A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.
- Topic classification is ongoing.
- Please kindly let me know [mingze.gao@mq.edu.au] in case of any errors.
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Results 5 resources
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We use a moral hazard model to compare monitored (nontraded) bank loans and traded (nonmonitored) bonds as sources of external funds for industry. We contrast the theoretical conditions that favor each system with the historical conditions prevailing when these financial systems evolved during the British and German industrial revolutions. To study persistence, we consider an entry model where financiers take the industrial structure as given when they lend and firms take the financial system as given when they borrow. We show multiple equilibria can exist, compare equilibria in welfare terms, and discuss their robustness to coordination between lenders and borrowers. Copyright 2004, Oxford University Press.
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Gallant, Hansen, and Tauchen (1990) show how to use conditioning information optimally to construct a sharper unconditional variance bound (the GHT bound) on pricing kernels. The literature predominantly resorts to a simple but suboptimal procedure that scales returns with predictive instruments and computes standard bounds using the original and scaled returns. This article provides a formal bridge between the two approaches. We propose an optimally scaled bound that coincides with the GHT bound when the first and second conditional moments are known. When these moments are misspecified, our optimally scaled bound yields a valid lower bound for the standard deviation of pricing kernels, whereas the GHT bound does not. We illustrate the behavior of the bounds using a number of linear and nonlinear models for consumption growth and bond and stock returns. We also illustrate how the optimally scaled bound can be used as a diagnostic for the specification of the first two conditional moments of asset returns. Copyright 2004, Oxford University Press.
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This article uses a general equilibrium framework to explore the origins and limitations of financial intermediaries. In the model, investors have a generic lending technology that they can improve at a cost. Those who upgrade become intermediaries to exploit their advantage. However, conflicts with depositors will limit the banks' market presence, and they will only lend to moderately endowed firms while bondholders will finance cash-rich corporations. The article also analyzes the extent to which investors adopt the superior lending technique, the nature of bank competition, and how corporate and bank conditions affect interest rates and investment.
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This article empirically tests five structural models of corporate bond pricing: those of Merton (1974), Geske (1977), Longstaff and Schwartz (1995), Leland and Toft (1996), and Collin-Dufresne and Goldstein (2001). We implement the models using a sample of 182 bond prices from firms with simple capital structures during the period 1986–1997. The conventional wisdom is that structural models do not generate spreads as high as those seen in the bond market, and true to expectations, we find that the predicted spreads in our implementation of the Merton model are too low. However, most of the other structural models predict spreads that are too high on average. Nevertheless, accuracy is a problem, as the newer models tend to severely overstate the credit risk of firms with high leverage or volatility and yet suffer from a spread underprediction problem with safer bonds. The Leland and Toft model is an exception in that it overpredicts spreads on most bonds, particularly those with high coupons. More accurate structural models must avoid features that increase the credit risk on the riskier bonds while scarcely affecting the spreads of the safest bonds. Copyright 2004, Oxford University Press.