William Diamond

William Diamond
  • Assistant Professor of Finance

Contact Information

  • office Address:

    2320 Steinberg-Dietrich Hall
    3620 Locust Walk
    Philadelphia, PA 19104

Links: CV

Research

  • William Diamond (2020), Safety Transformation and the Structure of the Financial System, Journal of Finance, forthcoming.

  • William Diamond and Tim Landvoigt, Credit Cycles with Market Based Household Leverage.

    Abstract: We develop a model in which mortgage leverage available to households depends on the risk bearing capacity of financial intermediaries. Our model features a novel transmission mechanism from Wall Street to Main Street, as borrower households choose lower leverage and consumption when intermediaries are distressed. The model has financially constrained young and unconstrained middle-aged households in overlapping generations. Young households choose higher leverage and riskier mortgages than the middle-aged, and their consumption is particularly sensitive to credit supply. Relative to a standard model with exogenous credit constraints, the macroeconomic importance of intermediary net worth is magnified through its effects on household leverage, house prices, and consumption demand. The model quantitatively demonstrates how recessions with housing crises differ from those driven only by productivity, and how a growing demand for safe assets replicates many features of the 2000s credit boom and increases the severity of future financial crises.

  • Jules van Binsbergen, William Diamond, Marco Grotteria (Working), Risk Free Interest Rates (R&R, Journal of Finance).

    Abstract: We document differing risk-free rates in a range of asset classes, providing a uniquely clean measure of segmentation between markets. The asset markets we consider are the government bond market, commodity markets for precious metals, exchange rate markets and option markets. We find that risk-free rates across markets can deviate for prolonged periods of time and we characterize market segmentation through the speed of convergence. We analyze how shocks propagate across rate spreads and develop an aggregate arbitrage index which captures the common variation of these spreads across markets. We further present a novel high-frequency measure of the convenience yield on government bonds, which equals 38 basis points on average and grows substantially during periods of financial distress. We argue that option-market-implied risk-free rates provide a convenience-yield-free and effectively credit-risk-free measure of time preference measured accurately at a minutely frequency. This makes such rates a strong candidate for the risk free benchmark rate and we explore a range of empirical asset pricing applications.

  • William Diamond and Nikhil Agarwal (2017), Latent Indices in Assortative Matching Models, Quantitative Economics (best paper award in QE for 2017).

Teaching

Current Courses

  • FNCE100 - Corporate Finance

    This course provides an introduction to the theory, the methods, and the concerns of corporate finance. The concepts developed in FNCE 100 form the foundation for all elective finance courses. The main topics include: 1) the time value of money and capital budgeting techniques; 2) uncertainty and the trade-off between risk and return; 3) security market efficiency; 4) optimal capital structure, and 5) dividend policy decisions. During the Fall semester there are honors sections of FNCE 100 offered. The seats in the honors sections are awarded through an application process. Please go to: https://fnce.wharton.upenn.edu/programs/course-applications for additional information. Corporate Finance is a Core course and must be taken for a grade.

    FNCE100301 ( Syllabus )

    FNCE100302 ( Syllabus )

    FNCE100303 ( Syllabus )

  • FNCE611 - Corporate Finance

    This course serves as an introduction to business finance (corporate financial management and investments) for both non-majors and majors preparing for upper-level course work. The primary objective is to provide the framework, concepts, and tools for analyzing financial decisions based on fundamental principles of modern financial theory. The approach is rigorous and analytical. Topics covered include discounted cash flow techniques; corporate capital budgeting and valuation; investment decisions under uncertainty; capital asset pricing; options; and market efficiency. The course will also analyze corporate financial policy, including capital structure, cost of capital, dividend policy, and related issues. Additional topics will differ according to individual instructors.

    FNCE611301

    FNCE611302

    FNCE611303

Past Courses

  • FNCE100 - CORPORATE FINANCE

    This course provides an introduction to the theory, the methods, and the concerns of corporate finance. The concepts developed in FNCE 100 form the foundation for all elective finance courses. The main topics include: 1) the time value of money and capital budgeting techniques; 2) uncertainty and the trade-off between risk and return; 3) security market efficiency; 4) optimal capital structure, and 5) dividend policy decisions. During the Fall semester there are honors sections of FNCE 100 offered. The seats in the honors sections are awarded through an application process. Please go to: https://fnce.wharton.upenn.edu/programs/course-applications for additional information. Corporate Finance is a Core course and must be taken for a grade.

  • FNCE611 - CORPORATE FINANCE

    This course serves as an introduction to business finance (corporate financial management and investments) for both non-majors and majors preparing for upper-level course work. The primary objective is to provide the framework, concepts, and tools for analyzing financial decisions based on fundamental principles of modern financial theory. The approach is rigorous and analytical. Topics covered include discounted cash flow techniques; corporate capital budgeting and valuation; investment decisions under uncertainty; capital asset pricing; options; and market efficiency. The course will also analyze corporate financial policy, including capital structure, cost of capital, dividend policy, and related issues. Additional topics will differ according to individual instructors.

In the News

Knowledge @ Wharton

Activity

Latest Research

William Diamond (2020), Safety Transformation and the Structure of the Financial System, Journal of Finance, forthcoming.
All Research

In the News

The Downside to Playing It Safe in the Banking Industry

Recent Wharton research looks at why banks tend to invest in assets with the lowest risk, and how that behavior can affect the broader economy.

Knowledge @ Wharton - 2018/04/6
All News