We study how the market prices the default and liquidity risks incorporated into one of the most important credit spreads in the financial markets–interest rate swap spreads. Our approach consists of jointly modeling the Treasury, repo, and swap term structures using a general five-factor...

This paper studies the market price of credit risk incorporated into one of the most important credit spreads in the financial markets: interestrate swap spreads. Our approach consists of jointly modeling the swap and Treasury term structures using a four-factor affine credit framework and...

This paper studies the market price of credit risk incorporated into one of the most important credit spreads in the financial markets: interest rate swap spreads. Our approach consists of jointly modeling the swap and Treasury term structures using a general five-factor affine credit framework...

Many firms have stockholders who face severe restrictions on their ability to sell their shares and diversify the risk of their personal wealth. We study the costs of these liquidity restrictions on stockholders using a continuous-time portfolio choice framework. These restrictions have major...

Major events often trigger abrupt changes in stock prices and volatility. We study the implications of jumps in prices and volatility on investment strategies. Using the event-risk framework of Duffie, Pan, and Singleton (2000), we provide analytical solutions to the optimal portfolio problem....

Major events often trigger abrupt changes in stock prices and volatility. We study the implications of jumps in prices and volatility on investment strategies. Using the event-risk framework of Duffie, Pan, and Singleton (2000), we provide analytical solutions to the optimal portfolio problem....