The Great Recession has been characterised by the two stylized facts: the buildup of leverage in the household sector in the period preceding the recession and a protracted economic recovery that followed. We attempt to explain these two facts as an information friction, whereby agents are...

Robert C. Merton is the School of Management Distinguished Professor of Finance at Massachusetts Institute of Technology, and the John and Natty McArthur University Professor Emeritus at Harvard University. Merton received the Alfred Nobel Memorial Prize in Economic Sciences in 1997 for a new...

In this paper we investigate the influence of coupon structure on the financial behavior of Individual Investors in the fixed-income market. Examining circa 26 million decisions on 204 standard putable bonds with different coupon offerings our major findings are: (i) Products with a flat coupon...