Results 1 - 10 of 9,332

Risk Management, Capital Budgeting and Capital Structure Policy for Financial Institutions: An Integrated Approach

by Kenneth A. Froot, Jeremy C. Stein, Anthony M. Santomero , 1996
"... : We develop a framework for analyzing the capital allocation and capital structure decisions facing financial institutions such as banks. Our model incorporates two key features: i) value-maximizing banks have a well-founded concern with risk management; and ii) not all the risks they face can be ..."
Abstract - Cited by 240 (7 self) - Add to MetaCart
of unhedgeable derivatives portfolios. I. Introduction One of the fundamental roles of banks and other financial intermediaries is to invest in illiquid financial assets--assets which, because of their information-intensive nature, cannot be frictionlessly traded in the capital markets. The standard example

Risks for the long run: A potential resolution of asset pricing puzzles

by Ravi Bansal, Amir Yaron - JOURNAL OF FINANCE , 1994
"... We model consumption and dividend growth rates as containing (i) a small long-run predictable component and (ii) fluctuating economic uncertainty (consumption volatility). These dynamics, for which we provide empirical support, in conjunction with Epstein and Zin’s (1989) preferences, can explain ke ..."
Abstract - Cited by 761 (63 self) - Add to MetaCart
key asset markets phenomena. In our economy, financial markets dislike economic uncertainty and better long-run growth prospects raise equity prices. The model can justify the equity premium, the risk-free rate, and the volatility of the market return, risk-free rate, and the price-dividend ratio

Nonparametric Estimation of State-Price Densities Implicit In Financial Asset Prices

by Yacine Aït-Sahalia, Andrew W. Lo - JOURNAL OF FINANCE , 1997
"... Implicit in the prices of traded financial assets are Arrow-Debreu prices or, with continuous states, the state-price density (SPD). We construct a nonparametric estimator for the SPD implicit in option prices and derive its asymptotic sampling theory. This estimator provides an arbitrage-free metho ..."
Abstract - Cited by 339 (6 self) - Add to MetaCart
Implicit in the prices of traded financial assets are Arrow-Debreu prices or, with continuous states, the state-price density (SPD). We construct a nonparametric estimator for the SPD implicit in option prices and derive its asymptotic sampling theory. This estimator provides an arbitrage

Pricing Illiquid Assets

by Miklós Koren, Ádám Szeidl (ye , 2001
"... The present paper investigates the portfolio allocation decisions of an investor with infinite horizon when available financial assets differ in their degrees of liquidity. A model with risk neutral agents allows us to endogenously determine the liquidity premium. With risk averse agents, we develop ..."
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The present paper investigates the portfolio allocation decisions of an investor with infinite horizon when available financial assets differ in their degrees of liquidity. A model with risk neutral agents allows us to endogenously determine the liquidity premium. With risk averse agents, we

Noise Trader Risk in Financial Markets

by J. Bradford De Long, Andrei Shleifer, Lawrence H. Summers, Robert J. Waldmann , 1989
"... We present a simple overlapping generations model of an asset market in which irrational noise traders with erroneous stochastic beliefs both affect prices and earn higher expected returns. The unpredictability of noise traders ’ beliefs creates a risk in the price of the asset that deters rational ..."
Abstract - Cited by 894 (25 self) - Add to MetaCart
rational investors. The model sheds light on a number of financial anomalies, including the excess volatility of asset prices, the mean reversion of stock returns, the underpricing of closed end mutual funds, and the Mehra-Prescott equity premium puzzle.

Monetary policy and asset price volatility

by Ben Bernanke, Mark Gertler - CHALLENGES FOR MONETARY POLICY, PROCEEDINGS OF THE 19 TH JACKSON HOLE CONFERENCE , 1999
"... During the past 20 years, the world’s major central banks have been largely successful at bringing inflation under control. Although it is premature to suggest that inflation is no longer an issue of great concern, it is quite conceivable that the next battles facing central bankers will lie on a di ..."
Abstract - Cited by 407 (6 self) - Add to MetaCart
different front. One development that has already concentrated the minds of policymakers is an apparent increase in financial instability, of which one important dimension is increased volatility of asset prices. Borio, Kennedy, and Prowse (1994), among others, document the emergence of major boom

House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle

by Matteo Iacoviello , 2002
"... I develop a general equilibrium model with sticky prices, credit constraints, nominal loans and asset prices. Changes in asset prices modify agents ’ borrowing capacity through collateral value; changes in nominal prices affect real repayments through debt deflation. Monetary policy shocks move asse ..."
Abstract - Cited by 512 (10 self) - Add to MetaCart
asset and nominal prices in the same direction, and are amplified and propagated over time. The “financial accelerator ” is not constant across shocks: nominal debt stabilises supply shocks, making the economy less volatile when the central bank controls the interest rate. I discuss the role of equity

Answering the Skeptics: Yes, Standard Volatility Models Do Provide Accurate Forecasts

by Torben G. Andersen, Tim Bollerslev
"... Volatility permeates modern financial theories and decision making processes. As such, accurate measures and good forecasts of future volatility are critical for the implementation and evaluation of asset and derivative pricing theories as well as trading and hedging strategies. In response to this, ..."
Abstract - Cited by 561 (45 self) - Add to MetaCart
Volatility permeates modern financial theories and decision making processes. As such, accurate measures and good forecasts of future volatility are critical for the implementation and evaluation of asset and derivative pricing theories as well as trading and hedging strategies. In response to this

The theory and practice of corporate finance: Evidence from the field

by John R. Graham, Campbell R. Harvey - Journal of Financial Economics , 2001
"... We survey 392 CFOs about the cost of capital, capital budgeting, and capital structure. Large firms rely heavily on present value techniques and the capital asset pricing model, while small firms are relatively likely to use the payback criterion. We find that a surprising number of firms use their ..."
Abstract - Cited by 725 (23 self) - Add to MetaCart
We survey 392 CFOs about the cost of capital, capital budgeting, and capital structure. Large firms rely heavily on present value techniques and the capital asset pricing model, while small firms are relatively likely to use the payback criterion. We find that a surprising number of firms use

Valuing American options by simulation: A simple least-squares approach

by Francis A. Longstaff, Eduardo S. Schwartz - Review of Financial Studies , 2001
"... This article presents a simple yet powerful new approach for approximating the value of America11 options by simulation. The kcy to this approach is the use of least squares to estimate the conditional expected payoff to the optionholder from continuation. This makes this approach readily applicable ..."
Abstract - Cited by 517 (9 self) - Add to MetaCart
applicable in path-dependent and multifactor situations where traditional finite difference techniques cannot be used. We illustrate this technique with several realistic exatnples including valuing an option when the underlying asset follows a jump-diffusion process and valuing an America11 swaption in a 20
Results 1 - 10 of 9,332