Publications

January 2008
Background Note

Collateralized Debt Obligations (CDOs)

By: Joshua Coval and Erik Stafford

This lesson integrated Merton's (1974) contingent claims model of debt and equity claims with the CAPM, which allows us to examine the risks and pricing of credit portfolios and the derivative claims issued against them. In particular, this model is used to make... View Details

Keywords: Decision Choices and Conditions; Borrowing and Debt; Credit Derivatives and Swaps; Investment Portfolio; Risk Management

January 2016 (Revised April 2017)
Case

The Galaxy Dividend Income Growth Fund's Option Investment Strategies

By: W. Carl Kester

This case is designed to provide an elementary introduction to options and option pricing for beginning finance students. Analysis of the case requires students to compare the prices of put and call options with various exercise prices and maturity dates on two... View Details

Keywords: Options; Option Contract; Option Pricing; Derivatives; Mutual Funds; Call Options; Put Options; Stock Options; Risk and Uncertainty; Volatility; Financial Services Industry; United States

13 Oct 2010
Research & Ideas

How Government can Discourage Private Sector Reliance on Short-Term Debt

sector's tilt toward short-term financing was merely the industry responding to a lack of available government debt instruments, such as short-term risk-free Treasuries, that were much in demand by investors during the global savings... View Details

Keywords: by Staff; Financial Services

12 Nov 2015
News

Airbnb Pledges to Work With Cities and Pay ‘Fair Share’ of Taxes

February 1995 (Revised April 1996)
Case

MW Petroleum Corporation (B)

By: Timothy A. Luehrman, Peter Tufano and Barbara Wall

Amoco Corp. is negotiating to sell a wholly-owned subsidiary, MW Petroleum, to Apache Corp. MW owns large reserves of oil and gas comprising many properties at different stages of engineering, development, and production. The proposed acquisition is a large one for... View Details

Keywords: Business Subsidiaries; Mergers and Acquisitions; Risk Management; Financing and Loans; Mining Industry; Energy Industry

2018
Working Paper

Bank Risk-Taking and the Real Economy: Evidence from the Housing Boom and Its Aftermath

By: Antonio Falato, Giovanni Favara and David Scharfstein

We present evidence that pressure to maximize short-term stock prices and earnings leads banks to increase risk. We start by showing that banks increase risk when they transition from private to public ownership through a public listing or an acquisition. The increase... View Details

Keywords: Risk and Uncertainty; Financial Markets; Investment; Corporate Finance; Banks and Banking

Read Now

November 1974 (Revised May 1994)
Case

Science Technology Co.

By: Thomas R. Piper

The president of a medium-sized electronics company is evaluating the financial forecasts and proposed financing program submitted by the chief financial officer. The forecasts are prepared in constant dollars, on which basis the proposed financing plan seems... View Details

Keywords: Currency; Financial Strategy; Forecasting and Prediction; Inflation and Deflation; Risk and Uncertainty; Outcome or Result; Technology Industry; Electronics Industry

January 1973 (Revised September 1990)
Case

Carrefour S.A.

By: William E. Fruhan Jr.

Involves a very rapidly growing retail chain that is financing itself in an unusual (and at first glance) risky fashion. View Details

Keywords: Growth and Development Strategy; Financing and Loans; Risk and Uncertainty; Retail Industry

2022
Working Paper

Heterogeneous Investors and Stock Market Fluctuations

By: Odhrain McCarthy and Sebastian Hillenbrand

We introduce a heterogeneous agent model which features extrapolative beliefs and time-varying risk aversion. The model leads to an empirical framework which we estimate with stock prices, survey data and risk aversion measures. We find that extrapolative beliefs and... View Details

Keywords: Stock Market; Investment Decisions; Asset Pricing; Investment; Behavioral Finance; Stocks

SSRN

June 2010 (Revised September 2013)
Case

IDFC India: Infrastructure Investment Intermediaries

By: John D. Macomber and Viraal Balsari

Indian financial intermediary matching international capital to local infrastructure decides how to balance range of services, risk-adjusted return, margin pressure, and nation building. IDFC was chartered with partial ownership from the Indian government to help... View Details

Keywords: Investment; Infrastructure; Corporate Social Responsibility and Impact; Mission and Purpose; State Ownership; Business and Government Relations; Business and Shareholder Relations; Partners and Partnerships; Financial Services Industry; India

November 1973 (Revised April 1983)
Case

Southport Minerals, Inc.

By: William E. Fruhan Jr.

Examines how the attractiveness of an investment project can be enhanced by making financing and operating decisions which either manage investment returns or reduce project risks. View Details

Keywords: Decisions; Financing and Loans; Investment; Investment Return; Risk Management; Operations; Projects

April 1998
Case

Cephalon, Inc.

By: Peter Tufano

In early 1997, Cephalon, awaited an FDA panel's decision on whether its drug, Myotrophin, would be approved. If the drug was approved, the firm might need substantial additional funds to commercialize as well as to buy back rights to it (which had been sold earlier to... View Details

Keywords: Risk Management; Financing and Loans; Health Care and Treatment; Pharmaceutical Industry; United States

September 2008
Case

Samoa Tala

By: Joshua D. Coval, Bhagwan Chowdhry and Konark Saxena

This case examines currency risks faced by Microfinance Institutions, and evaluates strategies to hedge them in countries with pegged currency regimes and no derivatives markets. An MFI based in Western Samoa borrows in different currencies like the US dollar and the... View Details

Keywords: Cash Flow; Currency Exchange Rate; Microfinance; Risk and Uncertainty; Financial Services Industry; Samoa

15 Sep 2014
Research & Ideas

Are the Most Talented Employees the Highest Paid? Yes—If They’re Bankers

to talent in the finance industry. "When rewarding talent, banks tend to focus only on the short-run productivity of bankers, often overlooking long-run risk-taking," Vallée says. "Banks may also neglect tasks that are hard to monitor,... View Details

Keywords: by Carmen Nobel; Banking

May 2011
Article

The Hollow Science

By: Robert S. Kaplan

The financial meltdown made clear that the executives of many major financial institutions were operating with inadequate or distorted information about the values and risks of their firms' assets. It's fair to say that business scholars bear some... View Details

Keywords: Accounting; Financial Crisis; Financial Management; Information; Knowledge Acquisition; Risk Management; Practice

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