Getting the Most Out of a Mandatory Subordinated Debt Requirement

Recent advances in asset pricing—the reduced-form approach to pricing risky debt and derivatives—are used to quantitatively evaluate several proposals for mandatory bank issue of subordinated debt. We find that credit spreads on both fixed- and floating-rate subordinated debt provide relatively clean signals of bank risk and are not unduly influenced by nonrisk factors. Fixed-rate debt with a put is unacceptable, but making the putable debt floating resolves most problems. Our approach also helps to clarify several different notions of “bank risk.”     

An Illuminating Exchange The Construction of Social Reality

A BSTRACT . In his The Construction of Social Reality , Searle presents an account of rights, responsibilities, obligations, duties, and similar entities in terms of the formula X counts as Y in context C , where " X " refers in the simplest case to some physical object or event and " Y " to the result of imposing upon X some deontic power or function. Smith attempts to show the limitations of this formula, focusing especially on the examples of contested property rights (where C is not uniquely defined), and of money in bank accounts and other phenomena (where no physical X -term is available). Searle responds to these criticisms, above all by pointing to the fact that some of the problems Smith raises are to be addressed not by an ontological analysis of social reality but rather through legal or political means.     

An Empirical Analysis of Entrant and Incumbent Bidding in Road Construction Auctions

This paper explores differences in the bidding patterns of entrants and incumbents in road construction auctions. We find that entrants bid more aggressively and win auctions with significantly lower bids than incumbents. The differences in their bidding patterns are consistent with a model of auctions in which the distribution of an entrant's costs exhibits greater dispersion than that of an incumbent's and relations of stochastic dominance in the distributions do not persist for the entire range of estimated costs. We also find that more efficient firms bid, on average, more aggressively and firms with greater backlogs bid less aggressively.     

The Law and Economics of Marriage Contracts

Growth in property ownership has raised the stakes in the distribution of financial assets on divorce. Given high risks of marital failure, this has stimulated the demand for private ordering through enforceable marriage contracts. This paper surveys the existing law and economics literature and legal practice to consider the state of knowledge on the economic theory, scope and limits of written nuptial agreements.     

DURATION MOMENTS AND YIELD CURVE MOVEMENTS

In this paper we will analyze the relationship between the value and duration moments of a cash flow and movements in the yield curve. We will show that for changes in the yield curve which can be related to tⁿ , the 1st order changes in the net present value of a cash flow are linearly dependent on the n + lth duration moments, and that the 2nd order changes are dependent on the sum of duration moments of order 2 n + 1 and 2 n + 2. We will use this relationship to tilt tracking portfolios so as to protect them against specific changes in the yield curve.     

Futures assessment by field anomaly relaxation : A review and appraisal

Futures research includes the problem of generating reasonably exhaustive and plausible scenarios for a given topic, a problem for which there are no truly satisfactory solutions. This article reviews and evaluates a method, field anomaly relaxation, first put forward some 20 years ago. The evaluation is in the context of an illustrative study of political developments in Europe. The research reconstructs and further develops the method and concludes that it has something to offer for scenario generation. Its weaknesses are identified and suggestions for further research are made.     

The New Urbanism Versus the Market Process

The new urbanism argues that land-use planning should be used to create higher-density development and to promote alternatives to the use of personal automobiles for transportation. The concerns of the new urbanist movement are shown to be misplaced, and the goals of the new urbanism are shown to be in conflict with market incentives, making them difficult to implement in any event. A better policy for more efficient land use would be for governments to plan more effectively for their own infrastructure development while allowing the development of privately-owned land to be guided by market forces.