Marking to Market versus Taking to Market
While the debate on cost and market-value accounting has been raging for years, economists lack a framework allowing a comparison of their relative...
Information Asymmetries, Volatility, Liquidity and the Tobin Tax
Information asymmetries and trading costs, in a financial market model with dynamic information, generate a self-exciting equilibrium price process...
Endogenous Market Making and Network Formation
This paper proposes a theory of intermediation in which intermediaries emerge endogenously as the choice of agents. In contrast to the previous...
Portfolio Optimization under Expected Shortfall: Contour Maps of Estimation Error
The contour maps of the error of historical resp. parametric estimates for large random portfolios optimized under the risk measure Expected Shortfall...
Endogenous Contractual Externalities
We study effort and risk-taking behaviour in an economy with a continuum of principal-agent pairs where each agent exerts costly hidden effort. When...
Human Capital and International Portfolio Diversification: A Reappraisal
We study the implications of human capital hedging for international portfolio choice. First, we document that, at the household level, the degree of...
What is the expected return on the market?
This paper presents a new lower bound on the equity premium in terms of a volatility index, SVIX, that can be calculated from index option prices...
Can We Prove a Bank Guilty of Creating Systemic Risk? A Minority Report
Since increasing a bank's capital requirement to improve the stability of the financial system imposes costs upon the bank, a regulator should ideally...
Endogenous Contractual Externalities
We study effort and risk-taking behaviour in an economy with a continuum of principal-agent pairs where each agent exerts costly hidden effort. When...
Parameterized Games, Minimal Nash Correspondences, and Connectedness
Economics and game theory are replete with examples of parameterized games. We show that all minimal Nash payoff USCOs belonging to the Nash...
A Fixed Point Theorem for Measurable-Selection-Valued Correspondences Arising in Game Theory
We establish a new fixed point result for measurable-selection-valued correspondences with nonconvex and possibly disconnected values arising from the...
Stationary Markov Equilibria for K-Class Discounted Stochastic Games
For a discounted stochastic game with an uncountable state space and compact metric action spaces, we show that if the measurable-selection-valued...
The Interest rate conditioning assumption
A central bank’s forecast must contain some assumption about the likely future path for its own policy-determined short-term interest rate. Most of...
Insecure Debt
We analyse bank runs under fundamental and asset liquidity risk, adopting a realistic description of bank default. We obtain an unique run equilibrium...
Taming the Basel Leverage Cycle
Effective risk control must make a tradeoff between the microprudential risk of exogenous shocks to individual institutions and the macroprudential...
Activist Funds, Leverage, and Procyclicality
We develop a dual-layered agency model to study blockholder monitoring by activist funds that compete for investor flow. Competition for flow affects...
