|
Showing 1 - 10 of
10 matches in All Departments
Continuous-Time Models in Corporate Finance synthesizes four
decades of research to show how stochastic calculus can be used in
corporate finance. Combining mathematical rigor with economic
intuition, Santiago Moreno-Bromberg and Jean-Charles Rochet analyze
corporate decisions such as dividend distribution, the issuance of
securities, and capital structure and default. They pay particular
attention to financial intermediaries, including banks and
insurance companies. The authors begin by recalling the ways that
option-pricing techniques can be employed for the pricing of
corporate debt and equity. They then present the dynamic model of
the trade-off between taxes and bankruptcy costs and derive
implications for optimal capital structure. The core chapter
introduces the workhorse liquidity-management model--where
liquidity and risk management decisions are made in order to
minimize the costs of external finance. This model is used to study
corporate finance decisions and specific features of banks and
insurance companies. The book concludes by presenting the dynamic
agency model, where financial frictions stem from the lack of
interest alignment between a firm's manager and its financiers. The
appendix contains an overview of the main mathematical tools used
throughout the book. Requiring some familiarity with stochastic
calculus methods, Continuous-Time Models in Corporate Finance will
be useful for students, researchers, and professionals who want to
develop dynamic models of firms' financial decisions.
The financial crisis that began in 2007 in the United States swept
the world, producing substantial bank failures and forcing
unprecedented state aid for the crippled global financial system.
Bringing together three leading financial economists to provide an
international perspective, Balancing the Banks draws critical
lessons from the causes of the crisis and proposes important
regulatory reforms, including sound guidelines for the ways in
which distressed banks might be dealt with in the future. While
some recent policy moves go in the right direction, others, the
book argues, are not sufficient to prevent another crisis. The
authors show the necessity of an adaptive prudential regulatory
system that can better address financial innovation. Stressing the
numerous and complex challenges faced by politicians, finance
professionals, and regulators, and calling for reinforced
international coordination (for example, in the treatment of
distressed banks), the authors put forth a number of principles to
deal with issues regarding the economic incentives of financial
institutions, the impact of economic shocks, and the role of
political constraints. Offering a global perspective, Balancing the
Banks should be read by anyone concerned with solving the current
crisis and preventing another such calamity in the future.
In the 1990s, large insurance companies failed in virtually
every major market, prompting a fierce and ongoing debate about how
to better protect policyholders. Drawing lessons from the failures
of four insurance companies, "When Insurers Go Bust" dramatically
advances this debate by arguing that the current approach to
insurance regulation should be replaced with mechanisms that
replicate the governance of non-financial firms.
Rather than immediately addressing the minutiae of supervision,
Guillaume Plantin and Jean-Charles Rochet first identify a
fundamental economic rationale for supervising the solvency of
insurance companies: policyholders are the "bankers" of insurance
companies. But because policyholders are too dispersed to
effectively monitor insurers, it might be efficient to delegate
monitoring to an institution--a prudential authority. Applying
recent developments in corporate finance theory and the economic
theory of organizations, the authors describe in practical terms
how such authorities could be created and given the incentives to
behave exactly like bankers behave toward borrowers, as "tough"
claimholders.
The financial crisis that began in 2007 in the United States
swept the world, producing substantial bank failures and forcing
unprecedented state aid for the crippled global financial system.
Bringing together three leading financial economists to provide an
international perspective, "Balancing the Banks" draws critical
lessons from the causes of the crisis and proposes important
regulatory reforms, including sound guidelines for the ways in
which distressed banks might be dealt with in the future.
While some recent policy moves go in the right direction,
others, the book argues, are not sufficient to prevent another
crisis. The authors show the necessity of an "adaptive" prudential
regulatory system that can better address financial innovation.
Stressing the numerous and complex challenges faced by politicians,
finance professionals, and regulators, and calling for reinforced
international coordination (for example, in the treatment of
distressed banks), the authors put forth a number of principles to
deal with issues regarding the economic incentives of financial
institutions, the impact of economic shocks, and the role of
political constraints.
Offering a global perspective, "Balancing the Banks" should be
read by anyone concerned with solving the current crisis and
preventing another such calamity in the future.
Almost every country in the world has sophisticated systems to
prevent banking crises. Yet such crises--and the massive financial
and social damage they can cause--remain common throughout the
world. Does deposit insurance encourage depositors and bankers to
take excessive risks? Are banking regulations poorly designed? Or
are banking regulators incompetent? Jean-Charles Rochet, one of the
world's leading authorities on banking regulation, argues that the
answer in each case is "no." In "Why Are There So Many Banking
Crises?," he makes the case that, although many banking crises are
precipitated by financial deregulation and globalization, political
interference often causes--and almost always exacerbates--banking
crises. If, for example, political authorities are allowed to
pressure banking regulators into bailing out banks that should be
allowed to fail, then regulation will lack credibility and market
discipline won't work. Only by insuring the independence of banking
regulators, Rochet says, can market forces work and banking crises
be prevented and minimized. In this important collection of essays,
Rochet examines the causes of banking crises around the world in
recent decades, focusing on the lender of last resort; prudential
regulation and the management of risk; and solvency regulations.
His proposals for reforms that could limit the frequency and
severity of banking crises should interest a wide range of academic
economists and those working for central and private banks and
financial services authorities.
In the 1990s, large insurance companies failed in virtually every
major market, prompting a fierce and ongoing debate about how to
better protect policyholders. Drawing lessons from the failures of
four insurance companies, When Insurers Go Bust dramatically
advances this debate by arguing that the current approach to
insurance regulation should be replaced with mechanisms that
replicate the governance of non-financial firms. Rather than
immediately addressing the minutiae of supervision, Guillaume
Plantin and Jean-Charles Rochet first identify a fundamental
economic rationale for supervising the solvency of insurance
companies: policyholders are the "bankers" of insurance companies.
But because policyholders are too dispersed to effectively monitor
insurers, it might be efficient to delegate monitoring to an
institution--a prudential authority. Applying recent developments
in corporate finance theory and the economic theory of
organizations, the authors describe in practical terms how such
authorities could be created and given the incentives to behave
exactly like bankers behave toward borrowers, as "tough"
claimholders.
The subprime crisis has shown that the sophisticated risk
management models used by banks and insurance companies had serious
flaws. Some people even suggest that these models are completely
useless. Others claim that the crisis was just an unpredictable
accident that was largely amplified by the lack of expertise and
even naivety of many investors. This book takes the middle view. It
shows that these models have been designed for "tranquil times,"
when financial markets behave smoothly and efficiently. However, we
are living in more and more "turbulent times": large risks
materialize much more often than predicted by "normal" models,
financial models periodically go through bubbles and crashes.
Moreover, financial risks result from the decisions of economic
actors who can have incentives to take excessive risks, especially
when their remunerations are ill designed. The book provides a
clear account of the fundamental hypotheses underlying the most
popular models of risk management and show that these hypotheses
are flawed. However it shows that simple models can still be
useful, provided they are well understood and used with caution.
|
|