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Online reviews have become increasingly popular as a way to judge the quality of various products and services. However, recent work demonstrates that the absence of reporting incentives leads to a biased set of reviews that may not reflect the true qualit ...
Reduced-form models of default that attribute a large fraction of credit spreads to compensation for credit event risk typically preclude the most plausible economic justification for such risk to be priced--namely, a “contagious” response of the market po ...
We examine the impact of the U.S. bankruptcy procedure on the valuation of corporate securities and capital structure decisions. We provide closed-form solutions for corporate debt and equity values when defaulting firms can either liquidate their assets o ...
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 adv ...
In this paper, we build on a single product, finite horizon, periodic review inventory management setting and include key financial aspects such as working capital constraints, payment delays and multiple sources of financing. We numerically solve for the ...
In this paper, we build on a single product, finite horizon, periodic review inventory management setting and include key financial aspects such as working capital constraints, payment delays and multiple sources of financing. We numerically solve for the ...
This paper develops a framework for analyzing the impact of macroeconomic conditions on credit risk and dynamic capital structure choice. We begin by observing that when cash flows depend on current economic conditions, there will be a benefit for firms to ...
Most structural models of default preclude the firm from altering its capital structure. In practice, firms adjust outstanding debt levels in response to changes in firm value, thus generating mean-reverting leverage ratios. We propose a structural model o ...
Structural models of default calibrated to historical default rates, recovery rates, and Sharpe ratios typically generate Baa-Aaa credit spreads that are significantly below historical values. However, this "credit spread puzzle" can be resolved if one acc ...
We investigate a structural model of market and firm-level dynamics in order to jointly price long-dated S&P 500 index options and CDO tranches of corporate debt. We identify market dynamics from index option prices and idiosyncratic dynamics from the term ...
