This article presents a simple yet powerful new approach for approximating the value of
American options by simulation. The key to this approach is the use of least squares to estimate …

We use the information in credit default swaps to obtain direct measures of the size of the
default and nondefault components in corporate spreads. We find that the majority of the …

We estimate and compare a variety of continuous‐time models of the short‐term riskless
rate using the Generalized Method of Moments. We find that the most successful models in …

We study the nature of sovereign credit risk using an extensive set of sovereign CDS data.
We find that the majority of sovereign credit risk can be linked to global factors. A single …

I conduct an empirical investigation into the pricing of subprime asset-backed collateralized
debt obligations (CDOs) and their contagion effects on other markets. Using data for the ABX …

We derive and test an alternative closed-form general equilibrium model of the term structure
within the Cox, Ingersoll, and Ross theoretical framework in which yields are nonlinear …

Traditional models of portfolio choice assume that investors can continuously trade unlimited
amounts of securities. In reality, investors face liquidity constraints. I analyze a model where …

In the absence of frictions, the value of the underlying asset implied by option prices must
equal its actual market value. With frictions, however, this requirement need not hold. Using …

We develop a simple approach to valuing risky corporate debt that incorporates both default
and interest rate risk. We use this approach to derive simple closed‐form valuation …

We develop a two‐factor general equilibrium model of the term structure. The factors are the
short‐term interest rate and the volatility of the short‐term interest rate. We derive closed‐…