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...
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...
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...
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...
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...
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...
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...
Endogenous Correlated Network Dynamics
We model the structure and strategy of social interactions prevailing at any point in time as a directed network and we address the following open...
Blended Automation: Integrating Algorithms on the Floor of the New York Stock Exchange
The recent automation of the American stock market has replaced floor intermediaries with trading algorithms, calling into question the sociological...
The Bankers’ Paradox: The Political Economy of Macroprudential Regulation
Macroprudential regulation, which has emerged as a new departure in financial regulation (albeit with a longer heritage), since the financial crash...
Why risk is so hard to measure
This paper analyzes the robustness of standard risk analysis techniques, with a special emphasis on the specifications in Basel III. We focus on the...
