The recent real estate bubble was fuelled by non-risk adjusted lending policies, low interest rates and complex finance vehicles. Mortgage-backed securities (MBS) played a crucial role in the crisis. These vehicles were praised as liquid capital market instruments that allowed mortgage lenders...

Market frictions inhibit perfect replication of property derivatives and dene the property spreadas a price measure in the incomplete real estate market. We identify transaction costs, transactiontime and short sale constraints as the main frictions in this market. Based on these frictions,...

This paper addresses the issue of intergenerational and internationalsharing of longevity and growth risks. Current research on worldwidedemographic changes highlights the importance of longevity risk on financialmarkets and the need to devise optimal hedging vehicles. We present a...

This paper empirically investigates how the intensity of product market competitionaffects the cost of debt. Using a large sample of loans to publicly traded US manufac-turing fi…rms, I provide evidence that an intensi…fication of product market competitionamong fi…rms signifi…cantly...

The recursive prediction and filtering formulas of the Kalman filter are difficult to implementin nonlinear state space models. For Gaussian linear state space models, or for models with qualitativestate variables, the recursive formulas of the filter require the updating of a finite number...

Recent crises have seen very large spikes in asset price risk without dramatic shiftsin fundamentals. We propose an explanation for these risk panics based on selffullling shifts in risk made possible by a negative link between the current assetprice and risk about the future asset price. This...

In a Lucas orchard with heterogeneous beliefs, we study the link between market-wide uncertainty, difference of opinionsand co-movement of stock returns. We show that this link plays an important role in explaining the dynamics of equilibriumvolatility and correlation risk premia. In our...

Richer and healthier agents tend to hold riskier portfolios and spend proportionallyless on health expenditures. Potential explanations include health and wealth eects onpreferences, expected longevity or disposable total wealth. Using HRS data, we perform astructural estimation of a dynamic...

We build a general model for pricing defaultable claims. In addition to the usual ab-sence of arbitrage assumption, we assume that one defaultable asset (at least) looses value when thedefault occurs. We prove that under this assumption, in some standard market ltrations, defaulttimes are...

We argue that there is a connection between the interbank market for liquidity and thebroader financial markets, which has its basis in demand for liquidity by banks. Tightnessin the interbank market for liquidity leads banks to engage in what we term “liquiditypull-back,” which involves...