We study the effects of takeover feasibility on asset prices and returns in a unified framework. We show theoretically that takeover protections increase equity risk, stock returns, and bond yields by removing a valuable put option to sell the firm, notabl ...
Capital ages and must eventually be replaced. We propose a theory of financing in which firms borrow to finance investment and deleverage as capital ages to have enough financial slack to finance replacement investments. To achieve these dynamics, firms is ...
Uncertainty of spillover effects – including property devaluation - from proposed land-use change elicits opposition to local development. This hinders cities’ ability to implement land-use policy aimed at housing affordability and environmental sustainabi ...
In this thesis we present three closed form approximation methods for portfolio valuation and risk management.The first chapter is titled ``Kernel methods for portfolio valuation and risk management'', and is a joint work with Damir Filipovi'c (SFI and ...
This paper reviews the mortgage-backed securities (MBS) market, with a particular emphasis on agency residential MBS in the United States. We discuss the institutional environment, security design, MBS risks and asset pricing, and the economic effects of m ...
This thesis studies the origins and consequences of financial crises, and computational techniques to solve continuous-time economic models that explain such crises.The first chapter shows that financial recessions are typically characterised by a large ...
We develop an exchange rate target zone model with finite exit time and non-Gaussian tails. We show how the tails are a consequence of time-varying investor risk aversion, which generates mean-preserving spreads in the fundamental distribution. We solve ex ...
The modeling of the probability of joint default or total number of defaults among the firms is one of the crucial problems to mitigate the credit risk since the default correlations significantly affect the portfolio loss distribution and hence play a sig ...
This article derives a closed-form pricing formula for European exchange options under a non-Gaussianframework for the underlying assets, intending to resolve mispricing associated with a geometric Brownianmotion. The dynamics of each of the two correlated ...
This thesis uses machine learning techniques and text data to investigate the relationships that arise between the Fed and financial markets, and their consequences for asset prices.The first chapter, entitled Market Expectations and the Impact of Unconv ...
This article shows that the inability to use monetary policy for macroeconomic stabilization leaves a government more vulnerable to a rollover crisis. We study a sovereign default model with self-fulfilling rollover crises, foreign currency debt, and nomin ...
This thesis examines how banks choose their optimal capital structure and cash reserves in the presence of regulatory measures.The first chapter, titled Bank Capital Structure and Tail Risk, presents a bank capital structure model in which bank assets ...
After the financial crisis, policy rates in the major advanced economies have moved downwards to near/below zero. Some countries have experienced an increase in house prices and an expansion of mortgages. Also, there have been considerable changes in the m ...
We challenge the view that short-term debt curbs moral hazard and demonstrate that, in a world with financing frictions and fair debt pricing, short-term debt generates incentives for risk-taking. To do so, we develop a model in which firms are financed wi ...
We extend Duffie et al.'s (2005) search-theoretic model of over-the-counter (OTC) asset markets, allowing for a decentralized inter-dealer market with arbitrary heterogeneity in dealers' valuations (or, equivalently, inventory costs). We develop a solution ...
This thesis develops three models that study the motivation of various agents to take on debt,
and the impact that excessive financial leverage can have on social welfare.
In the chapter "Short-term Bank Leverage and the Value of Liquid Reserves", the ince ...
We investigate the cross-sectional variation in the credit default swap (CDS)-bond bases and test explanations for the violation of the arbitrage relation between cash bond and CDS contract, which states that the basis should be zero in normal conditions. ...
This thesis studies the valuation and hedging of financial derivatives, which is fundamental for trading and risk-management operations in financial institutions. The three chapters in this thesis deal with derivatives whose payoffs are linked to interest ...
I started my PhD studies in August 2014 with a strong desire to push my own limits without knowing precisely the areas I wanted to cover in detail. To me, it was clear that I was interested by many different fields, however, I was particularly concerned wi ...
An accurate assessment of the risk of extreme environmental events is of great importance for populations, authorities and the banking/insurance/reinsurance industry. Koch (2017) introduced a notion of spatial risk measure and a corresponding set of axioms ...