This paper develops a theory of the firm, and equilibrium credit rationing mechanisms in oligopoly with R&D-product market competition. Credit rationing arises from a hold-up problem between wealth-constrained entrepreneurs and external investors. Underinvestment occurs if entrepreneurial wealth constraint is binding, even though the equilibrium corporate governance structure addresses the hold...

In the present paper we introduce a two-dimensional shifted square-root diffusion (SSRD) model for interest rate derivatives and single-name credit derivatives, in a stochastic intensity framework. The SSRD is the unique model, to the best of our knowledge, allowing for an automatic calibration of the term structure of interest rates and of credit default swaps (CDS’s). Moreover, the model reta...

We utilize a unique pair of experiments to isolate the ways in which reductions in asymmetric information alter credit market outcomes. A Guatemalan microfinance lender gradually started using a credit bureau across its branches without letting borrowers know about it. One year later, we ran a large randomized credit information course that described the existence and workings of the bureau to ...

The paper develops a positive theory of dynamic competition between credit card lenders, featuring balance transfers and default. Based on our theory and our quantitative results, we argue that the observed outcomes in the US credit card market are consistent with reduced effectiveness of personal bankruptcy protection, and inefficiently elevated costs of unsecured credit for intertemporal smoo...

In this paper we propose a new, information-based approach for modelling the dynamic evolution of a portfolio of credit risky securities. In our setup market prices of traded credit derivatives are given by the solution of a nonlinear filtering problem. The innovations approach to nonlinear filtering is used to solve this problem and to derive the dynamics of market prices. Moreover, the practi...

By exploiting a comprehensive dataset of Credit Default Swaps (CDS), we investigate the intra-industry credit contagion effect in the context of Chapter 11 bankruptcy, Chapter 7 liquidation, and other credit events defined by extreme jumps in the CDS spread. Our analysis suggests the following findings: First, the credit contagion effect dominates the competitive effect surrounding Chapter 11 r...

Observers routinely claim that the Japanese government of the high-growth 1960s and 1970s rationed and ultimately directed credit. It barred domestic competitors to banks, insulated the domestic capital market from international competitive pressure, and capped loan interest rates. In the resulting credit shortage, it promoted industrial policy by rationing credit. As much as the government pur...

In this paper, using China’s risk-free and corporate zero yields together with aggregate credit risk measures and various control variables from 2006 to 2013, we document a puzzle of counter-credit-risk corporate yield spreads. We interpret this puzzle as a symptom of the immaturity of China’s credit bond market, which reveals a distorted pricing mechanism latent in the fundamental of this mark...

A classifier system is used to learn control and profit optimization of a batch chemical reaction. Ability to learn different market conditions and changes to reaction parameters is demonstrated. The profit sharing algorithm is used for apportionment of credit. The greater effectiveness of the use of the genetic algorithm over apportionment of credit alone or the random replacement of low stren...