Papers
Bank capital and the composition of credit
Uploaded: Feb 1, 2017
We propose a general equilibrium framework to analyze the cross-sectional distribution of credit and its exposure to shocks to the financial system, such as changes to bank capital, capital requirements, and interest rates. We characterize how over- and underinvestment in...
Risk Preferences and the Macro Announcement Premium
Uploaded: Jan 6, 2017
The paper develops a theory for equity premium around macroeconomic announcements. Stock returns realized around pre-scheduled macroeconomic announcements, such as the employment report and the FOMC statements, account for 55% of the market equity premium during the 1961-2014 period, and...
A Dynamic Model of Optimal Creditor Dispersion
Uploaded: Dec 30, 2016
Firms often choose to raise capital from multiple creditors even though doing so may lead to inefficient liquidation caused by coordination failure. Potential coordination failure can, however, improve a firm’s incentive to repay its debt, thus increasing its debt capacity....
Credit Ratings: Strategic Issuer Disclosure and Optimal Screening
Uploaded: Dec 28, 2016
We study a model in which an issuer can manipulate information obtained by a credit rating agency (CRA) seeking to screen and rate its financial claim. Better CRA screening leads to a lower probability of obtaining a high rating but...
Alternating-offer Bargaining with the Global Games Information Structure
Uploaded: Dec 28, 2016
This paper studies frequent-offer limits of perfect Bayesian equilibria in the alternating-offer bilateral bargaining model with private correlated values. The correlation of values is modeled via the global games information structure: values depend on the unobserved quality of the object...
Contracting on Credit Ratings: Adding Value to Public Information
Uploaded: Dec 28, 2016
We provide a novel interpretation of the role of credit ratings when contracts between investors and portfolio managers are incomplete. In our model, a credit rating on a bond provides a verifiable signal about an unverifiable state. We show that...
