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- Jing-zhi Huang, Ming Huang, +11 authors Suresh Sundaresan
- 2003

How Much of the Corporate-Treasury Yield Spread Is Due to Credit Risk? No consensus has yet emerged from the existing credit risk literature on how much of the observed corporate-Treasury yield spreads can be explained by credit risk. In this paper, we propose a new calibration approach based on historical default data and show that one can indeed obtain… (More)

This article studies the design and valuation of debt contracts in a general dynamic setting under uncertainty. We incorporate some insights of the recent corporate finance literature into a valuation framework. The basic framework is an extensive form game determined by the terms of a debt contract and applicable bankruptcy laws. Debtholders and… (More)

This article analyzes optimal, dynamic portfolio and wealth/consumption policies of utility maximizing investors who must also manage market-risk exposure using Value-atRisk (VaR). We find that VaR risk managers often optimally choose a larger exposure to risky assets than non-risk managers and consequently incur larger losses when losses occur. We suggest… (More)

- YACINE AÏT-SAHALIA, Freddy Delbaen, +6 authors Suresh Sundaresan
- 1999

This paper applies to interest rate models the theoretical method developed in Aït-Sahalia ~1998! to generate accurate closed-form approximations to the transition function of an arbitrary diffusion. While the main focus of this paper is on the maximum-likelihood estimation of interest rate models with otherwise unknown transition functions, applications to… (More)

- Adam B. Ashcraft, João A. C. Santos, +5 authors Sarita Subramanian
- 2009

There have been many claims that credit derivatives like credit default swaps (CDS) have lowered the cost of debt financing to firms by creating new hedging opportunities and information for investors. However, these instruments also give banks an opaque means through which to sever links to their borrowers, reducing lender incentives to screen and monitor.… (More)

I document the profits on a trade that is long the old 30-year Treasury bond and short the new 30-year Treasury bond, and is rolled over every auction cycle from June 1995 to November 1999. Despite the systematic convergence of the spread over the auction cycle, the average profits are close to zero. The difference in repo-market financing rates between the… (More)

This paper empirically compares a variety of ®rm-value-based models of contingent claims. We formulate a general model which nests versions of the models introduced by Merton (1974), Leland (1994), Anderson and Sundaresan (1996), and Mella-Barral and Perraudin (1997). We estimate these using aggregate time series data for the US corporate bond market,… (More)

In this article we construct a model in which a consumer’s utility depends on the consumption history We describe a general equilibrium framework similar to Cox, Ingersoll, and Ross (1985a). A simple example is then solved in closedform in this general equilibrium setting to rationalize the observed stickiness of the consumption series relative to the… (More)

- Ilan Kremer, Kjell G. Nyborg, +8 authors Suresh Sundaresan
- 2002

Underpricing and Market Power in Uniform Price Auctions In uniform auctions, buyers choose demand schedules as strategies and pay the same \market clearing" price for units awarded. The extant theory shows that these auctions are susceptible to arbitrarily large underpricing as a result of bidders having market power. This paper studies modi ̄cations to the… (More)

- Suresh Sundaresan, Neng Wang
- 2006

We model dynamic investment, financing and default decisions of a firm, which begins its life with a collection of growth options. The firm exercises them optimally over time, and finances the costs of investment by adjusting its capital structure, which trades off the tax benefits with the distress cost of debt and the agency cost of investment distortions… (More)