Introduction to Volume 5 of the Annual Review of Financial Economics

In Volume 5 of the Annual Review of Financial Economics, we continue focusing on the role of banks and credit in the recent financial crisis with articles on too big to fail, credit-rating agencies, corporate governance for banks, bank leverage and real interest rates, and financial contagion in the banking sector. More traditional topics such as dynamic capital-structure models, cross-sectional asset pricing tests, trends in firm-specific volatility, short selling, and conglomerates and the theory of the firm are also included. In addition, we have two contributions that fall outside the mainstream of financial economics, one involving capital allocation in the insurance industry and the other involving tax issues at the intersection of law and finance. But we begin this volume with a commemoration of the 40th anniversary of the publications of Black & Scholes (1973) and Merton (1973b) on pricing options and other derivative securities, two articles that forever changed the theory and practice of financial economics.