In this paper, we examine an exchange economy with a financial market composed of three assets: a share of a stock, an European call option written on the stock, and a riskless bond.

This paper argues that book-to-market and size attributes represent sensitivities of firm returns to several risk factors, and in so doing they subsume the information in other attributes.

This paper estimates a trivariate two-factor conditional version of the Intertemporal CAPM of Merton (1973).

The question that this paper raise in this paper is how to choose the best mix of countries to diversify internationally? They compare several methods of asset allocation from a Swiss perspective over the period 1988-2001.

A large part of the current debate on US stock price behaviorconcentrates on the question of whether stock prices are driven byfundamentals or by non-fundamental factors(...)

Starting from the Merton framework for firm defaults, we provide theanalytics and robustness of the relationship between defaultprobabilities and default correlations. We show that loans with higherdefault probabilities will not only have higher variances but also highercorrelations with other...

The valuation of corporate debt is an important issue in asset pricing. While there has been an enormous amount of theoretical modeling of corporate bond prices, there has been relatively little empirical testing of these models 1.(...)

We provide the impact on asset prices of search-and-bargaining frictions in over-the-counter markets. Under natural conditions, prices are lower and illiquidity discounts higher when counterparties are harder to find, when sellers have less bargaining power, when the fraction of qualified owners...

We introduce and study no-good-deal valuation bounds defined in terms of expected utility. A utility-based good deal is a payoff whose expected utility is toohigh in comparison to the utility of its price. Forbidding good deals induces, viaduality, restrictions on pricing kernels and thereby...

This study finds that a model with internal habit memory allowsto simultaneously explain a series of business cycle and asset pricing puzzles. Compared to the literature, the equity premium puzzle can be resolved in a model with endogenous labor, without giving rise to excessive risk free rate...