Publications

July 1987 (Revised October 2009)
Background Note

A Method For Valuing High-Risk, Long-Term Investments: The "Venture Capital Method"

By: William A. Sahlman and Daniel R Scherlis

Describes a method for valuing high-risk, long-term investments such as those confronting venture capitalists. The method entails forecasting a future value (e.g., five years from the present) and discounting that terminal value back to the present by applying a high... View Details

Keywords: Forecasting and Prediction; Entrepreneurship; Venture Capital; Investment; Risk Management; Valuation

September 2011
Article

How Did Increased Competition Affect Credit Ratings?

The credit rating industry has historically been dominated by just two agencies, Moody's and S&P, leading to longstanding legislative and regulatory calls for increased competition. The material entry of a third rating agency (Fitch) to the competitive landscape offers... View Details

Keywords: Credit; Governing Rules, Regulations, and Reforms; Competition; Forecasting and Prediction; Theory

2008
Working Paper

How Did Increased Competition Affect Credit Ratings?

The credit rating industry has historically been dominated by just two agencies, Moody's and S&P, leading to longstanding legislative and regulatory calls for increased competition. The material entry of a third rating agency (Fitch) to the competitive landscape offers... View Details

Keywords: Credit; Financial Markets; Governing Rules, Regulations, and Reforms; Quality; Reputation; Competition; Financial Services Industry

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January 2005 (Revised October 2005)
Background Note

Standard & Poor's Sovereign Credit Ratings: Scales and Process

By: Rawi E. Abdelal and Christopher Bruner

Describes Standard & Poor's sovereign credit ratings scales and the credit rating process. In particular, describes the role and function of the rating committee and the analytical categories considered in arriving at a final sovereign credit rating. View Details

Keywords: Financial Markets; Credit; Bonds; Policy; Risk and Uncertainty; Measurement and Metrics; Forecasting and Prediction; Financial Services Industry

March 1993 (Revised July 2008)
Case

Liability Management at General Motors

By: Peter Tufano

An analyst at General Motors charged with managing the structure of the automaker's debt must decide whether and how to modify the interest rate exposure of the firm's most recent debt offering. The analyst must take into consideration GM's liability management policy... View Details

Keywords: Borrowing and Debt; Capital Structure; Financial Management; Interest Rates; Risk Management; Auto Industry; North America

Spring 2021
Article

Corporate Resilience and Response During COVID-19

By: Alex Cheema-Fox, Bridget LaPerla, George Serafeim and Hui (Stacie) Wang

The coronavirus pandemic caused a sharp market decline while raising heterogeneous responses across companies related to their employees, supply chain, and repurposing of operations to provide needed products and services. We study whether during the 2020 COVID-19... View Details

SSRN

2012
Article

Friends with Money

By: Christopher Parsons, J. Engelberg and P. Gao

When banks and firms are connected through interpersonal linkages—such as their respective management having attended college or previously worked together—interest rates are markedly reduced, comparable with single shifts in credit ratings. These rate concessions do... View Details

Keywords: Social and Collaborative Networks; Interest Rates; Banking Industry

November 2024
Article

Perceptions About Monetary Policy

By: Michael D. Bauer, Carolin Pflueger and Adi Sunderam

We estimate perceptions about the Federal Reserve’s monetary policy rule from panel data on professional forecasts of interest rates and macroeconomic conditions. The perceived dependence of the federal funds rate on economic conditions varies substantially over time,... View Details

Keywords: Monetary Policy; Policy; Interest Rates; Perception; Economy; Forecasting and Prediction

March 1997 (Revised May 2000)
Background Note

Bretton Woods System of Exchange Rates, The

By: Louis T. Wells Jr.

