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We investigate the in‡uence of various fundamental variables on a crosssection of credit default swap rates. Credit default swap rates can be seen as an alternative proxy for credit risk. Therefore our ...ndings are relevant not only for the understanding of credit default swaps but for credit risk in general. The fundamental variables include ratings,(More)
We study asset prices and portfolio choice with overlapping generations where the young disregard history to learn from own experience. Disregarding history implies less precise estimates of consumption growth, which, in equilibrium, leads the young to increase their investment in risky assets after positive returns or act as trend chasers and to lose(More)
We study how differences in beliefs about expected inflation affect the nominal term structure when investors have “catching up with the Joneses” preferences. In the model, “catching up with the Joneses” preferences help to match the level and slope of yields as well as the level of yield volatilities. Disagreement about expected inflation helps to match(More)
We present a tractable, static, general equilibrium model with multiple sectors in which firms offer workers incentive contracts and simultaneously raise capital in stock markets. Workers optimally invest in the stock market and at the same time hedge labor income risk. Firms rationally take agents’ portfolio decisions into account. In equilibrium, the cost(More)
In several multi-good models in the literature we see in equilibrium that the span of the stocks drop relative to the span of the dividends, which is not a desirable feature. Therefore, in this paper, we investigate conditions for endogenous completeness and incompleteness in continuous-time financial markets driven by diffusion processes with multiple(More)
‡ We would like to thank Jean-Pierre Danthine, Vihang Errunza, Christian Gourieroux, Albert Holly, Raymond Kan, Michael Rockinger, Olivier Scaillet, René Stulz, Ernst-Ludwig von Thadden, seminar participants at the FAME Workshops, the 5 Conference of the Swiss Society for Financial Market Research (2002), the Euro Conference at NYU (2002), the University of(More)
We study how differences in beliefs about expected inflation impact real and nominal yield curves in a frictionless economy. Inflation disagreement induces a spillover effect to the real side of the economy with a strong impact on the real yield curve. When investors have a coefficient of relative risk aversion greater than one, real yields across all(More)
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