Professor of Finance
Phone: +45 38153753
Department of Finance
Copenhagen Business School
Solberg Plads 3, A4.02
Empirical Asset Pricing, Credit Risk, Fixed Income, Liquidity Risk
PUBLISHED AND FORTHCOMING PAPERS
(with Yael Eisenthal-Berkovitz and Vikrant Vig), 2018, Journal of Financial Economics, forthcoming
We show that the threat of a leveraged buyout has a substantial ex-ante impact on bond credit spreads, on average 18-21bps. The impact is stronger in expansion periods and for long-maturity bonds.
(with Stephen Schaefer), 2018, Review of Financial Studies, 31, 2897-2942.
We propose a statistically more precise approach for calibrating structural models of credit risk to historical default rates. Using this new approach we find that a standard structural model (Black-Cox) matches the level of investment grade bonds well. Model spreads for speculative bonds are too low, partly due to bond illiquidity.
Jack Treynor Prize Winner, 2015
Risk Premia and Volatilities in a Nonlinear Term Structure Model (with Christian Heyerdahl-Larsen and Philipp Illeditsch), 2018, Review of Finance, 22, 337-380
A nonlinear term structure model with closed-form solutions. The model with only three latent factors captures variation in expected excess returns and yield volatilities and exhibits features consistent with unspanned stochastic volatility and unspanned risk premia.
Outstanding Paper Award, Wharton’s Jacobs Levy Equity Management Center for Quantitative Research, 2014
(with Edith Hotchkiss and Oğuzhan Karakaş), 2016, Journal of Financial Economics, 121, 1-27.
A new way to measure the premium in corporate bond prices that is related to creditor control. The premium increases as firm credit quality decreases and around defaults, bankruptcies, and covenant violations.
Journal of Finance, 2, 1650009
For a wide range of risk premium specifications, there is no three-factor affine model that can simultaneously capture the predictability in bond excess returns and time variation in yield volatility.
Corporate Bond Liquidity Before and After the Onset of the Subprime Crisis (with Jens Dick-Nielsen and David Lando), 2012, Journal of Financial Economics, 103, 471-492.
Illiquidity premia in US corporate bonds were large during the subprime crisis. Bonds become less liquid when financial distress hits a lead underwriter.
Monthly time series 2002:07-2009:12 of illiquidity of all US corporate bonds, industrial bonds, and financial bonds in the paper: Download. Updated data through 2018:09: Download. Our results are used in an Oliver Wyman study on the impact of the Volcker Rule on corporate bond liquidity. The study and our results are discussed in New York Times and Financial Times.
The Same Bond at Different Prices: Identifying Search Frictions and Selling Pressures, 2012, Review of Financial Studies, 25, 1155-1206.
A new way to measure selling pressures in over-the-counter markets. The evidence shows strong selling pressure in GM bonds in May 2005 and market-wide selling pressures in US corporate bonds during the subprime crisis.
Systematic and Idiosyncratic Default Risk in Synthetic Credit Markets (with Mads Stenbo Nielsen), 2012, Journal of Financial Econometrics, 10, 292-324.
How to estimate an intensity-based model for correlated defaults without the usual assumptions. The model matches the time-series variation of CDO tranche spreads well.
Previously entitled ‘‘An Empirical Investigation of an Intensity-Based Model for Pricing CDO Tranches”
Decomposing Swap Spreads (with David Lando), 2008, Journal of Financial Economics, 88, 375-405.
Use swap rates not Treasury yields as riskless rates. Hedging activity in the MBS market occasionally pushes swap rates down.
Society of Quantitative Analysts award for best paper on quantitative investment, Western Finance Association, 2006
Debt Dynamics and Credit Risk (with Stephen Schaefer), 2019
What Determines Bid-Ask Spreads in Over-the-Counter Markets? (with Thomas Kjær Poulsen), 2018
Keep it Simple: Dynamic Bond Portfolios Under Parameter Uncertainty (with Linda S. Larsen, Claus Munk, and Anders B. Trolle), 2012