I test whether corporate governance is ineffective in emerging markets by estimating the link between CEO turnover and firm performance for over 1,200 firms in eight emerging markets. I find two main results. First, CEOs of emerging market firms are more likely to lose their jobs when their...

I examine the relationship between a financial intermediary ("bank") and a borrowing firm in a three-period overlapping generations model. The model can accommodate two financing arrangements between the bank and the firm: one requires commitment to a long-term contract, the other does not....

The "Big Bang" deregulation of Japanese financial markets focuses on financial modernization. I argue that financial modernization is of secondary importance for improving the performance of the Japanese economy. A key long-term issue facing Japan is to maintain its high level of per capita...

A forecast of the correlation between two asset prices is required to price or hedge an option whose payoff depends on both asset prices or to measure the risk of a portfolio whose return depends on both asset prices. However, a number of factors make it difficult to evaluate forecasts of...

Synthetic collateralized debt obligations, or synthetic CDOs, are popular vehicles for trading the credit risk of a portfolio of assets. Following a brief summary of the development of the synthetic CDO market, I draw on recent innovations in modeling to present a pricing model for CDO tranches...

Jamshidian and Zhu (1997) propose a discrete grid method for simplifying the computation of Value at Risk (VaR) for fixed-income portfolios. Their method relies on two simplifications. First, the value of fixed income instruments is modeled as depending on a small number of risk factors chosen...

Firms active in OTC derivative markets increasingly use margin agreements to reduce counterparty credit risk. Making several simplifying assumptions, I use both a quasi- analytic approach and a simulation approach to quantify how margining reduces counterparty credit exposure. Margining reduces...

Over the last several years, a combination of loan losses and regulatory barriers to equity issuance have left Japanese banks starved for capital. In September 1995, the Mitsubishi Bank was permitted to issue a complicated convertible security in a foreign market. The results of simulations of...

I test for the existence of a bank lending channel of monetary policy transmission. I identify bank lending channel effects with a simple model of bank behavior incorporating long-term customer relationships. The model suggests that when a large fraction of bank assets is held in loans,...