Harjoat Singh Bhamra

TL;DR: The authors embeds a structural model of credit risk inside a dynamic continuous-time consumption-based asset pricing model, which allows us to price equity and corporate debt in a unified framework.

TL;DR: In this article, the impact of time-varying macroeconomic conditions on optimal dynamic capital structure and the aggregate dynamics of firms in a cross-section is studied. And the authors find that capital structure is procyclical at refinancing dates when firms relever, but counter-cyclical in aggregate dynamics, consistent with empirical evidence.

TL;DR: The authors embeds a structural model of credit risk inside a dynamic continuous-time consumption-based asset pricing model, which allows them to price equity and corporate debt in a unified framework, and generate a realistic average term structure and time series of actual default probabilities and credit spreads, together with a reasonable levered equity risk premium, which varies with macroeconomic conditions.

TL;DR: In this paper, the authors investigate the effect of macroeconomic conditions on asset valuation and optimal corporate policies, and of preferences on capital structure, and find that financially constrained firms choose more procyclical policies and that leverage accounts for most of the macroeconomic risk relevant for predicting defaults, but is a poor measure of how preferences impact capital structure.

TL;DR: In this paper, a closed-form solution to the consumption-sharing rule for agents who have both heterogeneous priors and heterogeneous preferences without restricting the risk aversion of the two agents to special values is presented.