Describes the exchange rate system adopted at Bretton Woods in 1994. View Details

Keywords: Trade; Currency Exchange Rate; Government and Politics; Adoption; System

March 2006 (Revised April 2010)
Case

China: To Float or Not To Float? (A)

By: Laura Alfaro, Rafael M. Di Tella and Ingrid Vogel

On July 21, 2005 China revalued its decade-long quasi-fixed exchange rate of approximately 8.28 yuan per U.S. dollar by 2.1% to 8.11 and, at the same time, introduced a more market-based exchange rate system. Many analysts and economists were disappointed with what... View Details

Keywords: Macroeconomics; Trade; Currency Exchange Rate; Governance Controls; Policy; Growth and Development Strategy; China

2010
Article

Multi-Rater Assessment of Creative Contributions to Team Projects in Organizations

By: Giovanni B. Moneta, Teresa M. Amabile, Elizabeth Schatzel and Steve J. Kramer

This study examined the convergent and construct validity of ratings of individual creative contributions in a team context. A sample of 201 employees and supervisors, working on 26 team projects, completed the NEO-Five Factor Inventory and rated themselves and their... View Details

Keywords: Creativity; Groups and Teams; Research; Performance Evaluation; Gender; Projects

January 2009 (Revised December 2017)
Case

Who Broke the Bank of England?

By: Niall Ferguson and Jonathan Schlefer

In the summer of 1992, hedge fund manager George Soros was contemplating the possibility that the European Exchange Rate Mechanism (ERM) would break down. Designed to pave the way for a full-scale European Monetary Union, the ERM was a system of fixed exchange rates... View Details

Keywords: Decision Choices and Conditions; Currency Exchange Rate; Investment; Governing Rules, Regulations, and Reforms; Financial Services Industry; European Union

February 1988 (Revised November 1994)
Background Note

Note on Fundamental Parity Conditions

By: W. Carl Kester and Richard P. Melnick

Provides a simple framework for analyzing expected exchange rate movements. Basic parity and equilibrium conditions are presented including purchasing power parity, forward parity, interest rate parity, the domestic Fisher effect, and the international Fisher effect... View Details

Keywords: Currency Exchange Rate; Situation or Environment

March 1984 (Revised November 2001)
Case

Decline of the Dollar, The: 1978

Describes the U.S. experience with floating exchange rates between 1973 and 1978, focusing on the rapid decline of the dollar in the summer of 1978. Illustrates the major determinants of the exchange rates and the role of government intervention in the foreign exchange... View Details

Keywords: Currency Exchange Rate; Government and Politics; Macroeconomics; United States

2020
Working Paper

Accounting for Product Impact in the Consumer Finance Industry

By: George Serafeim and Katie Trinh

We apply the product impact measurement framework of the Impact-Weighted Accounts Initiative (IWAI) in two competitor credit card providers within the consumer finance industry. We design a monetization methodology that allows us to calculate monetary impact estimates... View Details

SSRN

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February 1986 (Revised March 1989)
Background Note

Note on Foreign Exchange

Describes the operation of foreign exchange markets, including bid-offer spreads, cross rates, reciprocal rates, and forward rates. Provides several examples to demonstrate calculation of outright forward rates using discount and premium points quoted in the London... View Details

Keywords: Currency Exchange Rate; Capital Markets

August 2014
Article

Mortgage Convexity

By: Samuel G. Hanson

Most home mortgages in the United States are fixed-rate loans with an embedded prepayment option. When long-term rates decline, the effective duration of mortgage-backed securities (MBS) falls due to heightened refinancing expectations. I show that these changes in MBS... View Details

Keywords: Mortgages; Interest Rates; Volatility

May 1991 (Revised December 1994)
Case

State of Connecticut Municipal Swap

By: Andre F. Perold

The state of Connecticut wants to raise $325 million of long-term fixed-rate debt. One alternative is to do this synthetically--issue long-term variable rate debt and enter into an interest rate swap. The case is a vehicle for analyzing various floating rate structures... View Details

Keywords: Borrowing and Debt; Credit Derivatives and Swaps; Interest Rates; Taxation; Management Analysis, Tools, and Techniques; Risk and Uncertainty; New England