"We investigate a structural model of market and firm-level dynamics in order to jointly price long-dated S&P 500 options and tranche spreads on the five-year CDX index. We demonstrate the importance of calibrating the model to match the entire term structure of CDX index spreads because it...

"Empirical tests of reduced form models of default attribute a large fraction of observed credit spreads to compensation for jump-to-default risk. However, these models preclude a "contagion-risk'' channel, where the aggregate corporate bond index reacts adversely to a credit event. In this...

Recent evidence suggests that younger people update beliefs more in response to aggregate shocks than older people. We embed this generational learning bias in an equilibrium model where agents have recursive preferences and are uncertain about exogenous aggregate dynamics. The departure from...

Using a comprehensive sample of trades from Schedule 13D filings by activist investors, we study how measures of adverse selection respond to informed trading. We find that on days when activists accumulate shares, measures of adverse selection and of stock illiquidity are lower, even though...

We analyze a dynamic model of informed trading where a shareholder accumulates shares in an anonymous market and then expends costly effort to change the firm value. We find that equilibrium prices are affected by the position accumulated by the shareholder, because the level of effort...