks’ likelihood of financial distress. In...

Agency conflicts and asymmetric information are two possible explanations that may rationalize the use of a step-up provision in the bond indenture. Within a continuous-time framework with bankruptcy costs and tax benefits, we analyze the optimal step-up bond design with respect to both...